The Most Common FBT Mistakes
Fringe Benefits Tax or (FBT) is a Federal tax payable by employers who provide taxable fringe benefits to employees, or associates of employees, in respect of their employment, other than exempt benefits. There is some confusion amongst businesses in regards to exempt benefits.
Some benefits are exempt because of the nature of the employer, some because they are ‘minor’ and others are specifically exempt. Click here for the ATO’s list of FBT exempt items.
Common FBT Mistakes To Avoid
It may seem obvious, but salary of course is not a fringe benefit, and neither is a superannuation contribution. Entitlements under employee share acquisition schemes are not deemed to be a fringe benefit, nor are termination payments.
But you are giving a fringe benefit if, for example, you allow a staff member to use a work car for private purposes, give one of them a cheap loan, reimburse another for a private expense, such as school fees, or generally provide entertainment or recreation — and for FBT purposes, this would include, for example, taking clients to sporting events or other activities.
The ATO has released the following points to keep in mind to avoid what it has found to be the most common FBT mistakes:
- business vehicles garaged at an employee’s residence may be a car fringe benefit
- you must keep logbooks when using the operating cost method for calculating vehicle benefits
- when you use the operating cost method, the luxury car tax threshold does not apply when calculating the deemed interest and depreciation
- contributions an employee makes to the employer to reduce the taxable value of a fringe benefit
- are assessable income for income tax purposes
- are possibly taxable supplies for goods and services tax (GST) purposes
- if your employees have incurred any fuel and oil expenses they need to provide you with a declaration to substantiate these expenses
- directors running their business through a company may be regarded as employees. This may mean that fringe benefits provided to directors result in the company having FBT obligations
- when you include reportable fringe benefits on an employee’s payment summary, you must lodge an FBT return.