Fringe Benefits Tax - All the need-to-knows

Generally, if you have employees, including directors and you provide them with any of the following fringe benefits, you will need to register and lodge a FBT return:

• make vehicles owned or leased by the business available to employees for private use
• provide loans at reduced interest rates to employees
• forgive or release any debts owed by employees
• pay for, or reimburse, any private expenses incurred by employees
• provide a house or unit for accommodation to employees
• provide employees with living-away-from-home (LAFH) allowances
• provide entertainment by way of food, drink or recreation to employees (including Christmas parties and lunches/dinners)
• provide any employees with a salary package (salary sacrifice) arrangement

This is not an exhaustive list and if unsure, please contact us for clarification.

Using our annual FBT Questionnaire and Schedules, please provide us your details before end 30 April 2021 so we can calculate any potential FBT liability and lodge your FBT return on time.

Early in 2021, the ATO announced an enhanced “data matching” program with vehicles in business entities. The ATO believe the motor vehicle registries data-matching program will allows them to identify and address tax risks, including:

• fringe benefit tax compliance activities
• providing a holistic view of a taxpayer's financial position
• supporting compliance areas with modelling and case identification
• supporting taskforce programs including the black economy

This data matching program is primarily used for the ATO to identify non-compliance and tax obligations. The short story is, they WILL be chasing you for your FBT eventually.  Read more about the ATO data matching here.

We recommend preparing and submitting your paperwork to us before 30 April. FBT returns must be lodged by 28 May.

Preparing and lodging your FBT each year restricts the ATO to a 3 year look back period.

This minimises your risk of payable liability to the ATO.

Without an annual FBT return, the ATO is allowed to audit you / demand FBT payments for as far back as they wish to look! Imagine having the ATO look back on a business that has been offering fringe benefits for 5 or 10 or 15 years! The liability will be huge and in many cases, will crush a business.

If you are providing essential items such as mobile phones, laptops, tablets, portable printers, protective clothing, tools of trade etc, or minor and infrequent benefits that are less than $300 in value, you are unlikely to have to worry about FBT. This includes any items you may have had to supply due to COVID-19 and setting up your staff to successfully work from home.

You can fill out our FBT Questionnaire and Schedules to be 100% sure.

Here are some ways in which you can reduce your FBT liability:

• replace your fringe benefits with cash salary;
  
• provide benefits that your employees would be entitled to claim as an income tax deduction if they had to pay for the benefits themselves;
  
• look at providing benefits that are exempt from FBT; and
  
• use employee contributions, for example, an employee paying for some of the operating costs of car fringe benefit such as fuel that you don't reimburse them for. Though you should note that employee contributions may be deemed assessable income to you and subject to GST.
  

A common mistake is not maintaining a register of which employees are the recipient of meal entertainment benefits. Not all meal entertainment benefits are treated the same, which is why maintaining a register is vital.
For example, you have two employees, Simon and Garfunkle. Simon's job is to go out and impress current and potential clients at various social events where food and drink is consumed. Garfunckle's role on the other hand is to remain in the office and complete the projects that Simon wins. At the year-end social function, the food and drink that is consumed by Simon will not qualify as exempt meal entertainment, however, the food and drink consumed by Garfunkle will be exempt. Without the records to confirm who received meal entertainment benefits, and absence of a completed FBT return, the ATO has unlimited scope to audit your records for liabilities.

A common mistake occurs where an employee is provided with a car and the private use is worked out using the operating cost (logbook) method. A part of using the logbook method is working out deemed depreciation each year and many accountants overlook this or work it out incorrectly by relying on the depreciation claimed on the business’ financial statements.
This mistake can give rise to an FBT liability where the calculated employee contribution is insufficient to remove the car’s taxable value. If a mistake like this is identified the ATO is likely to review the entire period that the car was owned by the business. For example, if the car was owned for 5 years without a FBT return, the ATO can audit you for a 5 year period! Lodging an FBT return would limit the auditing length of time allowed by the ATO to three years only.