If you provide fringe benefits to employees, you must keep the necessary Fringe Benefit Tax (FBT) records and work out whether you have to pay FBT. If you need to pay FBT, you must register for FBT, lodge an FBT return, pay FBT to the ATO and if required, report fringe benefits on your employees’ payment summaries. The statutory due date for lodgement and payment is 21 May.
FBT is separate from income tax. An employer’s FBT liability is calculated by applying the FBT rate to the sum of the grossed-up taxable values of the fringe benefits provided. The FBT rate for the year commencing 1 April 2016 is 49%.
What is a fringe benefit?
A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages.
The terms benefit and fringe benefit have broad meanings for FBT purposes. Benefits include rights, privileges or services. For example, a fringe benefit may be provided when an employer:
- allows an employee to use a work car for private purposes
- gives an employee a cheap loan
- pays an employee’s gym membership
- provides entertainment by the way of free tickets to concerts
- reimburses an expense incurred by an employee, such as school fees
- gives benefits under a salary sacrifice arrangement with an employee.
- provides entertainment by way of food, drink or recreation to an employee;
- pays certain travel and accommodation expenses for an employee;
According to the fringe benefits tax (FBT) legislation, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. The ’employee’ may even be a former or future employee.
Record keeping requirements
There is a general requirement that you must keep records that are adequate to enable your fringe benefits tax (FBT) liability to be assessed. You must also keep records if you want to take advantage of various exemptions or concessions that reduce your FBT liability. Examples of these records are:
- employees declarations, invoices and/or receipts, bills of sale, lease documents, travel diaries, copies of log books, and odometer records
- where the benefit is a car fringe benefit valued under the operating cost method, fleet management records, log book records and odometer records.
Benefits under the ATO’s spotlight
In the 2017 FBT year the ATO is focusing on benefits received by employees from customer loyalty programs; expenditures incurred in respect of provision of food and drink; and use of business cars for private purposes.
Our tax accountants at the Quinn Group can provide specialised advice on FBT. Contact us on 02 9223 9166 or submit an online enquiry form today.