FBT Return: You must pay fringe benefits tax if you give your employee’s benefits other than their salaries (FBT). Determining what is and isn’t taxable and how to compute the taxable values can be difficult.
Payment to employees, a fringe benefit, is distinct from their regular income or earnings. Employers must pay FBT for certain benefits they provide to their staff members, families, or affiliates. Even if a third party provides the benefit as part of an agreement with the employer, FBT still applies.
These are some instances of fringe benefits:
- Enabling a worker’s personal use of a company vehicle
- loaning money at a reduced rate to a worker
- the cost of a worker’s gym membership
- By giving away concert tickets, we can entertain people.
- Paying back a cost an employee incurred, such as tuition,
- Providing perks to an employee as part of a salary-sacrifice agreement
FBT is determined based on the taxable value of the fringe benefit and is a separate tax from income. In principle, employers can deduct the cost of providing fringe benefits and the tax they pay on such benefits from their taxable income. Employers can also claim GST credits for goods given as fringe benefits.
Even though you have no obligation, why should you file an FBT return?
The most fundamental justification is that you create a line in the sand by filing because the ATO can generally only conduct an audit up to three years after the previous FBT return was filed.
Failure to file your FBT return could result in unwelcome scrutiny from the ATO. They can decide to start an investigation and examine all of your business operations.
Employers must maintain documentation (logbooks, signed statements, and records) to substantiate their FBT responsibilities. Even if the employee has quit, this still holds. You cannot recover any of these expenses from former employees.
Furthermore, even after a review, mistakes will be made by individuals. The obligation for car fringe benefits is frequently recorded incorrectly. The operating cost (logbook) method is employed to calculate the private use. The depreciation stated on the business’s financial statements is not the same for FBT reasons if you plan to handle this yourself. This error results in an FBT obligation.
The entire time your firm owned the car would undoubtedly be scrutinised by the ATO during their audit. The auditing period would generally be shortened to three years if an FBT return was filed. Finally, failing to keep track of which employees receive meal or entertainment benefits may result in an FBT obligation.
When must FBT returns be filed?
If an employer has an obligation (also known as a taxable fringe benefits amount) during an FBT year, they must file an FBT return (April 1 to March 31). You can file your FBT return up until June 25 if you are preparing it on your own. This avoids being penalised for failing to file. The payment is due on May 21.
The deadline to file and pay with a tax agent is May 21. Fill out a Fringe Benefits Tax – Notice of Non-Lodgment form if registered for FBT but do not need to file a return for the year.
If a business offers fringe benefits, it has obligations.
Determine how much FBT a company must pay. The amount FBT employers must pay each FBT year must be determined by self-evaluation.
Maintain the required FBT records. Employers must maintain specific records regarding the fringe benefits they offer by the FBT law.
Fill out employee payment summaries to include fringe benefits. Employers must disclose certain fringe benefits on employees’ pay stubs. When it comes time to finalise year-end payroll, employers who use Single Touch Payroll (STP) will notice that their payroll software will remind them to enter this information once a year.
FBT must be reported and paid to the Tax Office. Each year, by May 21, an FBT return covering the FBT year—which runs from April 1 to the following March 31—must be filed.
Indeed, according to the ATO, you are exempt from filing if your FBT liability for the FBT year was zero and you did not pay it in instalments.
Even though the FBT year ends on March 31, many businesses don’t do anything with the FBT until their annual Financial Statements, which usually take around six months.
Filing a “Notice of non-lodgement” is not the appropriate course of action, why?
Employers frequently file a “Fringe Benefits Tax – Notice of Non-Lodgment” form with the ATO to inform the agency that they have no FBT liability due to employee contributions. You are NOT protected by this, though.
The modification time limits are NOT triggered by filing a non-lodgment notice because no assessment is increased. This indicates that the ATO may issue an FBT assessment for the relevant FBT year at any point. In the event of an FBT audit, this implies that employers would always be at risk of having to pay FBT.
What about advantages that have no value?
It is not technically necessary for employers to file an FBT return if they offer perks with no taxable value for FBT purposes. On the other hand, doing so might very well be wise. The ATO has unlimited time to review earlier years without receiving an FBT return. In contrast, if returns are filed, the ATO’s review authority is typically only extended back three two to six seven years in general.
When employee contributions have rendered benefits worthless, this is especially crucial. The employee contribution might not be enough to cover the total amount of FBT due if a mistake was found in the benefits calculation.