FBT Mythbusters

March marks the end of the Fringe Benefits Tax (FBT) year and time to make sure your business doesn’t pay any more FBT than is necessary. 

Instead of giving you a boring description of what FBT is and your obligations, we thought we would take a different approach this year – Mythbusters!

So here is our list of top FBT misconceptions:

‘FBT doesn’t apply to me’

Most businesses with employees (including yourself as an employee) will be caught in the FBT system. If you provide your employees with a benefit other than salary/wages/bonuses/super then you are likely to be providing fringe benefits to your employees.

Please refer the below questionnaire which will assist you in understanding if you have provided fringe benefits.

‘I am ok, it’s all business use’

You may be correct that you do not have to pay any FBT, but you do have certain record keeping requirements including the need to have declarations completed for your employees at 31 March 2014 to avoid any FBT.

Please refer to the below links for many of these declarations you need to prepare and retain.

‘I can’t be bothered completing a logbook, I rely on the kilometres travelled’

In cases whereby the home to work trip is the majority of the kilometres (long commutes etc), then it is highly likely a logbook would be of no use. By also keeping a logbook you then have a choice between the 2 methods to calculate the lowest FBT.  More options, equals potentially less FBT.

‘I have a novated lease, FBT doesn’t apply’

Novation agreements between employees, employers and leasing companies have become more popular in recent years, even with the scare last year with regard to statutory calculations. Depending on how this arrangement is structured, it still may be possible that FBT applies. It is important you keep records of all expenses paid by you outside the novation agreement. Examples may include: service, repairs, insurance and petrol. These can be provided to your employer and treated as recipients payments to reduce any FBT.

‘I choose to rely on the 50/50 method for entertainment’

Using the 50/50 method simplifies record keeping requirements, however the 50/50 method totals all entertainment, including entertainment that may have been exempt under the minor benefits exemption (under $300). It is recommended to keep records of the actual split between clients and staff over the year to then determine whether the 50/50 or actual method results in the best outcome for FBT purposes.

‘I was told all gifts to my employees are subject to FBT’

Potentially, depending on the value and the frequency of the gifts. The ATO accepts what they refer to as minor benefits which will be supplied to employees throughout the year. The ATO treats these minor benefits as exempt from FBT if the benefit is under a GST inclusive value of $300 and provided on an infrequent or irregular basis. Therefore, the one off employee xmas bottle of wine, hamper or ham is not subject to FBT.

‘So, what do I need to do?’

If you're unsure or have any questions, your Altus Adviser is here to help.