The end of the FBT year is again fast approaching and the ATO are ramping up their compliance activities to ensure FBT compliance across a variety of businesses. Whilst in the past an ATO review of FBT was uncommon, the ATO are increasingly using data to connect the dots and commence reviews.
Most businesses will need to be registered for FBT with entertainment of employees being a common benefit provided, however, this is not the limit. If you have employees or directors and provide them with any of the following you may be liable for FBT.
- Cars (electric vehicles* may be exempt in some cases) and car parking
- Entertainment (ie food and drink, tickets)
- Reimbursement of private expenses
- Employee discounts and or loans
- Life insurance
The FBT landscape has changed in recent years with the rules around car parking a well-known example. As such, taxpayers are encouraged to reassess the potential benefits provided to employees and not rely on a “business as usual approach”.
There are a number of areas that taxpayers should consider and review annually – some of these include:
- Logbooks and records for company cars and utes –have the relevant statutory declarations been obtained? Has the use of the vehicle changed as a result of COVID and is the logbook still valid? Where there is a change in use, a historical logbook may no longer be valid.
Renewal of logbooks utilising 1 January to 31 March for the 12-week period is a common approach as long as its representative of the year.
- Should entertainment be managed using a 50 / 50 or actual approach? Is it beneficial in undertaking an analysis and how does the approach impact the application of the minor and infrequent rule?
Importantly, FBT should not be viewed in isolation as its impact can be wide ranging. The treatment of entertainment for FBT purposes can give rise to non-recoverable GST, however, this is often overlooked by taxpayers. The ATO have a high success rate when undertaking GST reviews with non-recoverable GST on entertainment being the largest source of recovered GST.
In addition, FBT impacts Payroll Tax (fringe benefits need to be included in Payroll Tax calculations) and certain fringe benefits are reportable (ie they are required to be included in a taxpayers income tax return and on their group certificate).
At ESV we have developed an FBT 2023 Questionnaire which we will be sending to all of our clients. Completing this simple questionnaire helps us determine your FBT position.
If you have any questions about FBT and the rules for 2023, please reach out to your Engagement Partner – so we can clarify the situation for your business.