Do you have a car owned by the Business
With the Fringe Benefits Tax (FBT) year end of 31 March 2018 upon us, it is time to assess the annual FBT obligations of your business.
The Australian Taxation Office has increased its compliance and audit activity in this area and as such it is crucial for your business, and as an employer providing fringe benefits, to understand the different types of benefits subject to FBT to ensure your business meet its obligations.
If you employ staff in your business you need to know about FBT. FBT is applied to most non-cash benefits employers provide to their employees and associates. For most businesses FBT applies to private use of cars, car parking, helping an employee with housing, providing an employee with a loan, paying private expenses like telephone or travel, providing meals or buying gifts for employees.
A separate Fringe Benefits Tax Return must be lodged for the year ended 31 March 2018, with tax paid by end of May. Failure to disclose fringe benefits can result in heavy penalties, and payment of prior years' outstanding taxes. This is especially important now with the self-assessment system and the ever-increasing possibility of a tax audit.
The fringe benefits detailed below are the top 5 fringe benefits businesses and employers provide to employees and their associates that are typically subject to FBT.
Top 5 Fringe Benefits for Employees and Employers
The annual Christmas party is an important event on your business calendar (at least to your employees).
Christmas festivities provided not on the business premises up to the value of $300 for each employee is generally exempt from FBT. So throwing a party where the cost per head is less than $300 should escape FBT consequences.
The downside is where FBT applies so does a tax deduction, and vice versa. Therefore if the event comes in under $300 per head, no FBT will apply and also the cost of the event won’t be tax deductible (no Christmas present there).
It is common in some industries to provide employees with a car as part of their salary package or where the car is needed to perform their role (i.e. sales representatives).
The provision of a car can result in a benefit that is subject to FBT, where the car is available for an employee’s private use. Availability is the key point here, as an employee doesn’t necessarily need to use the car in order for a benefit to arise. If the car is made available by the employee taking the car home, or even having the keys outside of work, the car is deemed to be available for private use.
It is not unusual for a business to provide free car parking for their employees. In some instances the provision of car parking can be a taxable benefit. The following outlines circumstances where providing car parking could be subject to FBT:
If within a one kilometre radius of the parking premises there is a commercial parking station that charges a fee.
If the car is parked for a total of more than four hours between 7am and 7pm and is used by the employee in relation to travelling to/from home and work.
If the car is parked at or near your employee’s primary place of employment.
Sometimes employees can be given advances on their salary or given loans that will be repaid via deductions from their pay. These advances or loans are considered benefits and as such could be subject to FBT if no interest or a lower interest rate than the FBT benchmark is applied to these loans.
Private Expenses Paid for on Behalf of Employees
Where a business pays or reimburses an employee for an expense of a private nature, FBT is likely to apply. As a general rule, a private expense is an expense that an employee would not be eligible to claim a tax deduction.
As there have been numerous changes in guidelines and rulings to different categories of FBT, we recommend a review of your financial records to identify benefits that have been provided to employees, owners and their associates and where necessary, we will prepare the documentation and/or lodgements required to meet your FBT compliance obligations.
If FBT is applicable to your business, SMART Business Solution's tax team can provide practical solutions to help prepare your FBT Return and legitimately reduce your FBT liability.
If you wish to discuss the impact of the above mentioned fringe benefits, or any other types of benefits that could potentially be subject to FBT, please contact SMART Business Solutions on 03 5911 7000 or firstname.lastname@example.org for a complimentary initial meeting.