Wondering if your business is required to pay fringe benefit tax (FBT) or lodge a fringe benefit tax (FBT) return this year? Many employers offer additional benefits and privileges to their executives or employees to acknowledge their efforts beyond their regular pay. This approach can be an effective motivational tool, but employers must consider potential tax implications. Unbeknownst to most, it is best to lodge an FBT tax return where no FBT is payable.
What is Fringe Benefit Tax (FBT)?
The introduction of the Fringe Benefits Tax in 1986 aimed to ensure that the government received tax on benefits that businesses provided tax-free to employees, their families, and executives. Fringe benefits are additional benefits such as personal use of company cars, gym memberships, meal & entertainment expenses, electronic devices, and payment of individual fees. This also applies to directors who use business assets for private purposes. A typical example is when a company vehicle is driven by a director or employee and garaged at home. Travel directly home and work is considered personal use by the ATO. The FBT rate is currently 47% of the total taxable value of these benefits.
When might a return be necessary?
A fringe benefit return may be necessary in the following cases:
· When the employer provides non-wage benefits to their employees such as company cars, health and wellness programs, meals, or entertainment expenses.
· When the employer provides benefits not directly to the employee. This can be education, childcare, and health insurance for employees’ spouses and dependents.
· When the benefit does not have to be provided by the employer, such as benefits provided by a third party, e.g., salary sacrifice arrangements, training, and development
If any of these apply, employers must calculate their FBT liability and register for FBT. This is where we come in.
Why should employers lodge an FBT tax return even if no FBT is payable?
Employers who provide fringe benefits with zero taxable value are not obligated to submit an FBT return. However, without lodgment and in the case of an FBT audit, the ATO may revisit an indefinite number of years where the employer may be assessed for FBT. By lodging a NIL FBT return, the ATO is only allowed three years from the original FBT assessment to amend to increase an employer’s FBT liability. This period may be extended if tax avoidance, fraud or evasion is believed to have occurred. Thus, employers should lodge a NIL FBT to reduce FBT exposure should an audit arise.
Deadlines for Fringe Benefit Tax Lodgment
Lodgment of FBT return’s due dates if you lodge through a tax agent is as follows:
· May 21 if the return is lodged by paper
· June 25 if the return is lodged electronically
Need help lodging your FBT return?
Staying updated on regular fringe benefits changes and reporting requirements is essential. Let us know if you have questions about Fringe Benefit Taxes (FBT) or need help.
Get in touch with us and we will support you and ensure your business meets and we will keep you and ensure your business complies with the latest regulations.