As we near the end of the Fringe Benefits Tax (FBT) year [1 April 2022 – 31 March 2023], it’s crucial for businesses with employees to carefully review any fringe benefits they have provided to their staff. The Australian Taxation Office (ATO) continues to prioritize FBT compliance, and it’s essential to ensure that your business is meeting its tax obligations in this regard.
Understanding Fringe Benefits: Non-Cash Benefits Provided to Employees
A fringe benefit refers to any non-cash benefit that an employer provides to their employees, which is considered of a private nature and is not part of their regular wages. Some common examples of fringe benefits include:
- Motor Vehicles – If the business owns a vehicle that is made available for employees’ private use, including Utes.
- Meal and Recreational Entertainment – Expenses related to Christmas parties, Melbourne Cup events, offsite lunches, after-work drinks, event tickets or corporate boxes, and work retreats.
- Payment of Private Expenses on Behalf of Employees – This can include insurances, costs associated with privately owned vehicles, gifts exceeding $300, phone or internet expenses, gym memberships, school fees, and childcare expenses.
- Loans – Providing employees with loans without repayment or interest terms.
- Living Away from Home Allowances
- Car Parking Provided to Employees
If you believe that any of the above benefits or similar ones have been provided to your employees by your business or a third party, it’s important to consider whether these benefits may result in a liability for Fringe Benefits Tax (FBT).
Do You Need to Lodge an Fringe Benefit Tax Return?
If your business has a liability for Fringe Benefits Tax (FBT) due to the benefits provided to employees, it is a requirement to lodge an FBT return. For the 2023 FBT year, the return must be lodged on or before 25 June 2023 if filed electronically through a tax agent, or 21 May 2023 if lodged by paper or self-lodged.
We recommend still lodging an FBT return even if the liability is reduced to nil due to employee contributions or applicable exceptions and exemptions. This is because the Australian Taxation Office (ATO) has access to data from various sources to identify businesses that may not be meeting their FBT obligations, and penalties and interest may be imposed for failing to report fringe benefits provided to employees.
Not lodging an FBT return removes the time limit for the ATO to review prior year returns, while lodging the return generally restricts the review period to 3-6 years. It’s important to ensure compliance with FBT requirements to avoid potential penalties and interest.
Key Exceptions for Fringe Benefits Tax (FBT)
There are several common exemptions that may apply to your business. These include:
- Minor benefits – Benefits that cost less than $300 including GST per person and are provided on an infrequent and irregular basis. For example, Christmas parties that cost less than $300 per person and occur only once a year.
- Otherwise deductible costs – Expenses that would be tax-deductible to the employee if they incurred it directly. For instance, Income Protection Insurance or training courses related to their employment.
- Portable electronic devices – Devices provided primarily (over 50%) for the purpose of enabling the employee to do their job. This includes items such as iPads, laptops, and mobile phones.
- Exempt vehicles – Vehicles that are not principally designed for the purpose of carrying passengers, provided the private use is minor, infrequent, and irregular. This can include vans, Utes, trucks, and other similar vehicles.
It’s important to be aware of these exemptions and their specific requirements to determine if they apply to your business and can result in an exemption from FBT liability.
What’s New in Fringe Benefits Tax (FBT) for 2023
The 2023 FBT year has brought about significant changes that may impact a large number of employers. While not an exhaustive list, some key developments include:
- FBT exemption for electric cars – Depending on meeting specific criteria, the provision of electric cars to employees may now be exempt from FBT.
- High Court ruling on independent contractors – It’s important to note that ‘independent contractors’ may now be considered ’employees’ in the eyes of the ATO, potentially resulting in FBT liability for employers who utilize such contractors.
- Car parking – The ATO has expanded its definition of a commercial car parking station when considering parking facilities within a one-kilometre radius. This now includes airports, hospitals, and shopping centres.
- Motor Vehicle Logbooks – The ATO now requires more detailed information on the purpose of trips in motor vehicle logbooks. Simply listing “business” or “private” as the purpose is no longer sufficient. Employers are now expected to include addresses and names of clients, customers, or sites to provide more specific information.
In the interim, please remember to record the odometer readings for all of your vehicles on 31 March 2023, and ensure that your logbooks have been prepared within the last 5 years.
In some cases, an employee’s contribution towards these benefits may reduce or eliminate the FBT liability. Our team is available to assist you in determining your FBT obligations and any potential exemptions or reductions.