Fringe Benefits Tax may apply to your business

Fringe Benefits Tax may apply to your business

fbt

On 31 March 2024, the Fringe Benefits Tax (FBT) year ends.

It will take you just 2 minutes to read this brief email. Even if you haven’t lodged a FBT Return for your business in prior years – you definitely need to consider lodging one this year.

With the ever-increasing budget deficits as a result of COVID-19, the ATO will be reviewing whether all employers who should be paying FBT are paying it, and that they are paying the right amount. The ATO has recently announced that the ‘FBT gap’ is now over $1.3 billion and will be deploying resources for FBT compliance to close this gap.

To help you meet your FBT obligations, we’ve put together a list of essentials every employer needs to know about FBT and review every year, such as:

  • Should I be registered for FBT?
  • Should I lodge an FBT Return even if no FBT is payable?
  • Key things you MUST do on 31 March 2024
  • What is exempt from FBT?
  • How can I reduce my FBT liability?
  • How can an Associated Lease improve my after tax cash flow?

These questions are all answered for you below. We also have a number of specially prepared FBT Factsheets that you can request from us to help you better understand your FBT obligations as a business owner.

1. Should you be registered for FBT?

Generally, if you have employees (including Directors) and you provide them with cars, car parking, entertainment (food and drink), employee discounts, loans, or reimburse private expenses, then you are likely to be providing a fringe benefit and we will need to register your business for FBT. There are 13 defined Fringe Benefit categories in the FBT law.

It’s important you start gathering all the details of these provided benefits as soon as possible using our annual FBT Questionnaire and Schedules, so we can calculate any potential FBT liability and lodge your FBT return on time – due 25 June 2024 with payment to be made by 25 June 2024.

CLICK HERE: 2024 FBT Questionnaire + Schedules for Completion

2. Should you 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 to you is yes, you should lodge an FBT return if you provide benefits to employees, even if no FBT is payable.

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 possibly find areas where they will charge you FBT and penalties.

We have compiled an FBT Factsheet that outlines some of the simple points that the ATO will review if you are selected for audit – How the ATO identifies potential audits. We have also prepared an FBT Factsheet that outlines why an FBT return is a good idea even where no FBT is payable – Why should you lodge an FBT Return.

3. Key things you must do on 31 March 2024

While 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 at 31 March 2024. We will then rely on this when we complete your 2024 annual Financial Statements. Here’s a summary of what you need to do:

  1. On Sunday 31 March 2024, when the employees have finished their travel for the day request your team each take a photo of their vehicle odometer readings using their phones and email the photo to you, or to a nominated person in your business to collate them all for you. Having these vehicle odometer readings for all business vehicles is vital to us being able to see if your FBT can be reduced by using the ‘operating cost’ method instead of the ‘statutory formula’ method.
  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. If significant variances are identified, a full ATO audit may follow.
  3. Review all meal entertainment expenses provided to employees, associates and clients and prepare a register that outlines the following for every event.
  • The 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 (names not needed)
  • The nature of the event (dinner, lunch, coffee, drinks, etc.)

The FBT Questionnaire has a meal entertainment sheet that will simplify this for you.

4. What items are exempt from FBT?

The following items are unlikely to be subject to FBT: mobile phones, laptops, tablets, portable printers, protective clothing, tools of trade etc, or minor and infrequent benefits that are less than $300 in value.

To find out if you are eligible for the minor and infrequent benefit exemption – please ask us to send you our Applying the Minor & Infrequent Benefits Exemptions factsheet.

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

5. Ways you can 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. You need to be aware that employee contributions will be deemed assessable income to you and subject to GST.

6. How an Associate Lease can Improve your Family’s after-Tax Cash Flow

This is an excellent tax planning strategy that you may want to discuss with us. An “Associate Lease” can be used to help improve your employees after tax cash flows, where one spouse earns considerably more than their partner.

Next Steps

The FBT year ends on 31 March 2024, so be sure to complete and return the FBT Questionnaire and Schedules to our office as soon as possible so you don’t miss the lodgement and payment date of 25 June 2024.

We will review these documents and then provide you with an up front price for our services before we begin any work.

We look forward to helping you meet your FBT obligations, and please remember that we are available anytime to answer any questions you have around reducing your FBT liability or creating effective salary sacrifice arrangements.

We look forward to hearing from you soon!

FBT Factsheets

Please let us know if you would like us to send you any or all of the following FBT Factsheets:

  • What is a Car Fringe Benefit?
  • Employee Business Cars – Tips & Traps
  • Entertaining, Meals & FBT – Tips & Traps
  • Using an Associate Lease to boost family income
  • Minor and Infrequent Benefits
  • How the ATO identifies potential audits
  • Why you should lodge an FBT Return
  • Workhorse Vehicles and new Safe Harbour provisions

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