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:
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.
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.
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.
Well, for the simple reason that it turns on a three-year deadline for the ATO to commence audit activities.
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.
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.
Want to talk about your Medical Practice to see if you are operating at your full potential, then contact us for a coffee and a chat.