Fringe Benefits Tax (FBT) – your questions answered!
On 31 March 2021, 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. To help you meet your fringe benefits obligations, we’ve answered the key questions clients have been asking below.
What is a Fringe Benefit?
A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages.
For Fringe Benefits Tax (FBT) purposes, an employee includes a:
• current, future or past employee
• director of a company
• beneficiary of a trust who works in the business.
What is Fringe Benefits Tax (FBT) and should I be registered?
Generally, if you have employees, including directors and you provide them with any of the following fringe benefits listed below, you will need to register and lodge a FBT return:
• allowing an employee to use a work car for private purposes
• giving an employee a discounted loan
• forgive or release any debts owed by employees
• pay for, or reimburse, any private expenses incurred by employees (i.e. a gym membership or school fees)
• 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, concert or event tickets and lunches/dinners)
• giving benefits under a salary sacrifice arrangement with an employee.
There are a few more things that are specific to certain circumstances, so when in doubt about FBT, speak with your Highview Accountant directly.
The following are not fringe benefits:
• salary and wages
• shares purchased under approved employee share acquisition schemes
• employer contributions to complying super funds
• employment termination payments (including for example, the gift or sale at a discount of a company car to an employee on termination)
• payment of amounts deemed to be dividends under Division 7A
• benefits provided to volunteers and contractors
• exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.
I have a company car. How would the ATO even know to chase me for FBT?
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. To view some more information about the ATO data matching click here.
When is FBT due for lodgement?
FBT returns must be lodged by 28 May. We recommend preparing and submitting your paperwork to your Highview Accountant in early April.
Why should you lodge a FBT return?
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.
How can you reduce your 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.
Chat to your Highview Accountant if you have further FBT queries – we’re here to help!
Source: https://www.ato.gov.au/General/fringe-benefits-tax-(fbt)/