Fringe Benefits Tax (FBT) is often called the “forgotten” tax. Many benefits provided by employers to their employees are overlooked, and the ATO doesn’t like being forgotten about when this occurs.
Most oversights happen because employers think they’re not providing a benefit when, in fact, they are. Whether it’s supplying work vehicles, or giving gifts at Christmas time, there are a lot of grey areas about benefits in the workplace. We want to help you clear up all this confusion about Fringe Benefits Tax because the ATO has made their intentions very clear.
The ATO’s sophisticated data matching and increased audit activity are leading to greater exposure to employers’ potential FBT obligations and liabilities, which can be backdated. They’re taking even further action, and some of it might be seen as extreme. For example, they are inspecting vehicles at sporting events to identify if commercial vehicles are being used for private purposes such as going to a game of footy!
Taking all that into consideration, we strongly recommend that you revisit your FBT obligations to keep the ATO onside. That includes lodging an FBT return (even if it’s a nil return) and giving serious consideration to these critical areas as we head into the 2021 FBT year.
Private use of commercial vehicles
Supplying employees with commercial vehicles such as vans and utes are usually considered to be exempt; they provided for work purposes, with some minor private travel allowed. e.g. home to work and work to home.
Albeit, the ATO has now released a practical guideline (PCG 2018/3) of minor private use as follows:
- No private journey exceeding 1,000kms for the year in total
- No private journey that adds a 2km diversion from work to home
- No private return journey exceeding 200kms.
With this in mind, maintain sufficient documentation such as declarations and logbooks.
Car parking charges from 1 April 2021
Small businesses with turnover below $ 10 million, and car parking not provided in a commercial car park, are exempt from any car parking benefits provided to employees.
For businesses with a turnover of more than $ 10 million, a fringe benefit will arise for car parking provided to employees. A commercial car park must be within a 1km radius of the business premises, charging over $8.95 (2020 FBT rate) for all-day parking.
A commercial parking station is defined as a permanent facility open to the members of the public, such as a Wilson or City of Perth Parking (CPP).
Just when you thought the parking situation was clear cut, this popped up: the ATO announced in TR 2019/D5, that the definition of a commercial parking station was to be widened to include:
- A parking station that charges penalty rates, such as short-term shopping centre
- Hospitals and University car parks
- Online car parking providers, such as CellO
- Only one car space needs to be available to the public for it commercially to exist.
The above measures came into effect from 1 April 2020.
Gifts to employees
Supplying gifts to employees can sometimes be confusing, and we have summaries in the table below. The table contains the FBT, Income tax and GST treatment as follows:
Entertainment gifts such as tickets to a musical, theatre, play, film, sporting events, or providing a holiday:
Amount |
Income tax treatment |
GST credit |
FBT applies |
| Under $300 per head. | Non-deductible | No | No |
| Over $300 per head | Deductible | Yes | Yes |
| Provided to clients | Non-Deductible | No | No |
Non-entertainment gifts including skincare, beauty products, flowers, wine, perfume, gift vouchers, hampers and alcohol not consumed at the workplace:
Amount |
Income tax treatment |
GST credit |
FBT applies |
| Under $300 per head | Deductible | Yes | No |
| Over $300 per head | Deductible | Yes | Yes |
| Provided to clients | Deductible | Yes | Yes |
Policies and documentation
Given recent announcements, we highly recommend that you review your FBT policies and procedures and ensure you have adequate documentation.
Log books and any private use declarations should be kept on hand to avoid and/or reduce any potential liabilities.
Summary
As mentioned above, employers not registered for Fringe Benefits Tax are on the ATO’s radar, and we urge you to review your current position. Even if you’re not providing benefits to employees, you MUST be registered for FBT as an employer.
Fringe Benefits Tax can be very complex and confusing given the number of exemptions, as well as what constitutes a benefit, and what doesn’t. Care must be taken when it comes to assessing your FBT position, so we invite you to contact our accounting team to discuss the “forgotten” tax.
