Effective FBT administration by government organisations

Why effective FBT administration is important

Fringe benefits tax (FBT) requires a broad organisational approach to adequately manage it. The way FBT is administered within an organisation will depend on the organisation's operating environment, particularly its structure and the number and type of benefits provided.

Entities should have the structure, processes and controls in place to enable them to meet their FBT obligations in an accurate, timely and cost-effective manner.

The primary obligations for an employer are to:

• administer their FBT obligations in a way that ensures full compliance with tax law
• determine and accurately report reportable fringe benefit amounts for their employees.

Well-managed FBT administration provides the following benefits:

• compliance with FBT legislation
• accurate capture of transactions that give rise to fringe benefits
• payment of FBT instalments on time
• accurate and timely reporting of reportable fringe benefits amounts
• ability to continually improve the management of FBT obligations by ensuring FBT returns are complete, accurate and lodged on time
• ability to deal with and minimise the impact of audit activity.

Summary of effective FBT administration measures

The following tables summarise an effective framework of practices your government organisation can adopt to manage its FBT obligations.

Although aimed mainly at government organisations, this information may assist staff responsible for FBT administration in any large public or private organisation.

Identify and assess FBT risks

Action to implement	When to review	Documentation
Review the extent and nature of your government organisation's FBT obligations	Annually	Details of outcomes of review
Conduct a review of your organisation’s FBT risks	Annually or on a restructure	FBT risk register

Establish and maintain an effective FBT control environment

Action to implement	When to review	Documentation
Assign responsibility for the management of FBT	Regularly	Organisational structure and responsibilities (including who the signatory is on FBT returns)
Establish and review policies and procedures	Regularly to ensure that they reflect: current legislation ATO guidance entity requirements any improvements identified by a post-lodgment review	Policies and procedural documents relating to FBT
Establish and review information systems	Annually	Commercial software products or internally developed systems
Identify and address training needs	Regularly, particularly where there are changes in: roles and responsibilities FBT law	Training materials and records of attendance at external training

Engage with stakeholders

Action to implement	When to review	Documentation
Communicating with employees	At the start and cessation of employment and receipt of benefits	Training, intranet material and payment summaries
Communicating with other work areas	Regularly	Details of: arrangements for communicating FBT information to all relevant work areas within the organisation contracts with service providers and external advisers
Communicating with external organisations	As required	Details of communications and advice received

Review the effectiveness of FBT administration

Action to implement	When to review	Documentation
Internal reviews	Pre and post-lodgment of FBT return	Details of outcomes of review and issues log
Independent reviews	As required	Details of outcomes of review

Next step

Identify and assess FBT risks

How to effectively manage FBT in your government organisation.