RSM Australia

Fringe Benefits Tax – Tips and Traps for the 2019 FBT year

Tax Insights

With the introduction of Single Touch Payroll (STP), the Australian Taxation Office (ATO) now has access to real-time information about employers and their employees.   If you have employees, the more likely it is you are providing some form of fringe benefit and the higher the risk the ATO will expect to see you lodge a Fringe Benefits Tax (FBT) return.

With the end of the 2019 FBT year fast approaching and taking into account the ATO’s increased access to information about employees, now is the time to undertake a review of FBT and the benefits you may be providing.

At RSM, common fringe benefits we see employers providing to employees and where employers go wrong are highlighted in the table below.

Fringe Benefit

What is it

Common Examples

Where can you go wrong?

Entertain -ment

Entertainment can be in the form of meal entertainment or recreation entertainment.

 

 

Annual Staff Christmas Party

Awards Dinner

Sporting Club Sponsorship (e.g. Eagles sponsorship including tickets to a game)

Lunch/Dinners with clients and/or employees

Not recognising staff functions, rewards lunches, restaurant lunches may attract FBT.

Not keeping adequate records to enable you to apply the actual method (and the associated exemptions and reductions).

Applying the $300 minor benefits exemption to EVERY entertainment expenses where the cost per head is less than $300 (inc GST).

Not all provisions of food and drinks qualify as meal entertainment.

Car Fringe Benefits

Where the employer ‘holds’ a car available for the private use of the employee.

An employee is provided with a company ‘car’ as part of their salary package.

Novated lease arrangements

Valid log books aren’t held for the cars.

Records aren’t held to substantiate the business use percentage.

The number of days the car is parked at an airport carpark treated as ‘not available for private use’ although the employee maintains custody of keys.

Car Fringe Benefits – Dual Cabs

As above

An employee is provided with an eligible ‘dual cab’ or utility as part of their salary package or employment agreement.

The employer makes the assumption the vehicle is exempt – rather than private use (where the private use meets the exemption criteria of being minor, infrequent & irregular).

Private use of vehicles not monitored.

Private use exceeds 750km per FBT year, adds more than 2km to the normal route between home and work or one single private trip exceeds 200km.

No policies in place to prohibit private use

Taxi Travel

The  provision of non-work related taxi travel

Taxi travel relating to a sick employee (e.g. trip home or to the doctors from work)

Taxi travel between work and a function, or a function and work.

Applying the taxi travel exemption to Uber expenses (Uber does not meet the definition of a taxi for the purposes of FBT).

Treating taxi travel between a function and home as exempt.

Other common fringe benefits employers are encouraged to review are:

  • Car parking fringe benefits.

  • Living away from home fringe benefits (particularly for fly in fly out employees).

  • Remote area housing fringe benefits (tip: the payment of an employee’s mortgage repayments in a remote area will not be exempt, however, the reimbursement of their mortgage interest may be eligible for a 50% reduction).

  • Expense payment reimbursements.

  • Loans to employees.

Keep in mind this list does not cover all possible fringe benefits and the fact you may be providing something not on this list does not mean you aren’t providing a fringe benefit to your employees.  FBT is complex and will be dependent on facts, it may not even be clear you are providing a fringe benefit.

Tips for preparing for the end of the FBT year

If you haven’t started the process already now is the time to:

  • Check if you are providing fringe benefits to employees;

  • Check that you have appropriate policies and procedures in place.Fringe Benefits tax (FBT) policies and procedures

  • Obtain copies of log books – if the log book is four years old or no longer reflects the private use of the vehicle, ask the employee to complete a new one.

  • Where you provide dual cabs and are relying on PCG 2018/3, obtain declarations from employees that their private use falls within the criteria in the PCG.   You may also want to put checks and balances in place to ensure the private use does fall within the criteria.

  • Check your accounting records to ensure you have the required information to apply relevant exemptions or reductions;

  • Obtain supporting documentation (invoices, bank statements etc) from employees in respect of expenses reimbursed (e.g. for meal entertainment, a description of the function, the number of people who attended, the names of who attended, whether they were an employee/associate/spouse/client);

  • Obtain required FBT declarations from employees (e.g. no private use declaration, loan fringe benefits declaration, living away from home declarations, relocation transport declarations.

If you are unsure if you are providing fringe benefits to your employees or you need assistance in preparing your FBT returns, contact your local RSM office where an adviser can assist with your specific requirements. 

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