The Fringe Benefits Tax (FBT) year ends on the 31st of March. And, with ever increasing budget deficits, the Australian Tax Office is reviewing whether all employers, who should be paying FBT, are paying and are paying the right amount.
In order to help you meet your FBT obligations, Siragusa has put together a list of essentials everyone needs to know about FBT. You will need to review every year. They include:
- Should I be registered for FBT?
- What is exempt from FBT?
- Are the benefits I pay my employees minor and infrequent?
- Do I need to review our salary sacrifice agreements?
- How can I reduce my FBT liability?
- What do I need to provide my accountant with?
- Is there an easier way to manage vehicle log books?
- Are you aware of safe harbour provisions for vehicles?
- Do I need to lodge an FBT return if not FBT is payable?
We have answered some of these questions below, for you, as well as discussing
1: Should I Be Registered for Fringe Benefits Tax?
If you have employees, including directors, and you provide them with entertainment, cars, car parking, employee discounts or you reimburse private expenses, then you are likely providing a fringe benefit. As a result, you will need to register your business for FBT.
It is also important that you start gathering the details of these benefits as soon as possible, so your accountant can calculate any potential FBT liability.
2: What is Exempt from Fringe Benefits Tax?
Are you providing the following items or similar?
- Mobile phones
- Tablets
- Laptops
- Portable printers
- Tools
- Protective clothing
- Minor and infrequent benefits less than $300 in value
If so, then you are unlikely to need to worry about FBT. Exemption from FBT only applies f the benefits are minor and infrequent.
3: Is There an Easier Way to Manage Your Vehicle Log Books?
If you have 20 or more cars required for your business – from cars for sales reps that are travelling extensively for the business to trade trucks, the ATO has a new process for validating the business use percentage of the car. This is known as the simplified method and if you meet the right conditions, you can apply an average business use percentage to all cars in your fleet for the first log book year and then the next 4 years. The conditions include:
- Each fleet car has less value than the luxury car limit when purchased (around $65,094)
- Your employees can’t choose to receive additional renumeration in lieu of using the cars
- Cars are not provided under a salary packaging arrangement/employee renumeration package
- The employer chose the make and model of the car, not the employee
- Valid log books are kept for at least 75% of the cars in the log book year
4: Are You Aware of Safe Harbour Provisions for Work Vehicles?
The ATO has now released the safe harbour guidelines for employees who are provided with “workhorse” vehicles like vans and utilities. Where the vehicle first meets the definition of a workhorse vehicle and the private use of the vehicle satisfies the following conditions, then the car will be exempt from FBT:
- No single, return journey undertaken by an employee that is wholly private purpose exceeds 200kms
- Any diversion for private travel between the employee’s home and work, add no more than 2kms to the ordinary length of the trip
- No more than 750kms in total for each fringe benefits year are taken for wholly private purposes
5: How Can I Reduce My Fringe Benefits Tax Liability?
Siragusa has provided some ways that you can reduce your FBT liability. These include:
- Look at providing benefits that are exempt from FBT
- Replace fringe benefits with cash salary
- Provide benefits that your employees can claim as an income tax deduction if they had to pay for the benefits themselves
- Use employee contributions
o i.e: an employee paying for some of the operating costs of a car, such as fuel, that you don’t have to reimburse them for
o These may be subjected to GST
6: Should I Lodge a Fringe Benefits Tax Return Even If No FBT is Payable?
If there is no FBT payable there is no legal need to lodge and FBT return. However, should you lodge one anyway? Our answer is, yes. Even when there is no legal obligation to lodge an FBT return, you should lodge one regardless. This reduces the ATO’s audit window to only three years. As a result, it is important to lodge a return even when there is no FBT payable.
Do you need help or advice when it comes to fringe benefits tax? Siragusa can help you sort out your FBT requirements so you remain tax compliant. Contact us today!