Are you an Australian employer providing non-cash benefits to your employees? Then you need to know all about Fringe Benefits Tax (FBT), the tax imposed on such benefits.
The FBT year runs from April 1st and ends on March 31st. Employers who provide fringe benefits to any employee or associate must lodge an FBT return for benefits provided during this period. Before you go ahead and start preparing your paperwork, there are a few FBT changes and areas of focus that may change the way you usually lodge your return, including:
- FBT thresholds;
- COVID testing;
- Electric vehicles;
- Car parking benefits;
- FBT exemptions;
- Record keeping essentials;
- Employer declarations; and
- Notice of non-lodgement
Let’s unpack them together!
Thresholds for 2023
Here’s a breakdown of some of the key thresholds for 2023:
- Type 1 (benefit provider entitled to GST credits) — 2.0802
- Type 2 (benefit provider not entitled to GST credits) — 1.8868
- Reportable fringe benefits – taxable value threshold — $2,000
- Car parking threshold — $9.72
- Statutory or benchmark interest rate — 4.52%
The Australian Taxation Office (ATO) has confirmed COVID-19 testing provided by employers to their employees will be exempt from FBT.
From July 1st 2021, individuals who buy or pay for a COVID-19 test due to work-related purposes, such as to determine if they should attend or remain at work, can claim an income tax deduction for this expense. Likewise, if an employer purchases, pays for or reimburses these expenses instead of the employee, the otherwise deductible rule may apply. While the worst of the pandemic is behind us, the ATO believes it is still important for employers to provide COVID-19 testing and help keep workplaces safe. So, you can rest easy knowing that your COVID-19 testing program won’t be taxed.
For more information, you can read more via the ATO here.
As part of the Australian Government’s push for reducing our environmental impact and footprint, employers purchasing an electric vehicle (EV) for their employees will now be exempt from FBT. To be eligible for this exemption, you will need to met the following criteria:
- The car is a zero or low emissions vehicle;
- The first time the car is both held and used is on or after July 1st, 2022;
- The car is used by a current employee or their associates (such as family members); and
- Luxury car tax has never been payable on the importation or sale of the car
If you would like to know more about the FBT benefits of electric cars, read our article here.
Car Parking Benefits
Car parking fringe benefits – car parking facilities that charge penalty rates over $9.72 per day from April 1st 2022 to March 31st 2023 are considered to be commercial parking stations for FBT purposes.
From 1 April 2022, special purpose car parks will now be subject to FBT. This change is significant because, in the past, employers could exclude car parking benefits from FBT if the only car parks within a one-kilometre radius were special purpose car parks, like the ones you might find at a shopping centre, university or hospital. These special purpose car parks often have a free period or a low hourly rate, but with a penalty rate to discourage all-day parking. However, this exemption is no longer valid. Now, employers must include these car parks in their assessment and calculation of FBT liability for car parking. Don’t hesitate to ask for help if you’re unsure about how to navigate these changes.
The small business parking exemption still applies where employers provide parking not in a commercial car park and their income for the FBT year was less than $10m or aggregated turnover was less than $50m. For further details, you can read the Tax Ruling TR 2021/2 here.
When preparing and lodging FBT returns this year, employers should review all their current car parking arrangements and consider if they are impacted by the change.
FBT exemptions can apply to expenses that would normally be deductible for employees. Employees can also use their contributions to reduce the taxable value of benefits to nil. If the benefit is minor and infrequent, with a value under $300, it’s exempt from FBT.
FBT exemptions also apply to retraining and re-skilling redundant employees, as well as eligible commercial vehicles where private use is minimal. Understanding FBT exemptions is crucial, and if you have any questions, don’t hesitate to reach out to an expert in the field.
Now, let’s talk about record keeping. If you’re providing fringe benefits to your employees, you need to keep accurate records of all transactions. That means recording the type and value of the fringe benefits provided, the employees who received them, and the dates they were provided. Documentation that you will need to keep on file includes:
- Supporting information
- Travel diaries
- Odometer records
- Employee declarations (Not sure what this is? Find out more here)
You need to keep these records for at least five years and have them readily available in case of an ATO audit.
FBT Return Deadline
Another thing to keep in mind is completing your employer declaration. This declaration is a statement of the fringe benefits provided by you and is used to calculate your FBT liability. As a self-lodger, you will need to lodge this declaration with the ATO by May 22nd, 2023. Alternatively, if you have a tax agent lodging this electronically on your behalf, the due date is June 26th, 2023. Either way, mark your calendar or set a reminder to ensure you don’t miss the deadline.
Notice of Non-Lodgement
Last but not least, if you are registered for FBT but did not provide any fringe benefits to your employees in this FBT year, you still need to let the ATO know by submitting a notice of non-lodgement. You need to lodge this notice with the ATO by June 25th each year.
We’re Here to Help!
As the FBT year is about to end, it’s time to start collating your documentation. If you don’t know where to start or need help finding the right paperwork, our expert team at Hoffman Kelly is here to help. Contact us for all your accounting needs and let’s tackle FBT together!