Fringe Benefits Tax (FBT): Important action required
The FBT year ends on 31 March 2014 and is an area of focus for the Australian Taxation Office (ATO). The ATO have found a high level of misunderstanding about FBT among employers with many simply not realising that they have incurred a FBT liability. Key areas include motor vehicles and benefits provided by associated companies.
FBT is payable by employers when certain benefits are provided to former, current or future employees in addition to salary or wages. The benefit can be either provided directly by the employer or by a third party under an arrangement. FBT was introduced to prevent employers reducing the tax liability of employees by providing benefits to them that were not recognised as income. Most employers who provide fringe benefits to employees during the course of the year need to register and pay FBT.
Are you liable for FBT?
If you are not sure whether your business is providing fringe benefits to employees, here are some key questions you should ask yourself:
- Do you make vehicles owned or leased by the business available to employees for private use?
- Does your business provide loans at reduced interest rates to employees?
- Has your business forgiven any debts owed by employees?
- Has your business paid for, or reimbursed, any private expenses incurred by employees?
- Does your business provide a house or unit of accommodation to your employees?
- Does your business provide employees with living-away-from-home allowances?
- Does your business provide entertainment by way of food, drink or recreation to your employees?
- Do any employees have a salary package (salary sacrifice) arrangement in place?
- Has your business provided employees with goods at a lower price than they are normally sold to the public?
A common area of confusion is motor vehicles. Where a motor vehicle owned or leased by the business is used by an employee for private purposes (including travelling between home and the workplace), then FBT is an issue that needs to be managed. Once again, the ATO will be specifically targeting motor vehicles, particularly high value motor vehicles, which are owned or leased by businesses so it will be important for us to identify any potential FBT issues before the ATO does.
Another common area of confusion is entertainment. Entertainment can be almost anything from food, drink, recreation such as movie tickets, to non-work based travel. If you provided any entertainment benefits to employees, such as an employee attending a business lunch or party, then FBT may apply. Entertainment is an area of continued focus for the ATO as the FBT treatment also interacts with the treatment of these expenses for income tax and GST purposes.
What’s exempt from FBT?
Certain benefits are excluded from the scope of the FBT rules. The following work related items are exempt from FBT if they are provided primarily for use in the employee’s employment:
- Portable electronic devices (e.g. laptop, tablet, mobile, PDA, electronic diary, notebook computer, GPS navigation device) that are provided primarily for use in the employee’s employment (limited to the purchase or reimbursement of one portable electronic device for each employee per FBT year);
- An item of computer software;
- Protective clothing required for the employee’s job;
- A briefcase;
- A calculator;
- A tool of trade.
The next steps
We wish to remind you of your obligation to maintain odometer records for motor vehicles owned or leased by your business which are used by yourselves or your employees for personal use.
For each car your business owns or leases which fall within this category, please download and complete the Motor Vehicle Declaration form.
Once you have recorded the readings for 31 March, please return a copy of the declaration to our office.
If you have any queries concerning this matter, please contact our office.
If you need to register for FBT for the first time, we will complete this process for you and call you to talk through your obligations once you are registered.
If we can assist you with any information or queries you might have about FBT or determining if you are liable for FBT, please call our office on 9964 4942 or e-mail our office at firstname.lastname@example.org