What is FBT?
Fringe Benefits Tax (FBT) is a tax payable by employers on certain benefits they provide to their employees. The FBT year runs from 1 April to 31 March. If you have provided certain benefits to your employees, you may be liable to pay FBT.
What types of benefits?
FBT is payable on any benefit given to an employee (such as free or discounted goods or services), unless an exemption applies. The most common types of benefits that create FBT liabilities are:
- Motor vehicles – even most company cars – if they’re used for private purposes
- Entertainment (such as restaurant meals, parties or prizes)
- Car parking, unless exemptions apply
- Payment of private expenses (such as home phone bills or car repayments)
- Gifts or discounted goods (e.g. gift vouchers, clothes, a TV, or shares in a company)
There are some exemptions from FBT. These include:
- Commercial vehicles – where the car is a ute and van (though the ATO has recently narrowed their view of the exemption)
- Minor benefits – where the benefit is valued at less than $300, and is infrequent or irregular
- Work-related items like laptops, tools and protective clothing
- Taxi travel to and from work
- Car parking, if you are a small business and certain conditions apply
Find out more about these exemptions here, or contact your Prime Partners advisor.
Motor vehicles – using the company car outside of work
Just because a business buys a motor vehicle primarily for work purposes, that alone does not mean that the car is exempt from FBT. If an employee uses the car for private purposes – to pick the kids up from school, to do the shopping, travel around on weekends – FBT is likely to apply.
In addition, if the vehicle is garaged at or near the employee’s home, even if only for security reasons, it is taken to be available for private use regardless of whether or not the employee has permission to use the car privately.
Generally, travel to and from work is private use of a vehicle.
Certain exceptions apply. FBT will not be payable where all of the following are true:
- The car is a ute and van (though the ATO has recently narrowed their view of the exemption)
- Private use is limited to travel to and from work, and other uses that are ‘minor, infrequent and irregular’.
- Reasonable steps are in place to limit employees’ private use (like a company policy, which is monitored through odometer readings)
- There are no non-business accessories in the car (like child seats)
- The value of the vehicle when it was acquired was less than the luxury car tax threshold ($75,526 for fuel efficient vehicles in 2017-18 and $65,094 for other vehicles)
- Total private use is under certain thresholds – no more than 200km per trip in private use, no more than 750km per year in private use, and any incidental private use on a trip between work and home adds no more than 2km to the ordinary trip length.
Find out more about FBT-exempt motor vehicles here.
Generally, if an employer provides a car space at or near work to an employee either on an ongoing or occasional basis, FBT will apply. There is an exemption for small businesses, however. You can claim the exemption if the car space is not provided in a commercial parking station, and your gross revenue in the last financial year was less than $10m.
Entertainment covers meals, drinks, recreation (e.g. sports, sightseeing tours and harbour cruises), and travel and accommodation made in connection with entertainment.
Some examples of ‘entertainment’ for FBT purposes are:
- business lunches and drinks, cocktail parties and staff social functions
- sporting or theatrical events, sightseeing tours or holidays
- accommodation and travel related to entertaining clients and employees over a weekend at a tourist resort, or providing them with a holiday.
Calculating FBT liability in connection with entertainment can be complicated. If you have any questions, please contact your advisor.
Should I lodge an FBT return?
If you have provided non-exempt benefits to your employees in this FBT year, you must lodge an FBT return.
Even if you don’t think you’ve provided these benefits, you may still want to lodge an FBT return. This is because it will cap the time period during which the ATO can review your FBT affairs. The ATO can only conduct FBT reviews for two years (small businesses) or four years (large businesses) after an FBT return is lodged. By lodging the return, you start the clock running. If you don’t lodge an FBT return, the ATO has an unlimited time to conduct a review.
Remember, just because you lodge an FBT return, doesn’t mean you will have to pay FBT. Exemptions may apply to your situation, or you may be able to reduce your FBT liability (for example, through an employee contribution to the expense).
What you need to do now
If you have a motor vehicle that is owned by the business, note the odometer reading on 31 March.
If you believe you have given a non-exempt benefit to an employee during this FBT year or want to lodge an FBT return, contact us on 8378 2421 to discuss the next steps.
The cost to lodge an FBT return
Our fees to lodge an FBT return for existing clients start at $450 plus GST. Additional fees may apply if you have multiple company vehicles, or other complicated arrangements. Contact us for a fee estimate.
If you have any questions, please don’t hesitate to contact your advisor on 8378 2421.