A recent risk review conducted by the ATO showed that up to 70% of employers that have Fringe Benefits Tax (FBT) obligations are non-compliant. This could leave businesses exposed to hefty fines and penalties. Read on to find out if you’re at risk…
Fringe Benefits are benefits given to an employee by an employer in addition to their salary. The most common Fringe Benefits comes in the form of company cars given to employees to use which is garaged at or near the Employee’s place of residence overnight.
The onus is on you to meet your FBT obligations. Ignorance is no excuse. Given that the ATO is ramping up their Audit Activity in this space, you must educate yourself on your obligations.
Here are ten areas every business owner needs to be aware of:
- Motor Vehicles – Even a Company Car driven by the Directors of the business attracts FBT. If you have any Company Car’s driven by Company Directors or Employees we have ways to potentially reduce the taxable value of these benefits down to $Nil, however by not doing anything dramatically increases your audit risk.
- Utes & Work Vehicles – There is a general view out there that all Utes & Work Vehicles are exempt for FBT purposes. These Motor Vehicles can be exempt however the private use of these vehicles must be minor and insignificant. This is a major Danger Zone!
- Employees using Novating Leasing – So an employee has approached you to Salary Package a Novated Lease. You have agreed. Have you ensured that you have set-up the relevant deduction in your Employee’s pay correctly? We have seen clients being burnt in this area where they thought they were doing the right thing!
- Meal Entertainment – This has been a confusing area of FBT – but the rules have now been clarified somewhat. If you provide meal entertainment to your Employees and their Associates, there are instances where this may be subject to FBT. While social lunches and drinks (including alcohol) at restaurants or bars incur Fringe Benefits Tax, light business-related lunches at a café during business hours are tax deductible and don’t incur Fringe Benefits Tax. ‘In-house’ meals which are offered to employees on the business premises are also fully tax deductible, as long as the meal isn’t offered in a ‘social’ environment.
- Car Parking Fringe Benefits – Do you offer Car Parking to your employees? If you have a Commercial Car Park within a 1km radius of the relevant employees usual place of employment that charges more than $8.26 per day (2015 FBT year rate) you may have an FBT obligation.
- Paying for Employee Car Parks at work – If you pay an external organisation for Employee Car Parks, then this falls out the Car Parking Fringe Benefits category and into the Expense Payment Category. It doesn’t matter if there is a Commercial Car Park within a 1km radius of the relevant employees usual place of employment.
- Living-Away-From-Home Allowance – The goal posts have recently shifted in relation to the Living-Away-From-Home Allowance, and when we say shifted, we mean the rules are now a lot more stringent.
- Expense Payment – If you pay an expense on behalf of an employee, it will only be FBT-exempt when the expense would be deductible if the employee paid for it themselves. BE CAREFUL!
- Loan Fringe Benefits – So you have borrowed some money to an employee which they are to pay back with little or no interest. If Interest isn’t charged at the current market rate, then this is considered as a Fringe Benefit!
- Housing Benefits & Air flights – Do you provide housing benefits and/or air flights to employees that are in a non-remote area? A lot of employers are unaware that this a Fringe Benefit!
To ensure you don’t get caught out, and to protect yourself from an unexpected audit, contact our FBT expert Tim Sherlock today on (03) 8888 4000 or firstname.lastname@example.org.