Even though Fringe Benefits Tax (FBT) is designed to capture benefits enjoyed by an employee, it is levied on the employer. Unless your employment agreement allows for any FBT that becomes payable to be recouped from the employee, the employer will have no recourse for reimbursement.
So, why should an employer lodge an FBT return where no FBT is payable? Well, for the simple reason that it turns on a three-year
deadline for the ATO to commence audit activities.
Without an FBT return being lodged, the ATO has the discretion to launch an audit into activities as far back as a business has had
employees. Without the evidence (e.g. signed declarations, logbooks, meal entertainment records, etc.) that FBT was NOT payable in each year
the ATO is likely to raise FBT liabilities, even where the employee who enjoyed the benefit no longer works for the business. Thereby making
it impossible for the business to recoup anything.
Where an employer believes they have done everything in accordance with legislation, people will make mistakes. 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. Lodging an FBT return would limit the length of time the ATO can audit to three years.
Another 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.
The ATO has signalled that there will be an increased focus on FBT this year so if you would like to limit the ATO’s ability to retrospectively launch an audit please contact your advisor on (03) 5911 7000 or email us for assistance.
Why should you lodge an FBT return where no FBT is payable? Well, for the simple reason that it turns on a three-year deadline for the ATO to commence audit activities. This is a NEW ATO rule as a result of massive deficits due to COVID. The ATO need to gain more funds somehow...FBT liability is one of the methods.
A car fringe benefit commonly arises when an employer makes a car they own or lease available for the private use of an employee.
An everyday occurrence across the business landscape in Australia is the practice of taking both existing and potential clients out for a meal to cement the business relationship, with the cost of this meal often covered by one party.
The ATO has signalled that there will be an increased focus on FBT this year. Given the ever-improving tools at the ATO’s disposal, in conjunction with the government’s need to raise additional revenues, it is important that employers ensure they remain compliant with their FBT requirements.
Granting employees’ access to company cars is treated by the ATO as a ‘non-cash benefit’, more commonly referred to as a fringe benefit.
On 31 March 2020, the Fringe Benefits Tax (FBT) year ends. With the ever increasing budget deficits, the ATO will be reviewing whether all employers who should be paying FBT are, and that they are paying the right amount. Who needs to lodge a FBT return? Find out here.
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