With the lodgement due date of the annual Fringe Benefits Tax (FBT) return looming, the Australian Taxation Office (ATO) is ramping up their activities to ensure FBT compliance across various businesses. While ATO reviews of FBT were once rare, the landscape is evolving, particularly with the use of data to initiate reviews.
Most businesses will need to be registered for FBT with entertainment of employees being a common benefit provided, however, this is just one of the benefits provided. 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
Of particular interest to the ATO is the identification of employers applying exemption rules for dual cabs and utes used by their employees, without regard for the private use of such vehicles. Accordingly, they have extended their motor vehicle data matching program for the 2022/23 to 2024/25 years to identify risks and trends of various non-compliance, including FBT.
Electric Vehicles
With recent changes, the Electric Vehicle FBT exemption isn’t all it is amped up to be for Employers.
The provision of an electric vehicle to an employee as a benefit does have some advantages as a result no FBT being levied, however you must be aware as an employer there is still the need to report the value of the benefit on the payment summary which for the employer adds some compliance costs.
If you provide a battery electric, hydrogen fuel cell vehicle or certain plug-in hybrid electric vehicles and meet the following tests, it should be exempt from FBT:
- Car was held and used after 1 July 2022
- The car benefit provided after 1 July 2022
- Provided in respect of employment of a current employee
- No luxury car tax was ever paid on the vehicle
The related expenses are also exempt being registration, insurance, repairs and maintenance, fuel as well as electricity used to charge the car.
Calculating the cost of electricity is important as you may want to reimburse the employee for the cost of electricity and if not, the employee will want to reduce the value of the benefit provided by the cost of electricity used or contributed when charging at home.
The ATO have given a short cut method to calculate the cost of charging an electric car at home using an electric vehicle charging rate – which is 4.2 cents per kilometre travelled in the FBT year. Please note a plug-in hybrid car must be calculated using the actual cost. (Otherwise, there could be a double counting of costs if the shortcut method was applied).
When using the short cut method any costs incurred at a commercial charging station must be excluded. The employee must declare annually to the employer that they incurred the electricity costs and provide the employer the distance travelled by the car.
If you have any questions about FBT and the rules for 2024, please reach out to your Engagement Partner – so we can clarify the situation for your business.
