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Fringe Benefits Tax (FBT) – Is Your Business Compliant?

Attracting and retaining the best employees for your business is important – and many find that providing extra frills beyond traditional remuneration packages can be useful. A potential downside to this is that certain benefits may attract Fringe Benefits Tax (FBT) of 47%.

In a time where the Australian Taxation Office (ATO) is putting things like FBT under the microscope, it’s as important as ever to ensure that your business remains FBT compliant. To help you get started on the preparation for FBT year-end on 31 March 2019, here are two common things that may attract FBT.

Motor Vehicles

The concept of providing an employee with a car as part of their employment is a well-known benefit.  That being said, many employers are still unaware that this provision may carry an FBT obligation, generally arising when the employee is allowed to use the vehicle for private use. As far as the ATO is concerned, a car is any of the following:

• a sedan or station wagon
• any other goods-carrying vehicle with a carrying capacity of less than one tonne, for example a panel van or utility (including four-wheel drive vehicles)
• any other passenger-carrying vehicle designed to carry fewer than nine passengers.

As for their definition of “private use”, the ATO considers a vehicle available for such if an employee or their associates (partner, spouse, family member etc.) uses it for private trips, or are allowed by the employer to do so, on any given day.

Also worth considering is where a vehicle is stored – garaged near or at an employee’s house is considered to indicate private use, even if it just for security reasons. This also applies when the place of employment and employee’s residence are the same.

The golden rule is to maintain a logbook!!  We can then assess all available concessions that apply to you when it comes time to preparing your FBT return.

Entertainment

A common business practice, particularly around Christmas, anniversaries and the end of the financial year, is to give gifts and provide staff functions for employees in recognition of a job well done!!

Generally if the entertainment was provided to staff (or associates), and cost more than $300 (inc. GST) per person, then FBT applies.  What is commonly overlooked is that benefits can also be subject to FBT even if they are below $300 in instances where they are not ‘infrequent and irregular’.

If the entertainment was provided to third parties (e.g. customers, clients, suppliers etc.), then FBT doesn’t apply – regardless of cost. For reference, gifts that constitute entertainment include: tickets to movies, plays, theatre shows etc, restaurant meals and admission tickets to an amusement centre.

The key is to maintain a registry of events and a list of attendees, especially in instances where costs exceed $300 per person.

The MP+ Difference

Being FBT-compliant involves consistent and thorough record-keeping practices within your business.

Establishing a process in-house for each type of benefit is imperative to maximising the use of FBT concessions and/or exemptions; as well as considering the broader aspects of FBT such as reporting, salary packaging and payroll tax exposure is imperative.  If this is something that is not already in place then a review from one of our tax specialists might be beneficial.

At McKinley Plowman, we have a dedicated team of tax and accounting professionals who can help you determine any necessary FBT obligations and assist you in remaining compliant moving forward. Give us a call on 08 9301 2200 or visit www.mckinleyplowman.com.au.

Data retrieved from:

https://www.afr.com/news/private-business-and-wealthy-individuals-not-ready-for-increased-ato-scrutiny-20181212-h1914d

https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/Types-of-fringe-benefits/

written by:

McKinley Plowman