Common potholes and pitfalls to watch out for regarding Fringe Benefit Tax

Employers need to carefully navigate all their business responsibilities, no less so regarding Fringe Benefit Tax (FBT). Some common potholes and pitfalls to avoid include issues relating to

1. Company vehicles

2. Car parking valuations

3. Living-away-from-home allowance (LAFHA)

4. Employee contributions

5. Employer rebates

6. Lodgement of FBT returns

Company vehicles
The use of a company vehicle for private travel is a fringe benefit and must be declared on the FBT return. Commencing in the 2019 financial year is a new definition of private use which is any diversion in travel adding “no more than two kilometres to the ordinary length of that trip”. Also “for journeys undertaken for a wholly private purpose (other than travel between home and place of work), the employee does not use the vehicle to travel more than 1,000 kilometres in total, and a return journey that exceeds 200 kilometres”.

Car parking valuations
Four frequent mistakes the ATO are aware of include, first, a lack of documentation of rates used for all day parking at a commercial parking station. Second, rates charged for parking on land without any car park infrastructure. Three, rates paid to a facility not identified as a commercial parking station. Finally, considerably lower valuations than fees charged for parking within a one kilometre radius of the premises where the car is parked.

Living-away-from-home allowance (LAFHA)
LAFHA is an allowance compensating employees for additional expenses incurred while living away from their normal residence. The taxable value of the LAFHA may be reduced by the exempt Accommodation and food components.

Errors noted by the ATO include:

• Not having receipts or invoices for accommodation, food, or beverages
• Claiming for ineligible employees
  • Not getting the necessary declarations from employees
  • Invalid claims for accommodation and food

Employee contributions
Employee contributions towards FBT reduce the FBT liability of the employer. Therefore, it is essential that these contributions are not included in both the FBT return and the employer’s income tax return. Inflating the contributions of employees on FBT returns to reduce the taxable value of benefits provided is another pitfall to be avoided.

Employer rebates

Of concern to the ATO is if an employer is eligible to claim a FBT rebate. To qualify, an employer must be a rebatable employer.   

Lodgement of FBT returns
Employers supplying benefits must lodge FBT returns unless  the taxable value of all fringe benefits has been reduced to nil. Two potholes employers often fall into are incorrectly calculating reduction amounts and not declaring the true values of benefits.

Disclaimer:

Hillyer Riches Management Pty Ltd , accountants and advisors located in Caulfield, is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.