Closing the Fringe Benefits Tax Gap
The 31st of March marks the end of the Fringe Benefits Tax (FBT) year.
As a result of budget deficits thanks to COVID-19, the ATO will be on the lookout for employers who should be paying FBT. With an FBT gap of over $1 billion, they are deploying all they have in FBT compliance resources in an effort to close this gap.
- Are you paying it?
- Are you paying the right amount?
For employers paying FBT
To help you meet your FBT obligations, we’ve put together a list of essentials you need to know regarding FBT.
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Should I be registered for FBT?
If you have employees (which includes Directors) and you provide them with cars, parking, entertainment (food and drink), employee discounts, loans, or reimburse private expenses, then you are likely to be providing a fringe benefit. This means you need to register your business for FBT.
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Should I lodge an FBT Return even if no FBT is payable?
Where no FBT is payable there is legally no need to lodge an FBT return.
But should you lodge one anyway?
Our strong recommendation is yes.
This restricts the ATO’s audit window to only 3 years from the date of lodgement.
Otherwise, the ATO is entitled to go back an unlimited number of years and audit your business and find areas where they will charge you FBT and penalties.
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Key things you MUST do on 31 March 2023
Whilst we strongly recommend that you register for FBT and if applicable lodge a Nil FBT Return, if you decide not to there is still key information that we need you to record as of 31 March 2023 to complete your 2023 annual Financial Statements.
1. On Thursday 31 March 2023, when employees finish their travel for the day, request your team take a photo of their vehicle odometer readings. Having these vehicle odometer readings for all business vehicles to assess if your FBT can be reduced.
2. Carefully manage the private use of business cars including the travel between home and work. The ATO is conducting a data matching program aimed at motor vehicles to capture benefits that aren’t currently being reported through FBT which can trigger an audit if major discrepancies.
3. Review all meal entertainment expenses provided to employees and record for every event:
• Total cost (GST inclusive)
• How many employees were present and their names
• How many employees’ associates were present and their names
• How many clients were present
• The nature of the event (dinner, lunch, coffee, drinks) -
What is exempt from FBT?
Mobile phones, laptops, tablets, portable printers, protective clothing, tools of trade and minor and infrequent benefits that are less than $300 in value are unlikely to be subject to FBT.
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Are there any special COVID-19 exemptions with FBT?
You may provide your employees with benefits you do not usually provide because of COVID-19 including necessities to work from home such as laptops, portable printers or other electronic devices and items to protect them from COVID-19 such as masks and sanitisers. However, the minor benefits exemption may apply if you provide an employee with minor, infrequent and irregular benefits under $300.
There are other COVID-19 FBT exemptions that may apply to you, so be sure to chat to your Accountant.
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How can I reduce my FBT liability?
Yes, you can! Some ways include:
• 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
• Provide benefits that are exempt from FBT
• 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. You need to be aware that employee contributions will be deemed assessable income to you and subject to GST.
For our current clients, you will receive an email from us in March with information pertaining specifically to you so please keep an eye out.
If you’d like to have a chat with one of our Financial Advisors or Accounting team, book an appointment today.
