Just because you don’t report Fringe Benefits Tax (FBT), doesn’t mean you are exempt from it. Read on to find out how FBT affects you, and how not reporting could affect your business.
Fringe Benefits Tax, or FBT, is a tax paid by employers on certain benefits they provide to their employees or their employees’ family/ associates. This applies even if the benefit is provided by a third party under an arrangement with the employer. Separate to income tax, FBT and is calculated on the taxable value of the fringe benefit.
With the 2021 FBT year concluding on the 31st of March 2021, the Australian Taxation Office (ATO) has urged businesses to prepare for FBT lodgements as they head into a new FBT year (starting April 1st, 2021). A large ATO shortfall has resulted from taxpayers choosing either to not engage in the system, or not reporting correctly. As a result, the ATO has warned that that they will be rolling out Audits affecting those who should be lodging an FBT return and refuse to, or don’t know to do so.
Don’t know if you need to lodge?
Some businesses aren’t aware that they do, in fact, have an FBT obligation. Examples of common Fringe Benefits
- If you have purchased a car in a business setting and use it for personal use;
- If you are paying an employee’s gym membership; or
- If you are reimbursing expenses incurred by an employee.
Unfortunately ignorance is not bliss when coming to the ATO regarding FBT. And by not preparing an FBT return, the ATO is also able to audit your accounts spanning back an unlimited timeframe.
If you lodge a Nil return (not to be confused with a return not necessary) you limit the audit time frame to 3 years.
Changes to FBT due to COVID-19
This FBT year, Covid-19 consideration has allowed for some changes to the FBT system. These include:
- Expansions of FBT exemptions for small businesses
- Windfalls for business use cars stored at employee’s residence over COVID-19 lockdowns,
- FBT exemptions for benefits provided to employees working from home, and
- FBT savings where commercial car parks are closed or offer free parking.
If you have FBT Obligations, or might be exposed to FBT, Walker Hill will be in touch with an opt-out feature to ensure you are aware of all lodging requirements necessary to meet Fringe Benefits compliance.
Please note, if you opt out, you MUST be prepared for auditing activities and associated penalties from the tax office. Considering the ATO’s shortfall is over a billion dollars, ensuring your business is engaging with their compliance obligations has never been more necessary.
For example, the ATO can now data match with car sales, meaning they are aware when you have purchased a vehicle through your business.