The Fringe Benefits Tax (FBT) year ends on 31 March. It is important that businesses are gathering information now to prepare their FBT return and if you haven’t lodged before, check whether you are offering fringe benefits to employees and need to lodge.
FBT generally hasn’t changed much in a long time. In a previous insight we looked at the common types of fringe benefits and their tax treatment.
In this insight, we explain what fringe benefits tax is and look at one relatively new FBT exemption. We look at why record keeping is more important than ever and how the Australian Tax Office is using data matching to ensure FBT compliance.
What is a fringe benefit?
A fringe benefit is a benefit provided to an employee, that isn’t their salary or wage, or employer contributions to superannuation.
There are many types of fringe benefits. Examples include using work cars for private purposes, car parking, gym memberships or reimbursing expenses such as school fees.
What is Fringe Benefits Tax (FBT)?
FBT is the tax employers must pay on certain fringe benefits they provide to employees or their associates. It is separate to income tax.
Employers pay FBT and it is generally calculated based upon the gross income their employees would have to earn, at the highest marginal tax rate (including the Medicare levy), to buy the benefits themselves.
If a benefit is subject to FBT, employers can claim an income tax deduction and GST credits for the cost of providing fringe benefits.
Benefits you provide to clients, such as entertainment, are not subject to FBT. As sole traders or partners in a partnership are not employees, their benefits are not subject to FBT.
Increased ATO data matching on FBT
The ATO is conducting more data matching than ever to determine whether businesses should be reporting fringe benefits and paying tax.
As well as looking at business activity statements and tax returns, the ATO also has access to data from vehicle leasing companies, the Roads and Maritime Service and insurance bodies to determine who owns, and who is benefitting from, company vehicles.
Good FBT record keeping is vital
There are, however, exemptions from FBT and with increased audits by the ATO, it is important that businesses have the correct records to prove they are eligible for an exemption.
One new FBT exemption – electric vehicles
Since July 2022 eligible zero or low-emission vehicles and associated expenses have been exempt from FBT. The exemption only applies if the first time the car was held and used was after 1 July 2022 and if luxury car tax has never been payable on the vehicle.
Electric motorcycles and scooters do not qualify for the exemption.
From 1 April 2025, plug-in hybrid electric vehicles will not be considered a zero or low emissions vehicle under FBT law. You will only be able to continue an FBT exemption if there is a financially binding commitment to continue providing private use of the vehicle. Optional extensions of leases do not qualify.
If your business is considering vehicle purchases, FBT exemptions in this area may be worth considering.
FBT lodgement dates
The FBT reporting year ends 31 March. In 2024 businesses must lodge their FBT returns by 21 May. If businesses use an agent such as Pitcher Partners Newcastle, the lodgement deadline is 25 June.
Expert help to navigate complex and time consuming FBT returns
FBT lodgement and compliance is complex and time consuming. The list of benefits that attract FBT and the list of exemptions is long.
Our experienced Tax and Business Advisory Accounting team love taking the pain out of preparing FBT returns. There may be some exemptions you are currently not claiming or some alternative, more tax advantageous, benefits you can offer employees. We take an integrated approach to your tax planning to not only minimise the amount of tax you pay but also to use the numbers to determine business strategy and decisions.
Have a question about Fringe Benefits Tax?
If you want to know more about Fringe Benefits Tax or need help with devising an FBT strategy or lodging FBT returns, please contact us.
Renae Korsman is a Partner at Pitcher Partners Newcastle and Hunter. She is a highly regarded and award-winning taxation strategist and business adviser. Renae applies her more than 25 years’ experience to proactively develop taxation strategies that meet the unique needs of a business, now and into the future.
