Why employers should lodge FBT Returns, even if it is Nil

What Is A Fringe Benefit?

A fringe benefit is a benefit provided to an employee (or their associate – typically family members) but in a different form to salary or wages. Benefits can also be provided by a third party under an arrangement with the employer. An employee can be a current, future or former employee.

If you are a director and run your business through a company, you may be regarded as an employee of that company. This may mean that fringe benefits provided to yourself result in your company having FBT obligations.

Examples of fringe benefits include:

• allowing an employee to use a work car for private purposes
• giving an employee a discounted loan
• paying an employee’s gym membership
• providing entertainment by way of free tickets to concerts
• reimbursing an expense incurred by an employee, such as school fees
• giving benefits under a salary sacrifice arrangement with an employee

What Is A Fringe Benefits Tax (FBT)?

Fringe Benefits Tax (FBT) is separate from income tax. It is a tax paid on certain benefits provided to employees or employees’ associates.

The employer must self-assess their FBT liability for the FBT year (1 April to 31 March) and lodge an FBT return by 21 May each year.

Paying FBT

Employers pay FBT based on the “value” of the benefit provided, even if the benefit is provided by an associate or by a third party under an arrangement with the employer.

In most cases, employers can claim a tax deduction for the cost of providing the benefit and for any fringe benefits tax they pay as a result.

There are ways of reducing the amount of FBT payable, including requiring the employees to make an “employee contribution” towards the cost of the fringe benefit.

Obligations If A Business Provides Fringe Benefits

1. Calculate how much FBT is payable. Employers self-assess if FBT is applicable and calculate how much FBT they must pay each FBT year.
2. Keep the necessary FBT records. The FBT law requires employers to keep certain records relating to the fringe benefits they provide.
3. Register for FBT. We recommend employers register once they establish that they must pay FBT.
4. Report fringe benefits on employee payment summaries. Employers must report certain fringe benefits on employees’ payment summaries. Employers using Single Touch Payroll (STP) will  find that their payroll software will prompt them to enter this information once a year prior to finalising year end payroll.
5. Lodge an FBT return and pay FBT to the Tax Office. A FBT return covering the FBT year, which runs from 1 April to the following 31 March should be lodged by 21 May each year.

While the FBT year ends on 31 March each year, but many businesses don’t do anything regarding FBT until about 6 months later when they work on their annual Financial Statements.

Why Employers Should Lodge An FBT Return Where No FBT Is Payable?

Well, for the simple reason that it turns on a three-year deadline for the ATO to commence audit activities.

Lodging your FBT Returns each year REDUCES the major risk of an ATO audit to just the past 3 years.

One of the biggest problems with an employer not lodging an FBT where no FBT is payable (due to employee contributions) is that no assessment is issued by the ATO. This gives the ATO an indefinite period where the employer may be assessed for FBT, commonly following an FBT audit.

Why Lodging A “Notice Of Non-Lodgement” Is NOT The Solution

A common practice by employers who have no FBT liability due to employee contributions is to notify the ATO by lodging a “Fringe Benefits Tax – Notice of Non-Lodgment” form.

Lodging a non-lodgment notice does NOT trigger the amendment time limits referred to above, as no assessment is raised. This means that the ATO can issue an FBT assessment for the FBT year in question, at anytime.

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