Meeting your FBT obligations
As an employer (or tax agent), you play an important role in the fringe benefits tax (FBT) system by:
- determining if benefits provided to employees are subject to FBT, and calculating your FBT liability
- lodging an FBT return and paying FBT by the due date
- including reportable fringe benefits on each employee’s annual income statement if required.
We're focused on increasing FBT awareness and helping employers to meet their registration, reporting, lodgment and payment obligations. We do this through education, advice and guidance.
In addition we use third party information and data matching to undertake targeted risk-based engagements to help employers get their FBT obligations right and address non-compliance.
Motor vehicles
We see a significant level of non-compliance in situations where an employer provides a motor vehicle to an employee (or their associate) for their private travel or makes it available to use privately.
Situations that concern us include when employers:
- treat cars as 100% business use, even though they are used or available for private purposes
- don't have a valid log book, or the log book is not a representative sample of actual travel
- treat all eligible commercial vehicles as FBT exempt, without considering if the private use of the vehicle was limited.
To find out what you should do, see FBT on cars, other vehicles, parking and tolls.
Example: identifying private use
Eve is the owner and sole director of a company, Eve’s Consultancy Business Pty Ltd (ECB). Eve arranges for ECB to purchase a car, which she uses to visit clients and for other work-related travel.
Eve considers the car to be a business car because it is owned by the company and has a sign on the side with the business name. Therefore, ECB does not keep a log book and does not lodge an FBT return.
Based on our data and risk models, we select ECB for an FBT car review to check if the company is meeting its FBT obligations.
During the review, Eve explains that the car is garaged at her home and she uses it for her daily commute to the office.
We advise Eve that:
- home to work travel is private use
- when a car is garaged at an employee’s home (as a director of ECB, Eve is considered an employee for FBT purposes), the car is considered to be available for their private use
- in both instances a car fringe benefit has been provided and FBT applies.
We provide Eve with information about how to calculate FBT using the statutory formula method (she can't use the operating cost method because there is no log book). She agrees to lodge an FBT return for ECB.
End of example
Example: limited private use of eligible vehicles
BTE is an engineering business. It has a fleet of dual cab utes (with a carrying capacity of less than 1 tonne) and sedans, which its employees use to attend business sites and visit clients.
BTE considers that FBT doesn’t apply to the vehicles because the utes are eligible commercial vehicles and the sedans are only used for business purposes. Therefore, BTE does not lodge an FBT return.
Based on our data and risk models, we select BTE for an FBT car review to check if the business is meeting its FBT obligations.
The review identifies that the sedans remain at the office and the utes are taken home by employees and used for private purposes (such as weekend sport and camping trips).
We advise BTE that the private use of the utes must be limited to be an exempt benefit (see PCG 2018/3 Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles). The utes were used for extensive private purposes therefore these conditions have not been met. In this situation a car fringe benefit has been provided and FBT applies.
We provide BTE with information about how to calculate FBT. The business lodges an FBT return.
End of exampleEmployee contributions
Situations that concern us include when employers:
- report employee contributions in their FBT return but don't report the corresponding amount in their income tax return, or report at the incorrect label
- incorrectly apply employee contributions to reduce their FBT liability to nil, and don't lodge an FBT return
To find out what you should do, see employee contributions and FBT guide: 1.7 What are the income tax consequences of providing benefits?.
Example: employee contributions
To thank staff, an employer arranges to charter a boat to take staff on a 7-night cruise.
The employer pays for the total cost per person ($3,000) and each employee is required to contribute 50%, reimbursing the employer through an after-tax payroll deduction.
The employer reduces their FBT liability by applying the employee contribution and reporting this in their FBT return.
However, the employer does not report an amount at the employee contribution label in their income tax return.
This is a data mismatch and triggers a compliance engagement to check if the employer is meeting their FBT obligations.
End of exampleReportable fringe benefits amount
We use data and analytics to identify discrepancies between reportable fringe benefits amounts (RFBAs) and the fringe benefits reported on the employer’s FBT return.
Situations that concern us include when employers:
- include an RFBA on an employee's annual income statement but don't lodge an FBT return (this includes employers lodging consolidated FBT returns)
- lodge an FBT return with amounts that would otherwise be included as an RFBA but don't include amounts on employee income statements
- incorrectly report an employee salary sacrificed superannuation contribution, made under an effective salary sacrifice arrangement paid to a complying super fund, as an RFBA.
To find out what you should do, see Reportable fringe benefits and Salary sacrifice arrangements.
Example: RFBA and consolidated group
Ben’s Insurance Group Pty Ltd (BIG) is the head entity of a consolidated group for income tax purposes.
BIG lodges a consolidated FBT return on behalf of MED Pty Ltd and SML Pty Ltd, which are employing entities in the group, and advises them of the RFBA to be included on their employee’s income statements.
Employers must lodge separate FBT returns. BIG can't lodge a consolidated FBT return for the entities in the group.
There is a mismatch between the reported RFBA and FBT. This triggers a compliance engagement to check if the employing entities are meeting their FBT obligations.
End of exampleCorrecting an error
If you have made an error on your FBT return, you can amend it or make a voluntary disclosure.
If you need to discuss your circumstances or complex transactions you can engage with us for advice.
To provide transparency, we publish the main FBT issues that attract our attention, and how we check compliance.