BDO has released udpated guidance on FBT compliance. Learn more about navigating Fringe Benefits Tax compliance, and ensure you're prepared for FBT season with our 2024 techincal update.
Employers who are not lodging Fringe Benefits Tax (FBT) returns should be aware that this is a key risk and ongoing area of focus for the ATO. Not all employers are required to lodge FBT returns, however the ATO may require them to justify their decision not to lodge. In this article, we’ve outlined some key points and provided a checklist to assist employers in navigating FBT requirements.
In our 2022 webinar we provided an overview of FBT matters to consider for the 2022 FBT year and beyond.
When is an FBT return necessary?
Whenever a benefit is provided to employees, the requirement to lodge an FBT return may be triggered. This requirement may be satisfied quite easily for a number of reasons:
- The definition of ‘benefit’ is quite broad. The ATO have provided a list of questions to help employers identify when a benefit is being provided and our checklist is a good reference
- The benefit does not have to be provided directly to the employee. A benefit provided to an associate of the employee may also trigger FBT
- The benefit does not have to be provided by the employer, or even with the employer’s knowledge.
What about benefits with nil value?
Employers providing benefits that have nil taxable value for FBT purposes are not strictly required to lodge an FBT return. However, it may well be advisable to do so. Without lodgement of an FBT return there is no time limit on the ATO’s power to revisit prior years. In contrast, where returns are lodged the ATO review powers are generally limited to between three and six years prior.
This is particularly important when benefits have a nil value due to employee contributions. If an error is detected in how benefits have been calculated, the employee contribution could be insufficient to eliminate the amount of FBT payable. In this situation, there is no time limit on the ATO’s power to raise additional assessments of FBT for prior years.
The impact of specific types of benefits
Vehicle fringe benefits are very common and employers are provided choice as to the method they use to calculate the taxable value of car fringe benefits. However, the election which must be made in order to use one of these methods - the ‘operating cost method’ - can only be completed when lodging an FBT return. Employers that use the operating cost method, even where the taxable value of the benefit is reduced to nil via employee contributions, are effectively required to lodge FBT returns.
Are you providing a fringe benefit?
The following questions are examples from our checklist, that can help you to determine whether you may be providing a fringe benefit and are liable for Fringe Benefits Tax (FBT):- Do you make cars or other vehicles owned or leased by the business available to employees for private use, including a car garaged at the employee’s place of residence?
- Do you provide your employees with entertainment by way of food, drink or recreation?
- Do you provide car parking for your employees within one kilometre of a commercial car parking station (which can include a shopping centre or hospital car park)?
If you answered yes to any of these questions, you may be required to lodge an FBT return. Use our checklist to help determine whether you may be liable for FBT.
If you would like to discuss your situation and whether you are required to lodge a return, contact your local BDO adviser.