Yes, it’s that time again – time to prepare for FBT. And this year you may have to factor in some of the impacts of the pandemic.
If you feel like you’ve only just got into the swing of the new year and it’s time to get the tax prepared, then you are not alone. The FBT year runs from 1 April to 31 March, so it does have a way of sneaking up.
By Paul Rattray
FBT can be time consuming for small businesses to prepare … Because many small businesses often can’t afford big corporate salaries they use additional benefits or ‘perks’ to attract and retain talent.
And this is where FBT comes in.
So first of all, let’s get clear, what exactly is a fringe benefit?
In relation to employees, the Australian Tax office defines a fringe benefit as anything that you pay or provide to an employee outside of their contracted salary.
These are not things associated with an employee’s role and responsibilities, like a mobile phone or even their home phone.
It can be tickets to an event, a weekend getaway, health insurance or a gym membership – benefits that are above and beyond their wage. It might be a meal voucher, cinema tickets, or a weekend getaway.
If you’re a business owner, then a fringe benefit is slightly different. It will relate to the private use of any business assets. The most obvious example would be using the company car outside of business hours and not always strictly for business purposes.
FBT is calculated on the ‘taxable value’ of a fringe benefit.
There are many different methods provided by the ATO for accountants to calculate the taxable value of the fringe benefit and therefore the FBT that has to be paid. But it can get confusing, so if you’re not clear, get professional advice.
It’s also important to remember there is an FBT limit for employees and it means that if the total taxable value of the fringe benefits provided to an employee in a FBT year exceeds $2,000, then employees must report the amount to the ATO.
Employers are responsible for ensuring their employees have the correct information to report to the ATO in their PAYG summaries via Single Touch Payroll.
Superannuation contributions are exempt from FBT.
Any benefits given to volunteers or contractors, or students/interns who are not ‘employees’ are also considered exempt from FBT.
The important factor this year of course is considering whether or not fringe benefits were impacted by Covid-19 lockdowns and closures and if this will change what you need to report. You will need to consider carefully whether gym memberships were suspended. Think about car usage and petrol consumption. Were tickets to events refunded or deferred?
If you’re not already using an accounting and payroll system such as Xero, it’s time to consider it because it will make your FBT reporting much easier.
The ATO is fair when it comes to genuine errors, but having to work through any discrepancies flagged by the ATO, can be stressful and time consuming, so you’re better off taking the time now, to get organised and to ensure the numbers are right.
Audits are on the rise too, which is why we recommend audit insurance, so that you can cover many of the costs associated with working through years of returns with the ATO.
Like most taxes relating to small business in Australia, FBT can be complicated and at times, confusing, so if you need professional help, just reach out. It’s what we’re here for.