Another FBT year has come and gone

[ Why is it so important to consider FBT ]
by Josh Smith Published

If you are a business that employs staff you are required to consider what fringe benefits you have provided to employees during the year ended 31 March 2018.

WHAT IS A FRINGE BENEFIT

A fringe benefit is essentially any benefit you provide to your employees that is not part of their wages.

The common types of benefits we see are:

  • Provision of cars to employees
  • Entertainment such as lunches, after work drinks, Christmas parties or corporate boxes
  • Payment of private expenses on behalf of employees
  • Living away from home allowances
  • Provision of car parking to employees

If you provide any of these benefits to employees you will need to consider whether that benefit results in an FBT liability. In some cases, you can use employee contributions to eliminate the FBT liability. We can assist you in making that determination.

DO YOU NEED TO LODGE AN FBT RETURN?

You are required to lodge an FBT return if the benefits you provide to employees result in an FBT liability. For the 2018 FBT year this return must be lodged on or before 21 May 2018.

The ATO use data from a variety of sources to identify businesses that may not be meeting their FBT obligations. Penalties and interest may apply where you fail to report fringe benefits provided to employees.

If in doubt you should consider lodging a nil FBT return to reduce this risk.

WHAT ARE THE KEY EXCEPTIONS?

There are a few common exemptions which might apply to you. These are:

  • Minor benefits – costing less than $300 per person and provided on an infrequent and irregular basis. For example, Christmas parties which generally cost less than $300 per person and only occur once a year.
  • Otherwise deductible costs – expenses that would be tax deductible to the employee if they incurred it directly.
  • Portable electronic devices - devices [such as iPads, laptops, mobile phones, etc] provided primarily [over 50%] for the purpose of enabling the employee to do their job.
  • Exempt vehicles – vehicles which are not principally designed for the purpose of carrying passengers [such as vans, utes, trucks, etc] and the private use is minor, infrequent and irregular.

WHAT'S NEW IN 2018

RATE CHANGES

In line with the removal of the temporary budget repair levy the FBT rate was reduced from 1 April 2017 to 47%.

NEW GUIDELINES RELEASED

1. Simplified logbook requirements

Last year the new simplified logbook requirements were released for fleets of 20 cars or more.The ATO this year has released further guidelines to assist in the correct application of these rules.Put simply for businesses that have more than 20 vehicles you can now apply an average business use percentage to all vehicles within the fleet. To apply these rules you must have at least 20 ‘eligible’ vehicles which are provided to employees to carry out their work. All employees must be required to keep logbooks and you must hold valid log books for at least 75% of those ‘eligible’ vehicles. If you meet these base requirements you may be able to use that average business use percentage for 5 FBT years.

2. Small Business Entities

The ATO have confirmed that where concessions are available for ‘small business entities’ the new threshold for FBT purposes will now be $10 million turnover in line with the new definition for tax purposes. For example, a small business can provide multiple work-related portable electronic devices of the same kind to an employee during the FBT year.

3. Private Use of Exempt Motor Vehicles

Draft Practical Compliance Guidelines have been released outlining what the ATO will accept as minor, infrequent and irregular in relation to the use of exempt vehicles.The following is a summary of these guidelines;

a) Any diversions for private purposes add no more than two kilometres to the trip (e.g.,dropping children off at school on the way to work);

b) Total private kilometres cannot exceed 750 kilometres for each FBT year; and

c) No single, return journey of a private nature exceeds 200 kilometres.

WHAT YOU NEED TO DO

If you are a businessDEPOT client that employs staff you will shortly receive an information pack which outlines what you need to consider for the 2018 FBT year.

If you have any questions or need any assistance with meeting your FBT obligations please contact us at 07 3193 3000.

Josh Smith
read more by Josh Smith

Josh is a member of our specialist tax team providing advice on a wide range of issues including corporate tax, business restructures, capital gains tax, GST, state taxes and asset protection. His analytical approach allows him to cut through the complexity of tax and provide real solutions for client’s problems.

He has extensive experience advising corporate and family businesses across wide range of industries. He has a particular interest in the building and construction industry with specialist knowledge on what it takes to survive and thrive in the industry.

Josh also has experience providing a range of different services including tax compliance, management reporting, cash flow forecasting, valuations and due diligence engagements.

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