The FBT year ends on 31 March 2023 and is an area of focus for the Australian Taxation Office (ATO). FBT is payable by employers when certain benefits are provided in addition to salary or wages to:
- Former, current, or future employees, or
- Associates (relatives such as your spouse or child).
These benefits might be provided directly by the employer or through a third party.
FBT was introduced to prevent employers reducing the tax liability of employees by providing benefits not recognised as income. Most employers who provide fringe benefits to employees during the course of the year need to register and pay FBT.
Should you be registered for FBT?
If you are not sure whether your business is providing fringe benefits to employees, here are some key questions you should ask about employees, directors or associates:
- Does the business provide entertainment – food, drink or recreation activities? For example, if you had a Christmas party then the business probably provided entertainment to employees.
- Are any vehicles owned or leased by the business available for private use?
- Are any salary package (salary sacrifice) arrangements in place?
- Has the business provided goods at a lower price than they are normally sold to the public?
- Does the business provide car parking?
- Does the business provide loans at reduced interest rates?
- Has the business forgiven any debts owed?
- Has the business paid for, or reimbursed, a private expenses?
- Does the business provide accommodation, i.e., a house or unit?
- Does the business provide any living-away-from-home allowances?
A common area of confusion is motor vehicles. Where a motor vehicle owned or leased by the business is used by an employee or director for private purposes (including travelling between home and work), then FBT is an issue that needs to be managed.
Another common area of confusion is entertainment. Entertainment can include food, drink, recreation activities such as movie tickets, through to non-work based travel. If you provided any entertainment benefits to employees, such as an employee attending a business lunch or party, then FBT may apply. Entertainment is an area of continued focus for the ATO as the FBT treatment also interacts with the treatment of these expenses for income tax and GST purposes.
What’s exempt from FBT?
Certain benefits are excluded from the scope of the FBT rules. The following work-related items are exempt from FBT if they are provided primarily for use in the employee’s employment:
- Portable electronic devices (e.g., laptop, ipad, printers, GPS, etc.,) that are provided primarily for use in the employee’s employment (larger businesses are limited to the purchase or reimbursement of one substantially identical portable electronic device for each employee per FBT year);
- An item of computer software;
- Protective clothing required for the employee’s job;
- A briefcase;
- A calculator;
- A ‘tool of trade’
If you need to register for FBT for the first time, our accounting team at Collective Financial Partners can complete this process for you and call you to talk through your obligations once you are registered.
For any information or queries you might have about FBT or determining if your business is liable for FBT, please call 02 4050 0900.
General Advice Disclaimer:
This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.
