Good to Great: How to Scale With an Outsourced CFO

It’s that time of year again: time to think about your Fringe Benefits Tax (FBT) return. Employers must lodge an FBT return if they’ve provided fringe benefits to any employees or associates during the FBT year. With the FBT year ending 31 March 2021, you’ll need to keep a few points in mind:

FBT payment

FBT is due for payment by 21 May 2021 if you file by paper or 28 May 2021 if you lodge electronically. However, if you lodge electronically, your return is not due until 25 June 2021.

Check your odometer

Make sure you check your odometer - 31 March 2021.

Seeking to reduce FBT?

1. Car fringe benefits – There are two approaches to FBT payable on motor vehicles (Operating cost method or statutory method). You can change plans each year to ensure the most tax effective method is being applied.

If you are keeping a log book, a lower amount of FBT may apply if you choose to use the ‘operating cost’ method. If so, any details of the following car costs are taken into consideration such as : 

• Insurance
• Registration
• Petrol and oil
• Lease payments
• Repairs and maintenance
• Roadside assistance fees
• Any other expenses

If using either method, the taxable value of the benefit provided may be reduced by any financial contribution made by the employee.

2. Employee contribution – In order to minimise the FBT payable, establish a salary packaging arrangement to accurately capture employee contributions. Where any operating expenses have been paid by employees, these can reduce the overall FBT payable by the employer. 

3. Entertainment fringe benefits – You may determine the taxable value of the meal and entertainment fringe benefit by using a 50/50 split, the actual cost or the 12-week register method. The first two are the most common methods.

If you have any questions about FBT or what your business can do to reduce expenses related to FBT, get in touch. We’re here to help you prepare all of your fringe benefits tax documentation.

The actual cost method

Under this method, the costs of the meal and entertainment should be allocated between the employees’ portion and the client’s portion. 

Expenses for non-meal entertainment (e.g. golf days, theatre tickets, recreational activities associated with the Christmas Party, etc.) should be considered separately for FBT purposes. Each benefit that is less than $300 may be a minor benefit and exempt if certain conditions are met.

50:50 split method

Using the 50/50 method is a simple and straightforward way to calculate FBT, particularly if you have not kept records of attendees. However, all meal and entertainment benefits, whether provided to employees, associates or third parties must be included.

Also remember that if an employee is travelling for work and dining with a client, it is most likely a travel expense, not entertainment so make sure you are keeping good records and making sure costs are not unnecessarily called entertainment.

But wait there’s more ...

Rates and Thresholds Updates: FBT rates and thresholds for the year ending 31 March 2021 have been updated. These updates affect gross-up rates, motor vehicle cents per kilometre rates, car parking thresholds, statutory benchmarks/interest rates, record keeping exemption thresholds, housing indexation and depreciation rates for cars.

PAYG Payment Summary Reporting: Where an employee receives a fringe benefit, the grossed-up value is included in their PAYG Payment Summary at the end of the year. However, remember it is only where the fringe benefit exceeds $2,000.

Payroll Tax on Fringe Benefits: Payments which are liable as fringe benefits for FBT are also considered to be taxable wages for payroll tax purposes. Remember to include the grossed-up value of fringe benefits when calculating your payroll tax for the year.

Download the Questionnaire and Declarations here and the Excel Workbook here.

If you have any questions about FBT or what your business can do to reduce expenses related to FBT, get in touch. We’re here to help you prepare all of your fringe benefits tax documentation.