It’s soon time for businesses to lodge their Fringe Benefits Tax (FBT) returns. With FBT on the ATO radar, here’s what you need to know for your 2018/2019 lodgement and steps to take to avoid an ATO audit.
What is FBT
Fringe benefits tax (“FBT”) is a tax paid on certain benefits you provide to your employees or your employees’ associates.
The FBT year runs from 1 April till the 31st March. For the current year (ending 31 March 2019 that FBT rate is 47%).
Should I be registered for FBT?
If you have employees (including Directors of a company) then it’s possible your business needs to register for FBT.
Generally, your business needs to register for FBT if you are providing any benefits to employees that are not exempt from FBT. So, if you provide cars, car spaces, reimburse private (not business) expenses, provide entertainment (food and drink), employee discounts etc., then you are likely to be providing a fringe benefit.
There is a list of exemptions that are considered exempt from FBT, such as portable electronic devices like laptops and iPads (although there are rules around how many), protective clothing, tools of trade etc. If your business only provides these exempt items, or items that are infrequent and valued under $300, then you are unlikely to have to worry about FBT.
How to reduce FBT Liability
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.
What attracting the ATOs attention
- Motor vehicles, particularly the private use of cars. The ATO highlighted that a car comes within the FBT net even though it is not driven but is garaged at the employees’ home, even if for security reasons. As a general rule, travel to and from work is private use of a vehicle.
- Employee contributions: overstatement of contributions paid by employees
- Employer rebate: rebates and concessions claimed by ineligible employers
- Failing to obtain Living Away from Home Allowance (LAFHA) declarations, reducing taxable value for ineligible employees, applying the incorrect reasonable food amounts
- Employers who should be lodging and paying FBT who are not in the system
Company Utilities no longer exempt from FBT
For a long time, businesses using utilities were exempt from Fringe Benefits Tax (FBT) so long as they were used predominantly for business use and personal use was ‘minor, infrequent and irregular’.
Under new guidelines, employees must not deviate from their usual route to and from work by more than 2km. For example travelling to sports practice after work in excess of 2km is now deemed unacceptable, as sports practice is a diversion from your usual route from work to home.
The new guidelines apply to the 2019 FBT Year and onwards. The guidelines also allow for an extra 1,000km a year of non-work travel, capped at 200km in any single return trip but this needs to be supported by a logbook.
It is desirable for employees to keep a 12-week logbook which will provide the number of kilometres driven by the work vehicle for business use (this is usually a logbook business percentage %).
Some useful apps that can be used to record kilometres include ATO Vehicle Logbook, Logbookme, Driversnote, Drivers Direct, Vehicle Logger.
FBT Lodgement due date
If you are lodging your FBT Return personally the statutory due date for lodgement and payment is 21 May 2019. However, if you are lodging your 2019 FBT returns through a registered tax agent the due date is 25 June 2019.
All in all, FBT is a complex area of taxation and calculating taxable benefits can be overwhelming for employers. Please feel free to reach out at anytime to discuss your FBT requirements with one of our FBT Specialists.