It’s that time of the year again. The Fringe Benefits Tax (FBT) year ended on 31 March 2017 and as an employer, you will need to calculate your FBT liability and lodge your FBT return by the lodgement due date of 21 May (or 25 June for tax agents). As FBT is a complex area, we have included below the top 3 tips to help you determine your FBT obligations.
Tip 1 – Have you provided fringe benefits to your employees?
FBT arises when an employer provides certain fringe benefits to their employees (or their families or other associates). Listed below is a summary of the most common types of fringe benefits employers provide:
Car fringe benefits
This is the most common fringe benefit provided to employees which arises when a vehicle is used or able to be used for private use.
Entertainment
Another common fringe benefit, entertainment includes:
– Meals and drinks, cocktail parties and staff social functions such as the annual Christmas party
– Sporting or theatrical events, sightseeing tours and holidays
– Entertaining employees and non-employees (for example, clients) over a weekend at a tourist resort or providing them with a holiday.
Please note that food and drink provided to employees on ordinary working days, such as morning or afternoon teas are not usually included.
Car parking fringe benefits
If your employee parks their car on your business premises, an FBT liability arises where there is a commercial parking station that is within a one kilometre radius of your business premises.. If you are a small business with gross total income of less than $10 million, an exemption is available if the car is not parked in a commercial parking station.
Expense payment fringe benefits
If your employee incurs expenses and you reimburse them or pay a third party for the expenses, you may be providing an expense payment benefit. Examples include school fees; private telephone bills; rates and land taxes, life and health insurance premiums, etc., all of which could be subject to FBT.
Tip 2 – Have good records.
Once you have determined that you have provided fringe benefits to your employees, you will need to ensure that you have adequate records to assist with the calculation of your FBT liability. Listed below are the information requirements for the fringe benefits mentioned above:
Car fringe benefits
– Is a properly maintained logbook available?
– Opening and closing odometer readings
– Operating costs such as petrol, insurance, registration, repairs and maintenance
Entertainment
When giving staff gifts, you will need to record:
– The amount you spent
– The type of gift – gifts such as hampers are treated differently to tickets to a sporting event
– Who you are giving the gift to as there are different rules for employees and clients
For your work Christmas party, you will need to record:
– The cost of the party
– When and where it is held – a party at work on a usual work day is treated differently to an event outside of work
– Who are the attendees – is it only employees or are partners and clients also attending
Car parking fringe benefits
If you are not eligible for the small business car parking exemption, you will need to record:
– If you have provided car parking facilities to employees on premises that you own or lease
– If there is a commercial all day car park with in a kilometre radius that charged more than $8.48 per day at the beginning of the FBT year
Expense payment fringe benefits
– The name of the employee for whom it was paid
– The date, nature and amount of the payment
– The extent to which, if any, that the payment is tax deductible to the employee
Tip 3 – Contact your Altitude Adviser
Determining your FBT liability is a complex process. Some benefits are exempt from FBT or receive concessional treatment. Before completing your return, it would be prudent to seek advice that is relevant to your specific circumstances.
Should you require any assistance, please do not hesitate to contact your Altitude Adviser.
Written by Tejal Nadkarni
