As the FBT year draws to a close on 31 March 2024, employers must ensure they’re well-prepared to meet their compliance obligations.
Fringe Benefits Tax (FBT) is a tax that employers pay on certain benefits they provide to their employees, employees’ families, or other associates.
Proper record-keeping and understanding the nuances of FBT can significantly impact how effectively you manage and minimise your FBT liability.
AFP Accounting, Tax and Business Advisory is here to guide you through what records you must compile and present to comply with 2024 FBT requirements.
Essential Records for FBT Compliance
Effective FBT management begins with diligent record-keeping. Keep your FBT records for 5 years from when you lodge your FBT return or from 21 May. Here’s what you need to keep on file:
1. Employee Declarations:
These are necessary for certain benefits, like car fringe benefits (where personal use is declared) and expense payments (confirming the business use portion). Other documents to retain from employees are invoices, receipts, lease documents or travel diaries.
2. Logbooks for Car Fringe Benefits:
A car fringe benefit is applied if vehicles are not kept at the business premises overnight and are taken home by employees. All employers providing car fringe benefits are required to document the odometer reading on 31 March 2024.
The value of the FBT can be reduced where a consistent logbook is kept, and the car has a high percentage of business use. Maintain detailed logbooks for at least 12 continuous weeks to establish the business use percentage of vehicles provided to employees.
This is crucial for calculating the taxable value of car fringe benefits. If the logbook does not meet ATO standards, the business use can be reduced to zero.
Another important consideration is whether a dual cab is principally designed to carry passengers. A complex calculation is required to make this determination. Still, the general rule is if the total determined passenger weight exceeds the remaining load capacity, the dual cab will be subject to FBT for all private usage.
If you do not have a motor vehicle logbook, contact us at AFP Accounting, and we can provide you with an electronic copy for use.
3. Entertainment Expenses:
Keep records of all entertainment expenses, including food and drinks. The information required is the date of the entertainment, who attended it, and the nature of the entertainment to determine if they’re subject to FBT. Maintain the receipts or invoices for the cost of the entertainment and where it was held.
4. Benefits Provided to Each Employee:
Compile detailed records of all benefits, including the type of benefit, its value, and the employee it was provided to. This aids in accurately reporting and calculating FBT. Eligible benefits that are paid must be recorded on employees’ payment summaries for the income year ending 30 June of the same year.
Examples of Effective Record-Keeping
- Digital Logbooks: We encourage employees to use digital logbook apps to track business and private use of vehicles for car fringe benefits. These apps can simplify record-keeping and improve accuracy.
- Expense Management Software: Utilise software that categorises expenses and can flag potential FBT liabilities, such as entertainment or personal use of company assets.
- Employee Benefit Declarations Online: Create a secure portal for employees to submit their declarations for expense payments and minor benefits, ensuring timely and accurate documentation.
Managing FBT Payments
Understanding how to manage the FBT you need to pay is just as important as accurate record-keeping. Here are strategies to effectively manage your FBT liabilities:
Review and Plan:
Early in the FBT year, review the benefits you’re providing and plan for any adjustments in the benefits offered or how they’re provided to reduce FBT liability.
Utilise FBT Exemptions and Concessions:
Familiarise yourself with FBT exemptions (like certain work-related items) and concessions (such as those for not-for-profit organisations) to minimise your FBT liability.
FBT Payment Options:
Depending on your cash flow and accounting practices, consider the timing of your FBT payment. You may pay quarterly or annually, but ensure you meet the ATO’s deadlines to avoid penalties.
FBT Exemption Arrangements
You may be eligible for a record-keeping exemption, and your FBT liability will be calculated based on the taxable value of fringe benefits in an earlier base year. You must have kept full FBT records in the base year. However, you must still report the value of fringe benefits in your employees’ payment summaries or through Single Touch Payroll.
When applying for a FBT exemption, you must have the necessary paperwork to support the exemption. The two most common FBT exemptions are:
Minor Benefits Exemption – benefits less than $300 and provided infrequently and irregularly may qualify for this exemption. A record of who received the benefit needs to be kept, such as a record of all who received vouchers. We recommend that these details be included in your accounting software.
Exempt Motor Vehicle Exemption – commonly used for tradies in a ute or commercial vehicle. Providing private use on such vehicles meets strict criteria such as no more than 1000 km of private travel each year, which includes no trip greater than 200 km return.
Other exemptions may be available for your business – see the ATO’s page for the list of exemptions available.
Minimise FBT with Accurate Record-Keeping
Ensuring compliance with FBT requirements doesn’t just help you avoid penalties; it can also reveal opportunities for tax savings and more efficient benefit provision.
As the 2024 FBT year-end approaches, remember that AFP Accounting supports you at every step, from record-keeping to strategic advice on managing your FBT obligations. Our team can assist with:
- Conducting FBT assessments to identify potential liabilities and savings opportunities.
- Providing advice on record-keeping practices and systems to streamline your process.
- Offering strategic planning to minimise your FBT liability while maintaining compliance.
Contact us for personalised guidance and support tailored to your business needs. Email us at enquiries@afpaccounting.com.au or call (02) 7804 1849.
