Fringe Benefits Tax – Why you should lodge?

What is Fringe Benefits Tax?

Fringe Benefits Tax (FBT) is a tax levied on employers on certain benefits they provide to their employees. It is different to income tax and the employer must self-assess their FBT for the FBT year (1 April – 31 March) and lodge an FBT return. Employers can claim an income tax deduction for FBT paid during the year, as well as claim GST credits on the FBT items.

Who should lodge an FBT return?

If you are a business that has employees you should consider lodging and FBT return, even if you have no FBT payable. The ATO has a three-year deadline to commence audit activities, this time period starts from when the FBT return is lodged. If no return is lodged, the ATO can audit as far back as the business had employees. Without the evidence that FBT was not payable in that year, the ATO will likely raise an FBT liability, even when the employee no longer works for the business.

What gives rise to an FBT Liability?

There are multiple ways that a business can incur an FBT Liability, below is a non-exhaustive list of the most common types of fringe benefits:

• Car fringe benefits
• Entertainment (food, drink, recreational activities)
• Gym Memberships
• Employee discounts
• Benefits under a salary sacrificing arrangement
• Reimbursing private expenses
• Car parking

To work out your FBT liability you take the value of the benefit, apply it by the relevant gross up margin (2.0802 or 1.8868), then times it by the FBT rate (47%).

What items are exempt from FBT?

There are also many items exempt from FBT, the most recent item added to the list were Covid 19 tests. In addition to this, the following items are also exempt for FBT:

• Work related items (phones, tablets, printers, software, protective clothing, briefcases, tools of trade)
• Retraining and Reskilling
• Minor FBT Exemption (less than $300 provided it is minor and infrequent)
• Taxi Travel
• Concessions for particular entities (eg not for profits, charities and other such entities)
• Living Away From Home Allowance Fringe Benefits
• Emergency Assistance

There are also several other concessions available depending on the benefit provided.

What records do I need to keep?

The type of benefit that you provide will determine the documentation that you need however the following are examples of types of records you should keep:

• Calculations
• Worksheets
• Employee Declarations
• Elections
• Invoices
• Receipts
• Lease Documents
• Travel Diaries
• Logbooks
• Odometre Readings

It is important to keep these documents for five years from the date your FBT return was lodged.

How do I reduce my FBT Liability?

You can consider the following options:

• Replace the benefits received with salary
• Only provide benefits that your employees would be entitled to claim as income tax deductions
• Only provide benefits that fall into an exempt category
• Use employee contributions for benefits subject to FBT

What do I do next?

Contact us for a copy of the FBT Questionnaire so that we can assess and get on top of your FBT liability for the year.