FBT: what you should be aware of
With the FBT lodgement deadline fast approaching, we give you some tips on areas of FBT which may need particular attention, such as motor vehicles, employee contributions, the living-away-from-home allowance, car parking and the employer rebate. These are the areas that the ATO is focusing their efforts on in terms of compliance. So, when you put together your FBT return, keep in mind these focus areas and you could avoid some costly mistakes.
In the countdown to FBT lodgement time, there are some areas that may need particular attention, such as motor vehicles, employee contributions, the living-away-from-home allowance, car parking and the employer rebate. Apart from non-lodgement of the FBT return, these are some of the areas that the ATO focus their compliance action on. For example, employers who fail to identify and report fringe benefits where a vehicle is available for private travel of employees will raise a flag within the ATO’s systems for a more detailed look at the company’s FBT records.
Similarly, the ATO will also be looking at employee contributions to ensure that the employer has declared the amount on both their FBT return and the income tax return. As well as making sure that the employer hasn’t overstated employee contributions on their FBT return to reduce the taxable benefits provided, which may be particularly prevalent in smaller private companies where the shareholders/directors are also the employees.
Some of the common mistakes the ATO has found in relation to the living-away-from-home allowance (LAFHA) include:
claiming reductions for ineligible employees;
failing to obtain required declarations from employees;
claiming a reduction in the taxable value of the LAFHA benefit for exempt accommodation and food components in invalid circumstances; and
failing to substantiate expenses relating to accommodation and where required food or drink.
If you’re an employer and you lodge an FBT return with LAFHA benefits you can be sure that the ATO will be looking closely at the benefits that have been provided. This is particularly true where the LAFHA is paid for more than 12 months for any particular employee without a change in employment location.
In relation to the car parking fringe benefits, the ATO will be focusing their attention on the following aspects:
market valuations that are significantly less than the fees charged for parking within a 1 km radius of the premises on which the car is parked;
the use of rates paid where the parking facility is not readily identifiable as a commercial parking station;
rates charged for monthly parking on properties purchased for future development that do not have any car park infrastructure; and
insufficient evidence to support the rates used as the lowest fee charged for all day parking by a commercial parking station.
Remember however, if you’re a small business with a gross income of less than $10m, you may be able to get a car parking exemption in certain circumstances. An exemption is not the same as a rebate. The rebate, put simply, reverses the effect of the FBT gross-up method and is only available to certain non-government, not-for-profit organisations. The ATO will look very carefully at employers who claim the rebate to ensure that they are eligible. So, when you put together your FBT return, keep in mind these areas which need particular attention and you could avoid some costly mistakes.
Do you know whether you’re entitled to a rebate? Or maybe you just want to find out whether you can access the exemption to car parking benefits? We can answer all your questions and help you with your FBT return. If you’re a little behind and think that you may miss the deadline for lodgement, we can help you get an extension.