FBT Compliance in 2018: Don’t get caught out this year…
With the close of the 2018 Fringe Benefits Tax year fast approaching, it’s important to take steps towards FBT compliance so that you don’t get caught out.
At this time, we recommend employers review their activity throughout the period 1 April 2017 – 31 March 2018 and consider whether FBT may apply.
Below is information to help you get compliant, especially in light of some important updates about motor vehicle ownership and portable electronic devices.
Renewed ATO focus on FBT compliance
As a result of producing over $4 billion of total tax revenue in 2016, the ATO is undertaking additional audit activity to improve the level of FBT compliance.
In 2018, the ATO will place focus on the following:
- Employers who have purchased motor vehicles but have not disclosed car fringe benefits in their FBT return or appropriate employee contributions in their income tax return;
- Reportable fringe benefits disclosed on payment summaries but without any FBT return being lodged; and
- Reviewing the eligibility of entities claiming an FBT exemption or rebate.
Do you need to register for FBT?
Unsure whether you should be registered for FBT?
Generally, if you provide fringe benefits to employees, you need to register for FBT. Common fringe benefits include:
- Car fringe benefits;
- Car parking fringe benefits;
- Entertainment fringe benefits; and
- Living away from home allowance fringe benefits.
New FBT rates
2018 marks the conclusion of the 2% Debt Tax (Temporary Budget Repair Levy) for FBT and has resulted in a tax rate reduction from 49% to 47%, which commenced on 1 April 2017.
The FBT rate for 2019 is yet been confirmed.
Important updates about motor vehicles & portable electronic devices
If your business holds motor vehicles, you must record the odometer reading at the close of the FBT year, being 31 March 2018, in order to correctly calculate your FBT liability.
Furthermore, ensure the odometer reading of any motor vehicle you purchase or sell throughout the FBT year is recorded on the invoice, or make a note of this in preparation for FBT consideration.
Changes to FBT compliance with fleet vehicles
Released by the ATO in October 2016, Practical Compliance Guidelines PCG 2016/10 provides a valuable administrative concession to employers who maintain a ‘fleet of motor vehicles’.
The guidance simplifies the record-keeping requirements to value a motor vehicle under the ‘operating cost method’ by allowing the employer to apply an average business use to qualifying motor vehicles.
For a motor vehicle to qualify for this concession, it must first meet the following conditions:
- It is a ‘tool of trade’ car;
- It has a GST-inclusive value less than $65,094 (Luxury Car Tax threshold);
- It is a make and model chosen by the employer rather than the employee; and
- It isn’t provided as part of a remuneration package.
Motor vehicles that meet the above criteria are referred to as ‘qualifying cars’. To apply the concession, the employer must:
- Hold a fleet that contains at least 20 qualifying cars; and
- Have a mandatory log book policy in place that requires employees using the qualifying cars to maintain valid log books for the vehicles.
If the above conditions are met and the employer has valid log books for at least 75% of the qualifying cars in the fleet, the average business use percentage can be used to value the fringe benefits for the entire fleet of qualifying cars.
Portable electronic devices
The FBT exemption for portable electronic devices has been extended to exclude the substantially identical function limitation for small businesses.
As a result, small businesses can provide multiple portable electronic devices to the same employee in the same FBT year, assuming the devices are used primarily in the employee’s employment.
Confused about your FBT lodgement responsibilities or need to discuss how FBT regulations may impact your business?
Contact our team on (07) 3490 9988 for assistance with any FBT issues.
