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Navigating Fringe Benefits Tax (FBT) and the ATO’s increased compliance activity

As the end of another Fringe Benefits Tax (FBT) year passes, it is crucial for businesses to be aware of the ATOs increased focus on employment tax compliance, including FBT.

The ATO has recently ramped up its efforts to ensure employers are meeting their FBT obligations. They are doing this via a number of different programs, making it more important than ever to ensure you are complying with your obligations:

ATO Random Enquiry Program (REP)

The ATO’s REP is randomly auditing businesses’ entire employment tax obligations. This includes Pay As You Go Withholding (PAYGW), Superannuation Guarantee (SG), and FBT. Businesses are selected randomly, regardless of size or turnover, to ensure they are accurately meeting their employment tax obligations. The ATO do this to assist them in estimating the ‘tax gap’, that is, the amount of tax that isn’t being paid when it should be.

Increased Data Matching

The ATO is also leveraging data from Single Touch Payroll (STP), tax returns, BAS, and their complaints lines to identify potential issues with PAYGW, SG, and FBT compliance. As opposed to the REP, this is a data-driven approach and leads to more targeted audits and information requests.

Fringe Benefits Tax Gap

Finally, the ATO has identified that the FBT tax gap is over $1 billion and is therefore deploying resources to close the gap through increased compliance activities. This means the ATO will be closely scrutinising whether all employers who should be paying FBT are doing so, and that they are paying the correct amount.

The FBT year ended on 31 March 2024 with returns due by 25th June (if lodged by a tax agent). To ensure your business is prepared, we recommend the following:

  1. Review your FBT Obligations annually: Carefully consider all of the benefits you have provided to your employees (including Directors and their associates). This can include cars, car parking, entertainment, employee discounts, employee loans, reimbursed private expenses, housing etc. Any benefit provided to an employee, Director, or associate that is not a cash wage may be considered a fringe benefit. You should have received an FBT Checklist from us just prior to 31 March to assist you in identifying benefits you may have provided. If you didn’t receive a checklist, let us know and we’ll arrange for one to be sent to you.
  1. Keep Accurate Records: It’s important to maintain detailed records to substantiate your FBT calculations. One of the most important items is a vehicle logbook (used to determine car fringe benefits). Incomplete or inaccurate records can lead to significant issues during an ATO audit. If you aren’t sure what records to keep, talk to us – we can step you through what the ATO considers to be best practice.
  1. Lodge an FBT Return: Even if no FBT is payable, we recommend lodging an FBT return. This (generally) restricts the ATO’s audit window to three years from the date of lodgement, rather than an unlimited number of years, which is the case when FBT returns are not lodged.
  1. Identify Exemptions: Certain benefits, such as portable electronic devices, electric vehicles, or remote housing may be exempt from FBT. Ensure you understand the requirements for these exemptions and apply them correctly, so you are not overpaying FBT, or applying exemptions in error.

FBT isn’t always a significant tax impost when managed proactively. However, it can be complex (particularly when it comes to the strict rules regarding common issues such as commercial vehicles), and costly (when waiting until an audit to properly review the benefits you provide).

By staying informed and taking proactive steps, you can successfully navigate the evolving landscape of employment taxes and ensure you are meeting your FBT obligations.

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