Why you should lodge a Fringe Benefits Tax (FBT) return (even if you don’t have to)

May 6, 2024

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As an Australian small business owner, you’re likely always on the lookout for ways to maximize your financial efficiency while staying compliant with the ever-changing tax regulations. One area that often raises questions is Fringe Benefits Tax (FBT). While it may seem like an additional administrative burden, lodging an FBT return can actually yield several benefits for your business, even when it might not be strictly necessary.

What is FBT?

FBT is separate from income tax. It is a tax paid on certain benefits provided to employees or their family and other associates.

If you are a director and run your business through a company, you may be regarded as an employee of that company, and so fringe benefits provided to yourself can result in your company having FBT obligations.

Common examples of fringe benefits include:

  • Providing food, drink or recreation that is considered entertainment.
  • Allowing an employee to use a work car or other vehicle for the employee’s private purposes (including taking the car home overnight)
  • Providing car parking for your employees
  • Giving an employee a cheap or interest-free loan

Even though it is designed to capture benefits enjoyed by an employee, FBT is levied on the employer.

The FBT year runs from 1 April to 31 March, and FBT returns are due by 21 May if lodged by paper, or 25 June if lodged via a registered tax agent such as Accelerated Prosperity.

Why should employers lodge an FBT return even if there is no FBT payable?

Without an FBT return being lodged, the ATO has the discretion to launch an audit into activities as far back as a business has had employees. Without the necessary evidence (e.g. signed declarations, logbooks, meal entertainment records, etc.) that FBT was NOT payable in each year the ATO is likely to raise FBT liabilities, even where the employee who enjoyed the benefit no longer works for the business. Thereby making it impossible for the business to recoup anything.

However lodging an FBT return, even if to declare that there is no FBT payable, starts the clock ticking on the three years the ATO can commence audit activities on fringe benefits and FBT for the business. The exception is in case of fraud or evasion in which case there is no time limit they can go back.

Other benefits of lodging an FBT return

While it’s true that lodging an FBT return entails some administrative effort, it also presents an opportunity to optimise your tax position. By accurately tracking and reporting fringe benefits, you can ensure that you’re claiming all available exemptions and concessions, ultimately reducing your taxable income.

Moreover, lodging an FBT return enables you to monitor and analyse your expenditure on fringe benefits. This can highlight areas where you’re overspending or where adjustments could be made to better align benefits with employee preferences. In essence, it’s a chance to fine-tune your benefits strategy for maximum impact and cost-effectiveness.

Staying up to date with FBT obligations can provide peace of mind, knowing that your business is operating within the bounds of the law. It’s a proactive approach to risk management that can protect your reputation and financial stability in the long run.

The ATO has indicated that there will be an increased focus on FBT this year so if you would like to reduce the ATO’s ability to retrospectively launch an audit, book in a time to speak to us today.

Business Advice
Andrew Sampson Accountant Accelerated Prosperity
The Author
Andrew Sampson
Andrew has dedicated his career to advising private clients on their financial and tax affairs for over 20 years and takes pride in going the extra mile to see you and your business prosper.
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