Frequently Asked Questions on FBT

Tomorrow marks the end of the Fringe Benefits Tax (FBT) year! This means you need to make sure your business doesn’t pay any more tax than is necessary. Read our list of Frequently Asked Questions on FBT:

How can I minimise my FBT?

• Even with high private kms, still maintain a logbook for cars – download an app to help manage kms
• Split your entertainment into separate categories – e.g. staff & client components via a per head basis
• Hold small staff functions at business premises as opposed to offsite locations
• For large overseas travel, have employees leave their car & keys at the office
• Maintain good documentation & record keeping – the reliance is on the employer

What are the implications of the Reportable Fringe Benefits appearing on my Payment Summary?

The Reportable Fringe Benefits amount is not included in your assessable income and is therefore not subject to income tax.

However, the amount is used to determine entitlement to, or liability for, a number of benefits including, Medicare Levy Surcharge and Superannuation Co-contributions.

What are the record keeping requirements for the operating cost (log book) method?

A log book is required to be maintained in the first year the operating cost (log book) method is used and then every five years. The log book must be kept for a continuous period of 12 weeks. The period may overlap 2 tax years.

The log book must record all business travel. The following information must be recorded for each business trip:

1. the date the trip began and ended;
2. odometer readings at the start and end of the trip;
3. kilometres travelled; and
4. the purpose of the trip.

The record must be made at the end of each trip or as soon as reasonably possible after the trip.

If the car is replaced, the log book may apply to the replacement car. 

What are entertainment benefits?

Entertainment means entertainment by way of food, drink or recreation, or accommodation or travel in relation to the provision of entertainment by way of food, drink or recreation.

What types of expenditure are ordinarily considered to be entertainment benefits?

Provision of the following is subject to FBT:

• Food or drink consumed on work premises by employees and/or associates at a social function;
• Food or drink consumed on work premises in an in-house dining facility by associates of employees not at a social function;
• Morning or afternoon tea or light lunches to employees where alcohol is provided;
• Food or drink consumed off work premises by employees and/or associates at a social function or business lunch;
• One employee entertains client and is reimbursed by the employer;
• Where employees dine together at a restaurant and the meal is paid; and
• Any other ‘non-deductible’ meal entertainment provided to employees whether or not on university premises.

What is the otherwise deductible rule?

The otherwise deductible rule allows the taxable value of a fringe benefit to be reduced to the extent that the recipient of the benefit would have been entitled to a tax deduction for the expense. 

A key part of this is that the tax deduction must be a once only deduction – a deduction spread over a number of years won’t qualify. This means that if an employee would claim a deduction for depreciation, the otherwise deductible rule won’t be available. 

As an example, if an employer reimburses an employee for the cost of a desktop computer, even if the employee uses the computer 100% for business purposes, any deductions the employee would otherwise claim for the cost of the computer would be in the form of depreciation, hence the otherwise deductible rule cannot apply.