Fringe Benefits Tax (FBT) is a unique tax levied on employers where specific benefits are provided to their employees that are not subject to regular income tax.
As an employer, you must self-assess your FBT liability for the FBT year (1 April to 31 March). If you have an FBT liability, you must lodge an FBT return and pay the FBT you owe.
This article explores the essentials every employer needs to know about FBT.
When does FBT apply?
FBT applies to fringe benefits provided to your employees, their families, or other associates. The payment of FBT rests with you as the employer.
- Owner employees: If you own a company, you may also be considered an employee, making benefits you provide yourself subject to FBT.
- Directors: Directors of a company are also deemed employees, resulting in benefits they receive subject to FBT.
- Sole traders and Partnerships: Sole traders and partners in partnerships are not classified as employees, hence benefits they provide to themselves are not subject to FBT.
- Clients: Benefits offered to clients, such as entertainment, are not subject to FBT.
Employers are also accountable for FBT if the benefit is provided by an associate or a third party under an arrangement with the employer. For instance, if a supplier provides goods or services to employees at a reduced cost under an agreement with the employer, FBT remains the employer’s responsibility.
Should you register for FBT?
If you provide benefits like cars, car parking, entertainment (food, drinks, tickets to sporting events or concerts), employee discounts, loans, or reimbursements for private expenses (school fees) to your employees (including directors), you likely need to register for FBT.
With the end of the FBT year on 31st March, it is crucial to compile all fringe benefit details now. Consider using tools like Calibre Business Advisory’s FBT questionnaire for assistance.
Should you lodge an FBT return even if no FBT is payable?
It is common for employers that provide benefits but do not have an FBT liability to choose not to lodge a FBT return because the benefits are exempt from FBT or where the FBT liability is immaterial to them.
In these circumstances, we strongly recommend that you do so. If you provide a benefit but have no FBT liability, you are still required to lodge an FBT return to disclose the benefit provided and the fact that the benefit is exempt from FBT.
By lodging an FBT return, the ATO’s audit window will be limited to only three years from the date of lodgement. Otherwise, the ATO is entitled to go back an unlimited number of years to audit your business and possibly find areas where it will change your FBT and impose penalties.
Obligations if you provide fringe benefits
Registration: We recommend employers to register for FBT upon determining that they provide benefits.
Calculation: Accurately calculate FBT liabilities, considering available exemptions and concessions to reduce your FBT liability.
Record Keeping: Maintain requisite FBT records as stipulated by law.
Reporting: Report fringe benefits on employee payment summaries.
Lodgment and Payment: File FBT returns and remit FBT payments to the Tax Office by the deadline, typically 21st May each year.
Understanding FBT obligations is crucial for compliance and avoiding potential penalties. Calibre Business Advisory can offer assistance to employers throughout the process. If you have questions about FBT, please contact us on (02) 9261 2177. Our dedicated team will be more than happy to assist. Our expertise and up-to-date knowledge of tax laws and regulations can help ensure compliance.