Every 31 March, the fringe benefits tax (FBT) year ends. With the ever-increasing budget deficits as a result of COVID-19, the Australian Taxation Office (ATO) will be reviewing whether all employers who should be paying FBT, are paying it and that they are paying the right amount.
To help you meet your FBT obligations, this blog examines the essentials every employer needs to know about FBT and review every year.
Should you be registered for FBT?
Generally, suppose you have employees (including directors), and you provide them with cars, car parking, entertainment (food and drink), employee discounts, loans, or reimburse private expenses. In that case, you are likely to be providing a fringe benefit, and your business will need to be registered for FBT.
Should you lodge an FBT return even if no FBT is payable?
Where no FBT is payable, there is legally no need to lodge an FBT return, but should you lodge one anyway?
Yes, our strong recommendation is to lodge an FBT return, even if no FBT is payable.
This restricts the ATO’s audit window to only three years from the date of lodgement. Otherwise, the ATO is entitled to go back an unlimited number of years and audit your business and possibly find areas where it will change your FBT and penalties.
How the ATO identifies potential audits
Some of the common expense codes that the ATO will review include:
- Employee/staff amenities
- Advertising and promotional expenses
- Travelling expenses
- Motor vehicle expenses
- Motor vehicle expenses (workhorse vehicles)
- Employee loans.
As part of an FBT review, the ATO can also access other databases to ensure that employers are compliant. One example of this is accessing state government records to confirm all motor vehicle purchases by an employer and ensuring that these are properly accounted for in both the financial statements and from an FBT point of view.
Key things you must have done by 31 March
While it is strongly recommended that you register for FBT and, if applicable, lodge a Nil FBT return, if you decide not to, there is still key information you need to record as at 31 March. This information will be needed for the completion of your annual financial statements. Here is a summary of what you need to have done:
- On 31 March, when they have finished their travel for the day, request your team each take a photo of their vehicle odometer readings using their phones and email it to you, or to a nominated person in your business to collate them all for you. Having these vehicle odometer readings for all business vehicles is vital to examine ways your FBT can be reduced.
- Carefully manage the private use of business cars, including the travel between home and work. The ATO is conducting a data matching program aimed at motor vehicles to capture benefits that are not currently being reported through FBT. If you are selected, the ATO will review your vehicle odometer readings and calculate the distance between your employee’s home and your office. If significant variances are identified, a full ATO audit may follow.
- Review all meal entertainment expenses provided to employees, associates and clients and prepare a register that outlines the following for every event:
- The total cost (GST inclusive)
- How many employees were present and their names
- How many employees’ associates were present and their names
- How many clients were present (names not needed)
- The nature of the event (dinner, lunch, coffee, drinks, etc.)
Contact KMT accountants now if you need advice or assistance with FBT Return lodgement!
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.