Whether you're an employer or employee, it's important to have a sound understanding of Fringe Benefits Tax (FBT) and what it can mean for your unique situation and circumstances. In this article we share how fringe benefits can be used as an effective tool for recruiting and retaining valuable staff, while doing it in a way that won’t attract a hefty FBT bill!
FBT is a complex tax that requires employers to make important choices that can significantly reduce their liability. FBT’s complex nature can also make the preparation of annual returns difficult for an employer’s internal accounting team. To help, we’ve put together everything you need to know about FBT in 2023, including the opportunities for providing benefits to employees, and what to watch out for to avoid being hit with an unexpected FBT liability. Here’s what we’ll cover:
- FBT exemption for electric vehicles (EVs)
- Employee Vs contractor FBT developments
- Changes to commercial parking
- WFH and returning to the office
- FBT Audits and what attracts ATO attention.
But First, When is Fringe Benefits Tax Paid?
A Fringe Benefit is a payment made to an employee, in a different form to both salary and wage. FBT exists to capture the tax on benefits provided to the employee that would otherwise have been taxed in their name as ordinary income. FBT is paid by employers on a number of benefits that they provide to their employees. Employers pay FBT on:
- Cars
- Entertainment
- Travel
- Parking
- Every other benefit that is not already taxed
Electric Vehicle FBT Exemptions
The provision of an electric vehicle (EV) to a current employee (or associate) for their private use may now be exempt from FBT . While this is an exciting development, it’s important to take a close look at the eligibility requirements to ensure you aren’t unintentionally running up an FBT bill. Here’s everything you need to know about FBT and electric vehicles .
How Hybrid Working Impacts Fringe Benefits Tax
The pandemic may seem like a distant memory for some, but we’ve seen big changes in the way Australians work, which can significantly impact FBT outcomes for employers. For many employers, a hybrid working environment between home and the office has become the new reality, with most employees expecting their employers to pay for their home office setups. Learn how providing working from home benefits can be achieved without attracting FBT .
Employee vs Contractor Developments
If your company employs any individuals directly and are currently treating them as contractors for tax and FBT purposes - you should review these engagements now! With an increased focus on employee vs contractor determination over the past year, it’s crucial for employers to review their treatment of contractors, particularly any individuals contracted directly rather than through an interposed entity. Increased case law in this area has made it more likely than ever for directly hired individual ‘contractors’ to be considered ‘employees’ for tax purposes, making any benefits provided to them potentially subject to FBT.
The employee/contractor rules can be very complex and getting caught out can cause huge consequences across all areas of tax - not just FBT. Our specialist tax advisory team can conduct a review of your employee/contractor treatment to help avoid something becoming a very expensive mistake!
Changes to Commercial Parking Stations
‘Special purpose’ car parks that charge penalty rates to discourage all-day parking (such as shopping centre and airport car parks) are now considered ‘commercial parking stations’ for the purposes of car parking fringe benefits. From 1 April 2022 (i.e. from the 2023 FBT year), employee parking provided near special purpose car parks may attract FBT.
While the former Government announced that it intended to address and revert this change, it’s unclear whether the current Government will follow through with this. Therefore, it’s important for employers situated near special purpose car parks to review their existing car parking arrangements.
Storing Salary-packaged Cars on Business Premises
The ATO has updated its guidance regarding salary packaged cars being stored on an employer’s business premises. Generally, where a non-salary packaged car is parked on an employer’s business premises, a car fringe benefit will not arise on a day that the car is not actually used. However, where a salary-packaged car is parked on an employer’s business premises and the employee has access to the car (i.e. has the keys), the ATO has now taken the view that the car has been ‘applied for private use’ - even if the employee doesn’t use it on that particular day.
To avoid exposure to FBT on days the employee is not using the car (such as annual leave days), it’s essential that employees hand in their keys to their employer and no other employee has access to the car during that time. Where an employee is unable to access or use the car on a particular day, the car will no longer be considered ‘applied for private use’ and a car fringe benefit will not arise for that day.
What Attracts the ATO’s Attention?
The ATO has identified significant compliance issues for SMEs and estimates that they’re paying far less in FBT than ATO modelling suggests they should be. We've shared the high-risk areas for FBT that might attract ATO attention in 2023. Learn how they're using smarter data matching, where they source the data from and how to steer clear of an ATO FBT audit.
Talk to a Tax Expert About All Things FBT
If you'd like to learn more about reducing your FBT bill while providing great benefits to attract and retain top talent, get in touch with our accounting team today for a free consultation . Simply complete the form below to get started.
