Fringe Benefits Tax

What is it and what do I need to do about it? A guide for businesses.

The deadline for FBT is the 31st of March. So it’s time for businesses to start getting ready. Keep in mind that if you have employees you probably should submit an FBT return even if you don’t need to to pay the ATO anything. Otherwise the ATO can do an audit on you. If they do that and you can’t prove nothing was owed (in other words, have records that prove nothing was owed) they can levy their own liabilities.

It’s forcing you to keep proper records (which is a great idea) and if you lodge a return – the ATO can only do an audit for the previous three years. If you’ve never lodged a return – they can do it for as long as you’ve had employees.

And just to keep you on your toes, the Australian Tax Office has already let it be known that they will be focusing on FBT this year!

What you need to know!

A “fringe benefit” is is a payment, consideration or benefit that an employee (or a director or beneficiary of a trust) gets that is not wages or salary. A classic example is a work car that the employee is allowed to use themselves after work. Or salary sacrifice or any kind of freebie they get out of work.

Costs under $300 (per employee) are usually exempt from FBT.

There are some things that are not subject to FBT and you should check out the ATO links below for more info. But generally, things needed for work purposes like protective clothing, a mobile phone or a laptop are exempt. (but there can be grey areas – so consult your accountant).

An employer can claim tax deductions for FBT and often get GST credits as well.

Keep records. Let me repeat that – keep records. You can’t claim what you can’t prove. There are a lot of ways to keep records but online bookkeeping software can greatly simplify the process. MYOB (our favourite example) has many “plugins” to help.

Consult with your accountant. FBT can often be very confusing and it’s easy to make mistakes that can get you in trouble. Just as importantly, your accountant will now simple things you can do to minimise your liability.

Vehicles are a big one when it comes to FBT and the ATO has changed the rules somewhat to simplify record keeping. There are also new provisions to take into account COVID disruptions. You can read more about cars and vehicles (and working out FBT) HERE.

There are a number of ways you can reduce your Fringe Benefits Tax liabilities. The simplest is to just pay more wages instead of giving a fringe benefit (or provide benefits that are not liable for FBT). Or you can give employees benefits that they would have claimed as an income tax deduction if they would have paid for it themselves. Or, you might also consider employee contributions. This is where (for example) the employee chips in for petrol for the company car. But the drawback with that one is that it might be regarded as assessable income and attract GST.

Have a look at everyone’s favourite website for more information:

Fringe benefits tax (FBT)

Car fringe benefits

Income and deductions for business

Get advice! Give us a call on 1300 268 800 for a no obligation chat about FBT.