What is Fringe Benefits Tax (FBT)?
Fringe benefits tax (FBT) is a tax Employers pay on certain benefits (eg. non-cash benefits) they provide to their employees – including their employee’s family or other associates.
The general concept of FBT is to ensure that any benefits over and above wages paid to employees are taxed to capture the PAYG withholding that would be paid if the benefit had been paid as a wage.
FBT is paid by the Employer to the Australian Taxation Office (ATO) and therefore it is the Employer’s responsibility to comply with the relevant requirements.
Small businesses often overlook lodging FBT thinking that it doesn’t apply to them, but this is not always the case.
Following improvements in their IT capabilities and having further access to financial and non-financial data from various external agencies, the ATO are now positioned with the tools to target Employers for review.
What benefits are subject to the FBT regime?
The list of benefits that fall within the FBT regime are listed below:
- Car fringe benefits;
- Car parking fringe benefits;
- Meal and Entertainment fringe benefits;
- Expense payment fringe benefits;
- Loan fringe benefits;
- Debt waiver fringe benefits;
- Housing fringe benefits;
- Board fringe benefits; and
- Living away from home allowance fringe benefits.
Whilst this list may seem quite black and white and leads to businesses assuming they do not have any benefits to worry about, there is complexity behind most of these items with the devil being in the detail.
Given the complexity surrounding this regime and the ATO’s continual improvement in being able to monitor and target Employers for review, it is essential that businesses rely on their accountant or financial advisor to assess their FBT obligation.
Important Dates for FBT Lodgement
The FBT year differs from the traditional financial year ended 30 June. The FBT year commences on 1 April and ceases on 31 March of each year.
For the 2022 FBT year, finishing up on 31 March 2022, the due date for lodgement and payment of any FBT tax will be 21 May 2022.
What are some of the notable changes coming into effect in 2022?
There have been several significant developments for Employers when determining their FBT liability for 2022 and beyond.
Car Fringe Benefits
The ATO have provided guidance on how COVID-19 will impact an Employer’s obligation where driving patterns or usage has changed. In circumstances where a car is not being driven at all and garaged at home or only driven briefly for the purpose of maintaining the car, it is considered not to be held for the purpose of providing fringe benefits to employees.
Employee Meals and Accomodation
Guidance regarding business travel, living-away-from-home allowances and relocating assistance has historically been limited, creating some confusion on what benefits need to be disclosed and assessed. The ATO has provided further clarity around these areas making it easier to assess what may or may not need to be included for FBT purposes.
In certain workplaces, employees must undertake COVID-19 testing before attending. Where Employers have been required to provide or reimburse an employee for Polymerase Chain Reaction (PCR) tests and/or Rapid Antigen Tests (RATs), this could be considered providing a fringe benefit.
It is important to note that this legislation is still pending approval, but it is intended to be passed and be exempt from your FBT. We will keep you up to date as more information is released.
As a part of our FBT assistance, we provide our business clients with a digital FBT questionnaire that includes easy to answer questions on various benefits to help assess their FBT obligations. If you are an Employer and would like to find out more about FBT, or receive our questionnaire to help assess your obligations, please contact your Davidsons team member or email us at firstname.lastname@example.org for more information.
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Disclaimer: This information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.