Are you meeting your fringe benefits tax obligations?

Sunday 24th March 2024

Are you meeting your fringe benefits tax obligations?

Sunday 24th March 2024
Written by Dan Sullivan

With the fringe benefits tax year ending on 31 March, it’s important that you familiarise yourself with this business tax and make sure you know what your reporting and payment fringe benefits tax obligations are. 

We know that FBT is often known as the tax that everybody hates. But we guarantee you’ll dislike it even more if you don’t meet your FBT obligations and get caught out, as standard failure to lodge (FTL) penalties apply. 

fringe tax benefits, FBT, FBT liabilities, ATO, business, advice 

Am I required to pay FBT?

Generally speaking, if you have employees and you provide them or their associates (typically family) with certain benefits in place of or as well as salary, you must register and pay fringe benefits tax, including those under a salary sacrifice arrangement.

Examples of fringe benefits include:

  • Use of a work car for business and/or personal use
  • Paying for all or part of private health insurance premiums
  • Providing housing either rent-free or at a reduced rate
  • Gifting tickets to concerts or sporting events
  • Paying for education and training costs
  • Giving a discounted loan
  • Offering discounts on products or services your company provides

Importantly, FBT is separate from income tax and is based on the taxable value of the various fringe benefits you’ve provided. 

fringe tax benefits, FBT, FBT liabilities, ATO, business, advice

What are my FBT obligations?

If you do provide fringe benefits to your employees, you must be registered for FBT. If the taxable value of the benefits provided is greater than zero, you’ll need to lodge an FBT return. 

After lodging, you may also be required to make quarterly FBT instalments as part of your Business Activity Statement (BAS) reporting. 

The FBT tax year runs from 1 April of the previous year to 31 March of the current year. Lodgements and payments (FBT liabilities) must be made each year by 21 May or 25 June if Maxim is lodging for you.

We recommend you lodge an FBT return even if no tax is payable. It’s not a legal requirement but reduces the ATO’s audit window to only three years. 

How much FBT do I have to pay?

To work out how much FBT you need to pay, you must ‘gross up’ the taxable benefits of the fringe benefits you’ve provided.

This means applying one of two different gross-up rates, depending on whether you’ve claimed GST on the benefit.  

The FBT you pay is 47% of the grossed-up value of the benefits. 

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How can I reduce my FBT liability?

There are ways to reduce your FBT liability while still providing your employees fringe benefits, as follows:

  • Ask for employee contributions - For most fringe benefits, the taxable value can be reduced by the amount the employee contributes towards it (usually done in cash)
  • Offer a cash bonus instead of a benefit - The employee must pay income tax on the benefit
  • Provide exempt or concessional benefits - This can include:

           - Work-related items (laptops, mobile phones, printers, software, protective clothing, tools of the trade)

           - Minor benefits (value of less than $300), provided they’re infrequent

           - Emergency assistance

           - Retraining and reskilling

           - Taxis and public transport

           - Work use of an eligible vehicle

           - Eligible electric or plug in hybrid vehicles

           - Food and drink consumed on your business premises

Make sure you keep records

As an employer, you must keep all records of the fringe benefits you provide to your employees and associates. This includes how you calculated them.

You must also keep records if you want to apply for various exemptions or concessions that reduce your FBT liability. 

Examples of FBT records include:

  • Calculations 
  • Employee declarations 
  • Invoices 
  • Travel diaries
  • Fleet management records
  • Logbooks
  • Odometer records
  • Valuations – if and when required

You generally need to keep your records for five years from the date your FBT was lodged. 

Be aware that the ATO data matches with motor vehicle registries and will look for disclosures of MV expenses and employee contributions in tax returns. 

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The FBT deadline is looming—take action!

With the 31 March deadline only a few days away, it’s important you start thinking about your fringe benefits tax obligations. If you haven’t got your FBT ducks in a row yet, ensure it’s on your priority to-do list. 

If you need assistance determining whether benefits are exempt or the taxable value of your benefits can be reduced, please contact your Maxim Advisor or contact our team

fringe tax benefits, FBT, FBT liabilities, ATO, business, advice