Lodging an FBT Return

Fringe Benefit Tax (FBT) captures benefits enjoyed by employees but it is the employer that is levied in the end. Unless the agreement with the employer allows payable FBT to be recouped from the employee, the employer can’t be reimbursed.

 

 

Why then would any employer want to lodge an FBT return if there is no FBT payable? The answer is, that this will initiate the three-year deadline in which ATO will begin audit activity.

 

Without a lodged FBT return, the ATO has the liberty to make audits that investigate as far back as the business has had hired employees. If the ATO is not provided with sufficient evidence that FBT was not payable each year, in the form of logbooks, signed declarations, meal entertainment records and the like, there is a good chance they will raise FBT liabilities. This may even apply to employees who are no longer present in the business. This will make it quite impossible for the business to recoup from employees who are no longer with the business.

 

An employer may think that they have done everything within the guidelines set by legislation, but mistakes can be made. A simple error that is quite common is when an employee is given a car and the private use of the car is calculated using the logbook or operating cost method.

 

This includes calculating the depreciation of the car year after year which is something that many accountants fail to keep in mind. Sometimes they make errors by applying the same depreciation in business financial statements. The consequence of this simple mistake can be nothing less than increased FBT liability, if the employee contribution can’t cover the car’s taxable value.

 

If mistakes like these are made, the ATO will probably review the entire history of car’s ownership by the business. But lodging a FBT return would limit the amount of time they can investigate to only three years.

Another mistake commonly made is not keeping a proper record of which employees are recipients of meal entertainment benefits. Not all meal entertainment benefits are the same and this is why keeping a proper record is so very important.

 

Imagine you have two employees, Jane and Michael. Michael’s job is to go out and impress clients by taking them to social events where plenty of food and drink must be provided. Jane on the other hand works at the office and completes the projects that Michael brings in for the company. At the end of the year function, Michael’s food will not qualify for meal entertainment benefits. On the other hand, Jane’s consumption of food and drink will.

 

Without detailed records of who received which meal liabilities, and no FBT return, the ATO will have freedom to audit your records at their leisure. ATO has also mentioned that they will be increasing their focus on FBT in the upcoming months. If you would like to limit their capacity to audit your business records, we recommend you file and FBT return by contacting your advisor at Success Accounting Group.

We look forward to helping you meet your FBT obligations and are available anytime to answer any questions you have around reducing your FBT liability or creating effective salary sacrifice arrangements.

 

Questions?

The ATO has signalled that there will be an increased focus on FBT this year so if you would like to limit the ATO’s ability to retrospectively launch an audit please contact your advisor on (03) 9583 0550 or email us for assistance.

 

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