The end of the Fringe Benefits Tax (FBT) year is nearly upon us – 31 March 2022
With summer now in the rear-view mirror, we hope you’re feeling a little more in control of your life. Christmas is over, school is back, wedding season is coming to an end, and your calendar is a little less full. Cue: breathe a sigh of relief… Well, before you get too comfortable, we’re here to throw a spanner in the works!
Get that pen out and the diary ready, because the end of the Fringe-Benefit-Tax year is looming: 31 March 2022. Got it in the calendar? Good.
Before we begin with our list of things for you to do, let’s quickly refresh on what Fringe-Benefit-Taxes (FBT) 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.
- Should I be registered for FBT?
- Should I lodge a FBT Return even if no FBT is payable?
- What is exempt from FBT?
- Are there any special COVID-19 exemptions with FBT?
- How can I reduce my FBT liability?
- FBT risk areas
- Key things you MUST do on 31 March 2022
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.
If you love the detail and you’d like to know more, we also have a number of specially prepared FBT Factsheets that you can request from us to help you better understand your FBT obligations as a business owner.
Ok, let’s get stuck in.
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 25 June 2022. However, as this is a Saturday the ATO will provide until Monday 27 June 2022 for lodgement.
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.
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 any of these tests – see our Applying the Minor & Infrequent Benefits Exemptions factsheet.
ARE THERE ANY SPECIAL COVID-19 EXEMPTIONS FOR FBT?
COVID-19 changed the way so many businesses work. The good news is, some of the benefits you may have provided your employees to allow them to work from home or in other ways may be exempt from FBT.
Working from Home
You may have provided employees with items to allow them to work from home (or from another location) due to COVID-19. Some items will usually be exempt from FBT if they are primarily used by your employees for work. The items include:
- Portable printers
- Other electronic devices.
Also, the minor benefits exemption or the otherwise deductible rule may apply if you:
- Allow your employee to use a monitor, mouse or keyboard they otherwise use in the workplace, or
- Provide them with stationery or computer consumables or pay for their phone and internet access.
You may need to pay FBT on items you gave your employees to help protect them from contracting COVID-19 while at work. These include:
- Anti-bacterial spray
However, these benefits are exempt from FBT under the emergency assistance exemption if you provided them to employees:
- Who have physical contact with – or are in close proximity to – customers or clients while carrying out their duties, or
- Are involved in cleaning premises.
Examples of this type of work include those in the medical (such as doctors, nurses, dentists and allied health workers), cleaning, airline, hairdressing and beauty, retail, café and restaurant industries.
Please note if your employees’ specific employment duties are not of the kind described above, the minor benefits exemption may apply if you provided an employee with minor, infrequent and irregular benefits under $300.
Motor Vehicles during COVID-19 restrictions
Fringe benefits don’t apply to company vehicles unless they are subject to private use by an employee.
During a period of COVID-19 restrictions, a car that you have provided to your employee is not taken to be available for your employee’s private use if all of the following apply:
- The car is returned to your business premises
- Your employee cannot gain access to the car
- Your employee has relinquished an entitlement to use your car for private purposes.
If you have been garaging work cars at your employees’ homes due to COVID-19, you may not have an FBT liability depending on:
- The type of vehicle
- How often the car is driven, and
- The calculation method you choose for car benefits.
There are other COVID-19 FBT exemptions that may apply to you, so again we recommend that you read the ATO COVID-19 and car fringe benefits factsheet so you can provide us with all required information to ensure you minimise any FBT payable.
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.
FBT RISK AREAS
According to the ATO’s latest statistics, the net FBT gap estimate for 2018-2019 was approximately $1.13billion! Due to this, they are using data to identify employers who are not meeting their FBT liabilities. Information is collected from many different sources including:
- Income tax returns and business activity statements
- Single touch payroll (STP)
- Data-matching programs with third parties such as insurance companies (have you purchased a life-style asset such as a boat in your business?)
Please reach out to your Ipsum Advisors contact or the FBT team to discuss any potential risk areas for your business.
KEY THINGS YOU MUST DO ON 31 MARCH 2022
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 2022. We’ll rely on this information when we complete your 2022 annual Financial Statements.
Here’s a summary of what you need to do:
On Thursday 31 March 2022, 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.)
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.
Here’s to a streamlined FBT return for all.