For 2020–21, the net fringe benefits tax (FBT) gap estimate was $1,275 million or 28.2%. In other words, those with an FBT liability are expected to pay around 72% of the total theoretical FBT for 2020–21.
Table 1 below shows the net gap has increased by 8.1 percentage points in 2020–21 from 2019–20, driven largely by a sharp decline in the amount of FBT voluntarily reported. While there has been a downward trend in FBT reported voluntarily for a number of years now, the 16.8% drop in 2020–21 was much larger than any declines is previous years.
The decline in voluntary FBT in 2020–21 was across all industries and fringe benefit categories of car, housing, meal entertainment and other benefits. It likely reflects economy-wide impacts from COVID-19 as economic disruptions and changes in employees’ work patterns resulted in less fringe benefits being offered by employers during the pandemic-affected years.
At the same time, there might have been an increase in FBT underreporting by employers facing greater financial hardship as their businesses were affected by lockdowns and reduced consumer spending. At this stage, we have not been able to determine the relative contributions of those factors to the contraction in FBT payable.
It is important to recognise that the FBT system is a component of the broader PAYG withholding income tax on salary and wages regime. When we view PAYG withholding and FBT together, the integrated gap is approximately 2.2%. This means employers are voluntarily paying close to 98% of taxes related to their employees' remuneration.
This gap forms a part of our overall tax performance program. Find out more about tax gaps, including why and how we measure them, and a summary of the latest available tax gap data.
|
Element |
2015–16 |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
|---|---|---|---|---|---|---|
|
Population |
825,499 |
848,613 |
852,408 |
855,047 |
896,528 |
927,831 |
|
Net revenue effect gross gap ($m) |
1,732 |
1,303 |
1,390 |
1,263 |
1,007 |
1,308 |
|
Amendments ($m) |
24 |
31 |
29 |
23 |
25 |
34 |
|
Net revenue effect net gap ($m) |
1,708 |
1,272 |
1,361 |
1,240 |
982 |
1,275 |
|
Expected collections ($m) |
4,333 |
4,160 |
3,858 |
3,906 |
3,904 |
3,246 |
|
Theoretical liability ($m) |
6,041 |
5,432 |
5,219 |
5,147 |
4,886 |
4,521 |
|
Net revenue gross gap (%) |
28.7 |
24.0 |
26.6 |
24.5 |
20.6 |
28.9 |
|
Net revenue net gap (%) |
28.3 |
23.4 |
26.1 |
24.1 |
20.1 |
28.2 |
Figure 1 displays the trend in the gross and net income tax gap over the same period as a percentage.
Figure 1: FBT net revenue effect gap summary diagram 2015–16 to 2020–21 (percentage)
What's driving the gap
The primary driver is employers not participating in the FBT system when they provide benefits to employees.
An example of this is when an employer doesn't lodge an FBT return but provides motor vehicle benefits to their employees.
Contact between tax agents and their clients for FBT matters is often ad hoc in nature. This contrasts with the strong focus and regular contact on income tax and GST. Some employers may not want to engage a tax agent to undertake FBT work because they do not want the additional cost.
Around a third of FBT adjustments result from a lack of awareness by either the employer or the tax agent. There are issues in understanding:
- FBT law
- rules of valuing, calculating, reporting and paying FBT on benefits provided
- concessions and exemptions for example, car fringe benefits errors in relation to which vehicles are exempt.