Fringe Benefits Tax (FBT) can be a complex topic for businesses in Australia, particularly for those new to the system or with evolving employee benefits. This comprehensive -article aims to shed light on FBT, empowering businesses and tax agents with the knowledge they need for accurate and compliant FBT obligations.
What are Fringe Benefits?
Fringe Benefits (FBT) are non-cash benefits provided by employers to their staff members as part of their employment package. These can consist of a wide range of offerings, including:
- Vehicles: Company cars, motorcycles, or even fuel for personal use.
- Medical and living expenses: Health insurance coverage, gym memberships, or assistance with rent.
- Financial and other benefits: Salary packaging arrangements, low-interest loans, or free meals.
The key characteristic of Fringe Benefits is that they are provided in addition to an employee’s regular salary or wages. However, unlike salary, these benefits may be subject to FBT depending on the specific type of benefit and its value.
What you need to know about FBT
Fringe Benefits Tax applies to the value of the benefit received by the employee. However, not all FBs are subject to FBT. There are exemptions for common items like office equipment (phones, laptops, etc., used for work) and minor benefits and perks with a value under $300.
Employers ultimately pay FBT on the value of certain fringe benefits. While employers don’t directly benefit from FBT, it’s an attractive offering for attracting and retaining employees.
In some cases, the cost of certain fringe benefits can be claimed as a tax deduction, effectively reducing a business’s taxable income. However, this is dependent on the specific benefit and its FBT treatment.
Cloud payroll software allows employers to add reportable and non-reportable fringe benefits to their payroll records. This makes relevant fringe benefits data available in their client’s database and on employees’ payslips.
FBT due dates in 2024
The FBT year runs from 1 April of the previous year to 31 March of the current year. The current relevant FBT year would be 1 April 2023 to 31 March 2024.
The standard FBT due date for lodging and paying is 21 May of the current year. In the case of the 2024 FBT year, the standard due date would be 21 May 2024.
If you lodge the FBT return electronically through a registered tax agent, you can avail of an extension until 25 June of the current year. For the 2024 FBT year, the extended due date for electronic lodgement would be 25 June 2024.
Why you should lodge FBT tax even if no FBT is payable
Even if you don’t believe you owe any Fringe Benefits Tax (FBT) for the year, lodging an FBT return can be a wise decision for two reasons:
Reduced audit risk
Lodging an FBT return establishes a clear record of your fringe benefit practices for the ATO. It demonstrates your transparency and willingness to comply with tax regulations.
FBT lodging triggers a three-year limit for the ATO to initiate an FBT audit for that specific year. This means they generally can’t go back further than the past three years to calculate your FBT liability.
Without a lodged return, the ATO has an indefinite timeframe to potentially audit your business and assess FBT on benefits provided in any prior year, even if you no longer employ the staff who received them. This can lead to unexpected tax bills and penalties down the line.
Transparency and trust with the ATO
Regularly lodging FBT returns, even when no tax is due, demonstrates a proactive approach to tax compliance. As a result, the ATO is likely to be more accepting of your business, and audits are likely to be less frequent.
To lodge FBT, you would have maintained accurate records of the benefits you provided throughout the year. This avoids the potential scramble to gather information for future purposes.
Let clients share
payroll files
& documents
Work with all of your payroll clients with Payroller Pro, designed for accountants, bookkeepers, and agents.
Visit our website to get started.
How to lodge and pay for FBT returns
There are three methods for lodging and paying FBT returns for businesses in Australia. Know the specifics for each option to advise business owners correctly:
Option 1: Electronically using Standard Business Reporting (SBR) software
- Step 1: Organise the details of all fringe benefits provided to employees during the FBT year. This includes car usage records (odometer readings), meal entertainment costs, private health insurance premiums paid on behalf of employees,
- Step 2: Using the SBR software, input the gathered information about employee benefits. The software should process and calculate potential FBT liability.
- Step 3: Submit the FBT return directly to the ATO through the SRB software.
- Step 4: If the return shows a payable FBT amount, advise the business to pay through the ATO’s appointed payment methods.
Option 2: Through a registered tax agent
- Step 1: Gather the relevant fringe benefits details, including employee benefit records, payroll data, and company car usage logs for the FBT year.
- Step 2: Complete the FBT return by inputting the fringe benefits into the SBR software.
- Step 3: On the client’s behalf, lodge the finalised FBT return electronically with the ATO using the Practitioner Lodgment Service (PLS).
- Step 4: If the return shows a payable FBT amount, advise the business to pay through the ATO’s appointed payment methods.
Option 3: Manually by posting a paper FBT to the ATO
- Step 1: Download the FBT return form from the ATO website for the relevant year.
- Step 2: Gather details from the business of all fringe benefits provided to employees during the FBT year.
- Step 3: Fill out the paper form with all the required information about employee benefits and calculations. An accurate and complete report is crucial to avoiding errors and delays.
- Step 4: Mail the paper FBT return to the ATO using the appropriate mailing address from the ATO website.
- Step 5: If the return shows a payable FBT amount, advise the business to pay through the ATO’s appointed payment methods.
Tips for lodging FBT returns
If you’re lodging FBT returns, follow these tips to go through the process seamlessly:
Request information early
Don’t wait until the deadline approaches. Start collecting details of all fringe benefits provided to employees throughout the FBT year well in advance. If the client reports STP, their STP software should be able to provide data on fringe benefits for each employee on the payroll.
ATO + STP Phase 2
Approved
Software
Make payroll simpler with Payroller, the payroll solution for bookkeepers. Sign up today and take the first step toward a more efficient and compliant payroll process.
Visit our website to get started.
Reference historical FBT documentation
Historical records can help ensure consistent valuation methods are applied for ongoing benefits provided across multiple FBT years. There may be benefits that were unintentionally excluded in the previous year, which can be reported and adjusted correctly in the current year.
Get employee declarations
You’ll need employee declarations to support your claim if you’re claiming any FBT concessions (benefits taxed at a reduced rate or exempt from FBT altogether). For example, if car allowances were provided to employees using the vehicle for work purposes, a declaration with work-related travel details can help qualify for a concession.
Do not lodge a Notice of Non-lodgment
A Notice of Non-lodgment simply informs the ATO that the business does not intend to lodge an FBT return. It doesn’t necessarily shield you from a potential FBT liability or an ATO audit. Unlike lodging a nil FBT return, a Notice of Non-lodgment doesn’t trigger a limitation period for ATO audits.
Help your clients stay tax-compliant
With the knowledge gleaned from this guide, you’re well-equipped to navigate FBT with confidence, ensuring a smooth end-of-financial year. By identifying fringe benefits accurately, using the right software to calculate FBT liability, and meeting the deadlines, you can ensure your clients remain compliant.
Using the right software can help your clients follow their tax obligations and help you manage them. Payroller is a comprehensive payroll management platform designed to streamline your workflow and simplify payroll for you and your clients. Manage all your clients in one user-friendly platform.
Payroll made accessible.
- 5 minute setup
- No credit card needed
- No contract period
Create your free account now.
*By clicking “Try For Free“, you agree to our terms of services and privacy policy.