Key points
- The ATO closely monitors Fringe Benefits Tax (FBT) compliance, especially around motor vehicle benefits, entertainment expenses, and discrepancies in employee contributions.
- Common triggers for ATO scrutiny include late or non-lodgement of FBT returns, misclassification of benefits, and undervaluation of car parking perks.
- FBT exemptions apply to work-related items like laptops, mobile phones, and protective clothing, but must be correctly applied and documented
What is the Fringe Benefits Tax (FBT)?
FBT is required to be paid by employers who provide non-cash benefits to their staff. Accurate reporting of FBT is something that is consistently on the ATO’s compliance program.
FBT is calculated on the taxable value of the benefits that have been provided to employees.
Types of benefits employers must pay FBT on include vehicles used for private use, discounted loans with a low or no rate of interest, paying an employee’s membership to a gym and entertainment perks such as free tickets to concerts and providing food and drink, accommodation or travel in connection with the entertainment.
When does the ATO look into FBT?
The ATO focuses on occasions where taxpayers avoid or delay payment of tax by non-lodgement of their FBT return. They are specifically looking into areas of FBT that include:
- Failing to report motor vehicle benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits.
- Discrepancies between an amount reported as an employee contribution on FBT returns compared to the income amounts on an employer’s tax return.
- Discrepancies between reportable fringe benefits amounts on employee’s annual income statements and fringe benefits reported on the employers FBT return.
- Claiming entertainment expenses as a deduction but not correctly reporting them as a benefit or incorrectly classifying entertainment expenses as sponsorship or advertising.
- Incorrectly calculating car parking benefits by significantly discounting market valuations, using non-commercial parking rates or not supporting with adequate evidence.
- Not reporting on business assets provided for the personal enjoyment of employees or their associates.
- Not lodging FBT returns or lodging them late, in an effort to delay or avoid payment of tax.
FBT exemptions
There are also a number of Fringe Benefits Tax exemptions — these can be because the benefits are primarily used by workers during employment. These Fringe Tax Benefits exemptions can include work-related items such as portable electronic devices (mobile phones, laptops, etc.), computer software, protective clothing, briefcases and trade tools.
If you have any queries about Fringe Benefits Tax, please contact the team at Pitcher Partners Newcastle & Hunter
