Why Should You Lodge an FBT Return?
If you’re an employer, you might wonder why you should lodge a Fringe Benefits Tax return when no FBT is payable. After all, the tax is designed to capture benefits enjoyed by employees, but it’s levied on the employer. There’s a simple reason why you should file a return: it turns on a three-year deadline for the ATO to commence audit activities.
If you don’t lodge an FBT return, the ATO can launch an audit into your activities as far back as the time your business has had employees.
Without evidence that FBT was not payable in each year, the ATO is likely to raise FBT liabilities, even if the employee who enjoyed the benefit no longer works for the business. This makes it impossible for the business to recoup anything from the past employee.
Even if you believe that you’ve done everything in accordance with legislation, mistakes can happen. For instance, a common one that occurs is when an employee is provided with a car, and the private use is worked out using the operating cost (logbook) method. If you overlook the deemed depreciation each year, it can give rise to an FBT liability where the calculated employee contribution is insufficient to remove the car’s taxable value. If such a mistake is identified, the ATO is likely to review the entire period that the car was owned by the business. Lodging an FBT return would limit the length of time the ATO can audit to three years.
Another common mistake is not maintaining a register of which employees are the recipient of meal entertainment benefits. Not all meal entertainment benefits are treated the same, which is why maintaining a register is vital.
For example, let’s say you have two employees, Jason and Greg. Jason’s job is to go out and impress current and potential clients at various social events where food and drink are consumed. Greg’s role on the other hand is to remain in the office and complete the projects that Jason wins. At the year-end social function, the food and drink that is consumed by Jason will not qualify as exempt meal entertainment, but the food and drink consumed by Greg may be exempt. Entertainment provided to employees that is infrequent and under $300 is generally exempt from FBT, while frequent entertainment is not. As Jason’s job requires him to attend frequent social events, he doesn’t satisfy the exemption test. Without records to confirm who received meal entertainment benefits, and absence of a completed FBT return, the ATO has unlimited scope to audit your records for liabilities.
The ATO has signaled that there will be an increased focus on FBT this year. If you’d like to limit the ATO’s ability to retrospectively launch an audit on your business, you know where to find us.