2023 Fringe Benefits Tax (FBT)
We understand that not everyone is familiar with the Fringe Benefits Tax (FBT), but that’s why we’ve created this blog, so you can access everything you need to know.
What is FBT?
Before we begin with our list of things for you to do, let’s quickly refresh on what Fringe-Benefit-Taxes are (for all the newbies in the room). FBT refers to a ‘payment’ made to an employee outside of their wage/salary. This can include the personal use of a work vehicle, discounted loans, reimbursed expenses, and entertainment items like tickets to concerts.
To help you meet your FBT obligations, we’ve put together a hit list of essentials every employer needs to know about FBT and review every year. These include:
- Should I be registered for FBT?
- Should I lodge a FBT Return even if no FBT is payable?
- Key things you MUST do on 31 March 2023
- What is exempt from FBT?
- What’s new in 2023?
- How can I reduce my FBT liability?
You’ll find all this and more below. We’ll be honest with you – it’s a long read, but it’s an important one.
Should you be registered for FBT?
Generally, if you have employees (including Directors) and you provide them with cars, car parking, entertainment (food and drink), employee discounts, loans, or reimburse private expenses, then you are likely to be providing a fringe benefit and we will need to register your business for FBT.
It’s important you start gathering all the details of these provided benefits as soon as possible so we can calculate any potential FBT liability and lodge and pay (if applicable) your FBT return on time – due 26 June 2023.
Should you lodge an FBT Return even if no FBT is payable?
Where no FBT is payable there is legally no need to lodge an FBT return, but should you lodge one anyway?
Our strong recommendation is yes!
This restricts the ATO’s audit window to only three years from the date of lodgement. Otherwise, the ATO is entitled to go back an unlimited number of years and audit your business and possibly find areas where they will charge you FBT and penalties.
See our FBT Factsheet outlining why a FBT return is a good idea even when no FBT is payable.
Key things you MUST do on 31 March 2023
While we’ve been pretty clear that we recommend you register for FBT and if applicable lodge a Nil FBT Return, if you decide not to, there’s still key information that we need you to record as of 31 March 2023. We’ll rely on this information when we complete your 2023 annual Financial Statements.
Here’s a summary of what you need to do:
- On Friday 31 March 2023 (today), when your employees have finished their travel for the day, request your team to each take a photo of their vehicle odometer readings using their phones and email it to you, or to a nominated person in your business. Having vehicle odometer readings for all business vehicles is vital for us to be able to examine ways your FBT can be reduced.
- Carefully manage the private use of business cars, including the travel between home and work. The ATO is conducting a data matching program aimed at motor vehicles to capture benefits that aren’t currently being reported through FBT. If you are selected for a review, the ATO will review your vehicle odometer readings and calculate the distance between your employee’s home and your office. If significant variances are identified a full ATO audit may follow.
- Review all meal and entertainment expenses provided to employees, associates and clients and prepare a register that outlines the following for every event:
- The total cost (GST inclusive)
- How many employees were present and their names
- How many employees’ associates were present and their names
- How many clients were present (names not needed)
- The nature of the event (dinner, lunch, coffee, drinks, etc.
What items are exempt from FBT?
If you provide items like mobile phones, laptops, tablets, portable printers, protective clothing, tools of trade etc, or minor and infrequent benefits that are less than $300 in value, it’s unlikely that you’ll have to worry about FBT.
The exemption only applies if the benefits are both minor and infrequent. To find out if you pass these tests – see our Applying the Minor & Infrequent Benefits Exemptions factsheet.
What’s new in 2023?
From 1 July 2022 employers do not pay FBT on eligible electric cars and associated car expenses. This new incentive encourages Australians to purchase zero or low emission vehicles and allows employers and employees to support the environment too!
So, what is required to be eligible?
- The car meets the ATO’s criteria of a zero or low emission vehicle
- Including, battery electric, hydrogen fuel cell electric vehicles or plug-in hybrid electric vehicles. We note, plug-in hybrid vehicles will not be considered zero or low emission vehicles from 1 April 2025
- It meets the definition of a ‘car’, being designed to carry a load of less than 1 tonne and fewer than 9 passengers (including the driver)
- The first time the car is both held and used is on or after 1 July 2023
- The car is used by a current employee or their associates (i.e. family)
- Luxury car tax (LCT) has never been payable on the importation or sale of the car
- The LCT threshold for the 2022-2023 financial year is $84,916 for fuel efficient vehicles or $71,849 for all other vehicles
Other important factors to consider:
- Associated car expenses relating to electric vehicles which are exempt include:
- Repairs and maintenance
- Fuel (including electricity to charge and run electric cars)
- The cost of home charging stations are not included in the exemption
- Reportable fringe benefits
- Whilst the private use of eligible electric cars is exempt, employers are required to include the total taxable value of the benefit on their employees payment summary via a reportable fringe benefit
- This inclusion does not increase an employees taxable income, but will be included in the calculation of Medicare Levy Surcharge liability, incomes tests for family assistance, child support assessments and some other government benefits and obligations
You can find out more at the ATO’s Electric Vehicles & Fringe Benefits Tax factsheet.
How can I reduce my FBT liability?
We love helping our clients reduce their FBT liability. Here are some ways to do that:
- Replace your fringe benefits with cash salary;
- Provide benefits that your employees would be entitled to claim as an income tax deduction if they had to pay for the benefits themselves;
- Look at providing benefits that are exempt from FBT; and
- Use employee contributions, for example, an employee paying for some of the operating costs of car fringe benefit such as fuel that you don’t reimburse them for. You need to be aware that employee contributions will be deemed assessable income to you and subject to GST.
If you are already registered for FBT, a separate information pack will be provided to you for review, completion and return to our office. That means there’s nothing more to do until you receive this material.
If you’re not registered for FBT (and believe you should be) or if you have any further questions, please reply to this email or phone 03 5442 2966.