Fringe Benefits Tax (FBT) is a tax an employer pays on certain benefits of a personal or private nature they provide to their employees and the employees family and associates.
Common examples are outlined below:
Car fringe benefits
If an employer owns or leases a car and makes that car available for the private use of employees then a car fringe benefit may have been provided.
Car parking fringe benefits
A car parking fringe benefit may arise where an employer provides car parking to an employee and there is a commercial parking station within a one kilometre radius and the fee charged by that car parking station is more than the ATO car parking threshold. For 2019 this threshold is $8.83.
Entertainment fringe benefits
Entertainment means the provision of food, drink or recreation or the provision of accommodation or travel in connection with such entertainment. Examples include business lunches, staff social functions, staff gifts and the provision of tickets to sporting or theatre events.
Expense payment fringe benefits
If an employee incurs expenses and the employer either reimburses the employee or pays a third party directly for the expense then a fringe benefit has been provided. The expense can be either private or business in nature and it must have been incurred by the employee.
Living away from home allowance (LAFHA) fringe benefits
LAFHA is an allowance paid to an employee to compensate for additional non-deductible expenses they might incur because their job requires them to live away from their normal place of residence.
Loan fringe benefits
A loan fringe benefit is when an employer provides a loan to an employee and charges no interest or interest at a rate less than the ATO benchmark rate. The benchmark interest rate for 2019 is 5.20%.
Property fringe benefits
A property fringe benefit arises when an employer provides an employee with property either free or discounted. Property includes goods, real property and any in-house property that an employer might purchase or manufacture in the ordinary course of their business.
As an employer, if you provide any of these benefits to employees you might be required to lodge an FBT Return and maintain and keep certain FBT records and declarations.
2019 FBT Update
The 2019 FBT year is for the period 1 April 2018 to 31 March 2019. FBT returns are required to be lodged by 21 May 2019. However, the ATO provides tax agents with a lodgement extension up to 25 June 2019. If you are not lodging your FBT return through a tax agent then the lodgement date remains as 21 May 2019.
Any FBT liability is required to be paid by 21 May 2019. However, the ATO provides a payment extension up to 28 May 2019 for returns lodged via tax agents.
There are some developments and changes to the FBT rules for the 2019 year. These are summarised below.
- The ATO has confirmed employers, whose staff receive benefits from a third party under an arrangement with the employer, are liable for fringe benefits tax.
- The ATO released Practical Compliance Guidelines PCG 2018/3 which further relaxes their guidelines regarding the FBT treatment of the private use of eligible vehicles. Some private motor vehicle travel will be classified as ‘minor, infrequent and irregular’ and will now be exempt from FBT. For example, if an employee travels for private purposes for no more than 1,000 kilometers each FBT year, and no single return journey exceeds 200 kilometers, this travel will be exempt. Also, an employer needs to obtain an assurance from employees that any private use is limited, replacing a former obligation to sufficiently monitor and enforce a policy limiting private use.