Common FBT Misconceptions

Talking Points:

  • Fringe Benefit Tax assessment year has ended with FBT Returns due 21 May 2021.
  • Misconceptions around what expenses attract FBT can result in you paying too much FBT.
  • It is important for business owners to review concessions & exemptions in light of COVID-19 as these may now be relevant for you.

Are you paying too much FBT?

The Fringe Benefit Tax (FBT) for 2021 ended on 31 March and the due date to lodge the FBT return in 21 May 2021. Payment for the FBT liability is due immediately so it’s important to be aware that the 21 May is both the lodgement & payment date.

Going forward, the FBT payment date will be permanently moved to 25 June for tax agents who lodge returns electronically.

As you begin to review your expenses and prepare your FBT return, we have prepared a useful list of questions and common misconceptions around the fringe benefits tax.

What has changed since COVID-19?

The ATO has listed a number of FBT exemptions and concessions available to employers. The majority of these exemptions and concessions have always existed, however they may be more relevant during COVID-19.

The ATO appears to have relaxed their position with respect employees garaging their work cars at home. Employers in this situation will not have to pay FBT to the extent that the car benefit would be valued under the operating cost method and the car was not driven, except for the purpose of maintaining the car (employees should keep odometer records to substantiate this point).

Cars, motorcycles, Utes and vans are one not one in the same (for FBT)

Employers are likely aware that where company cars are made available for private use, there will be FBT to pay. Employers may not be aware that they may be able to value motorcycle, Ute and van benefits differently to regular car benefits and in most cases this will lead to a more favourable FBT result.

In some circumstances, Utes and vans may not be subject to any FBT in a year where the private usage of the vehicle was minor and incidental.

Small business exemption for car parking – are your parking spots indeed exempt?

Some small businesses may qualify for the small business car parking exemption. For the 2021 FBT year, the small business turnover threshold is $10m, which will increase to $50m for the 2022 FBT year onward.

Employers should be aware that the exemption is not available if the parking spots in question are located in a commercial car park. This may be problematic for employers who are renting spots in a Wilson or Secure car park for employee use (especially given they operate a number of CBD car parks attached to office buildings).

More tech for small businesses!

Small business employers may not be aware that they can provide multiple electronic devices of the same type to employees within an FBT year. To give an example as to why this may be of interest to small businesses, given the fact that many employees are currently working both from home and in the office, they may find it more convenient to have a work laptop stationed in the office, as well as another laptop stationed at home, thus saving them the hassle of having to transport a laptop to and from the office.

Other electronic work items which are exempt from FBT:

  1. Mobile phones (including those which are on a leasing contract with a telecommunications provider);
  2. Tablets; and
  3. Portable printers.

Is it entertainment?

Employers are generally aware that if they are providing food or drink to employees, there is a reasonable chance that this will attract FBT. Here are some examples where the provision of food or drink to employees may not be considered entertainment (thus not attracting FBT):

  1. The monthly office morning tea celebration for employee birthdays;
  2. Providing lunch during an in-office training session;
  3. The odd coffee run, where the coffees are brought back to the office;
  4. Providing tea, coffee and light snacks in the office to help the team throughout the day;
  5. Reimbursing employee meals whilst they are travelling for business; and
  6. Meals provided during the annual firm strategy day.

Alcohol must not be involved in any of the first four examples above.

Note that in this list above, we have not included a meeting with a client at a café or restaurant to discuss business matters. There is a common misconception that such a meeting is exempt from FBT and automatically income tax deductible, however this is not necessarily the case. For most businesses, FBT would likely apply in such scenarios and the expense would not be wholly deductible.

Other misconceptions

We are also seeing many employers beginning to introduce fitness and wellness policies to employees, whereby the employer will reimburse employees for various fitness and wellness related costs. Employers are also providing yoga and personal training classes to their employees. CharterNet provides their employees with all of the above!

It should be noted that despite the argument that these types of policies are designed to lower employee stress, reduce the amount of sick days an employee may take and/or increase employee productivity, the ATO’s current position is that these types of policies will attract FBT.

Misconceptions around what expenses attract FBT can result in you paying too much FBT. Keep abreast of the scenarios and eligibility requirements most relevant to you in order to make the most informed business decisions.