With the 2019/20 Fringe Benefits Tax (FBT) year end approaching on 31 March 2020, now is the time to take note of the updates and changes that have occurred.
If your business provides any benefits to your employees or spouses (director’s included), this could create an FBT liability that needs to be addressed.
A common example is motor vehicle benefits.
- The odometer reading must be taken on the 31 March 2020
- Logbooks must be done per employee every 5 years or you can pay FBT on 20% of the base value of the vehicle.
Below we have outlined some of the major benefits and key developments over the last year. It is important you do not assume you are FBT exempt, as FBT changes may change the position of the exemption.
1. Motor vehicle benefits
As a result of the ATO’s continuing and elevated level of attention on car fringe benefits, cars often represent the biggest risk area for employers.
The provision of a workhorse vehicle to an employee can be exempt from FBT, but it is not an automatic exemption. Rather, it is an employer’s ability to claim an FBT exemption with respect to a workhorse vehicle ultimately depends on the extent of the employee’s private use of the vehicle.
2. Meal entertainment
Determining what is (and what is not) entertainment (particularly in relation to food and drink) is the first and most crucial step employers must complete with respect to such expenditure. This is because the FBT, income tax and GST implications of incurring ‘entertainment’ expenditure are often different to the implications that arise in relation to ‘non-entertainment’ expenditure.
3. Benefits provided to employees by third parties.
It is increasingly common for employers to allow their employees (and/or their associates) to receive non-cash benefits from third parties (e.g., clients, suppliers and contractors). The types of benefits typically provided by a third party to an employer’s staff often involve entertainment based benefits (e.g., attendance at a corporate box, a meal or attendance at a third party’s Christmas or end-of-financial year party).
Unfortunately, many employers incorrectly believe that an FBT liability does not, and cannot, arise in these circumstances, presumably because the benefit is not provided by the employer. It is important to be aware however, that the FBT Act contains rules, referred to as the ‘arranger provisions’, that can apply to create an FBT liability for an employer in respect of a benefit provided to their employee (or associate), by a third party (referred to as a ‘third-party benefit’).
4. Car parking benefits
Car parking benefits represent one of the most commonly provided types of fringe benefits, of which the benefit provisions are extremely complex, and many employers have made errors when applying these rules.
As a result of the many errors made in this area, the ATO has embarked on a very public audit campaign targeting employers that provide car parking benefits to their employees.
5. Property benefits
Was any property provided (free or at a discount) in respect of an employee’s employment? Property includes all tangible and intangible property. Examples of property are goods, shares and real property. The ATO considers the provision of Bitcoin to be a property fringe benefit.