It’s that time of year again. The FBT year which runs from 1 April to 31 March is over. This means that employers providing fringe benefits to their employees (and employee associates, such as family members), in addition to salary or wages, are required to lodge the necessary FBT returns. The term “employees” includes current, future or past employees, but does not cover contractual workers.
Some employers offer fringe benefits to attract top talent since these are not covered by income tax. Instead, FBT is determined based on the taxable value of the benefits provided by the employer and is paid for by the company.
So, if FBT is a grey area for you, yet you currently provide fringe benefits to your staff, you need to be sure of your taxation obligations. You need to understand how FBT could affect your business, your record-keeping obligations for the year (which ends on 31 March 2020), and how to register.
Know what constitutes fringe benefits
The Single Touch Payroll (STP) system introduced by the Australian Taxation Office (ATO) last year means that the ATO already has real-time access to employers and employee information. So if you are providing some type of fringe benefit to your employees, the ATO would expect you to lodge an FBT return and make the necessary payment (usually by 21 May).
Now that the 2019 FBT year is fast approaching, there’s no time like the present to undertake a review of the fringe benefits you may be providing your staff. These typically include the following:
- Entertainment: This can take the form of meal or recreation entertainment, including your annual staff Christmas party, food and drink or meals with clients and/or employees, etc.
- Car fringe benefits: This includes scenarios where the employer ‘holds’ a vehicle available for the employee’s personal use, or when an employee is provided with a company car as part of their salary package. Car fringe benefits also encompass novated lease arrangements and dual cabs.
- Taxi travel: This fringe benefit takes the form of non-work related taxi travel, taxi travel when an employee is sick, goes to a clinic or is hospitalised, and taxi travel relating to work or a function or a combination of these.
Aside from the above, other fringe benefits you may be offering but are not aware are covered by the FBT include:
- Reimbursements of expense payments (e.g. school fees)
- Low-interest loans
- Car parking
- Home internet costs (especially for work-from-home arrangements)
- Domestic and overseas travel (may include spouse, dependant or nominee)
- Living-away-from-home allowances
- Remote area housing
Necessary steps to get you covered for the FBT year
After checking and identifying the fringe benefits you provide to employees, there are a few more items you need to take care of. These are as follows:
- Ensure you have FBT policies and procedures in place.
- Get copies of logbooks and other necessary verifiable documentation, where necessary. An example of this would be a logbook recording the private use of a particular vehicle by an employee.
- Ensure you have the necessary information to apply relevant exemptions or reductions by evaluating accounting records.
- Collect supporting documents for reimbursed expenses from concerned employees. These include invoices, official receipts, bank statements, tickets, etc.
- Obtain the required FBT declarations from concerned staff.
- Register for FBT.
- Calculate the FBT you have to pay.
- File all records relating to the benefits you provide together, including the FBT calculations you made.
- Lodge your FBT return and speak with an accountant to see if you can potentially reduce your FBT payable to $0. This may be possible via an employee contribution.
- Ensure you include all reportable fringe benefits in the payment summary of your employees, or in the Single Touch Payroll (STP) income statement.
If you’re having difficulty identifying and documenting the fringe benefits you provide, you can always seek the assistance of a professional accounting firm. Once you’re done with all these, calculating costs for the next FBT year should be a breeze.