FBT in 2022: What You Need To Know
This one doesn’t go on the commonly asked questions list because most of our clients forget about it and many don’t know what it is or if it applies to them. With the technicalities changing regularly and the definition wordy, we get it. Here’s a breakdown of what you need to know, in simple terms. Key takeaway: if you’re a client, keep up to date with your emails! You’ll be receiving a form to complete, and we’ll take the rest from there.
What is FBT?
Fringe benefits tax. A fringe benefit is a benefit provided to an employee or their associate (eg/ family). This includes directors who own their business and aren’t necessarily paid a wage.
Examples of fringe benefits include…
- A work car which is also used as a private car
- Giving the employee a loan
- Private health insurance as part of a remuneration package
- Tickets to sporting events or other entertainment
- Meal entertainment expenses
- Gym membership
What’s changed with FBT?
The days of being fast and loose around FBT are gone. We are now registering everyone who has employees for FBT, unless you contact us to say otherwise. Even if you don’t have an FBT expense this year, but you do have employees – you’re still better off registering now… more on that later. The Commissioner is targeting FBT this financial year so it’s time to get our collective heads around it!
How is FBT charged?
The amount or formula is different for the different kinds of benefits. The tax rate is 47% (yeah, it’s a whopper). At the end of the FBT year (March 31st, not June 30th – so that we aren’t destroyed x 2 mid year) you need to tell us what fringe benefits you’ve provided to yourself or employees. Expect a questionnaire in your inbox from us, which will go through all the types of fringe benefits that may have been provided. Then, your accountant will calculate the combined total value of the fringe benefits and the correct formula will be applied to come up with your payable amount.
Who needs to register for FBT?
Any business who employs people needs to register for FBT. Your industry is dependant on how FBT will affect you.
There’s a reason to lodge an FBT return even if it’s nil…
You might be thinking “hmm this year I can’t think of any fringe benefit expenses, but yeah I do employ people”. Let’s get tricky with our tax strategy for a minute. Here are a few reasons why lodging an FBT return is still a smart move:
- You’ve effectively triggered a three year time limit for the Commissioner to review your FBT returns and liability
- So, if in the next three years they don’t review the liability, it can’t later on be checked
- Personal vs business use is subjective and so for that reason it’s beneficial to avoid auditing
- Or, it could be that you’ve made an honest mistake and forgotten to declare something, or forgotten a log book
What happens if you get audited for FBT?
If you’re getting audited, you will have an opportunity to disclose any mistakes you’ve made. If that’s the case and you do put your hand up and let the ATO know, there won’t be any fines or penalties. But if you don’t, penalties may apply.
What do you need to do for FBT?
We’re making it as easy as possible. Three things you need to know:
- You must fill out the form that’ll appear in your inbox in March
- You must have the form completed by 30th April
- By Future lodging a return, you are automatically registered for FBT