Why should you, as an employer, lodge an FBT return where no FBT is payable? For the simple reason that it turns on the three-year deadline for the ATO to commence audit activities on your business.
Examples of fringe benefits include:
- allowing an employee to use a work car for private purposes
- giving an employee a discounted loan
- paying an employee’s gym membership
- providing entertainment by way of free tickets to concerts
- reimbursing an expense incurred by an employee, such as school fees
- giving benefits under a salary sacrifice arrangement with an employee.
Without an FBT return being lodged, the ATO has the discretion to launch an audit into activities as far back as a business has had employees – past, current and future. Without the evidence (e.g. signed declarations, logbooks, meal entertainment records, etc.) that FBT was NOT payable in each year the ATO is likely to raise FBT liabilities even where the employee who enjoyed the benefit no longer works for the business. Thereby making it impossible for the business to recoup anything from the past employee.
A Common Error
Where you believe you have done everything in accordance with legislation, people can make mistakes. A common error made is where an employee is provided with a car and the private use is worked out using the operating cost (logbook) method. A part of using the logbook method is working out deemed depreciation each year. Many accountants overlook this or work it out incorrectly by relying on the depreciation claimed on the business’ financial statements. This mistake can give rise to an FBT liability where the calculated employee contribution is insufficient to remove the car’s taxable value.
If a mistake like this is identified the ATO is likely to review the entire period that the car was owned by the business. Lodging an FBT return would limit the length of time the ATO can audit the business to three years.
Another common mistake is not maintaining a register of which employees are the recipient of meal entertainment benefits. Not all meal entertainment benefits are treated the same which is why you maintaining a register is vital.
Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. Employers can also generally claim GST credits for items provided as fringe benefits.