If your business has employees (including the directors of the company or trustee company) then you should consider whether any fringe benefits have been provided to them.
Main Fringe Benefits
The main fringe benefits that we see being provided include cars, commercial or workhorse vehicles, expense payments, entertainment, gifts and staff discounts.
If benefits are provided then the employee can make a contribution to reduce the value to nil. If the benefits are not reduced then a FBT return will need to be prepared and lodged with the ATO.
Important to note
It is important to note that where a vehicle is provided and the employee is allowed to drive the vehicle to their home then a fringe benefit would likely arise. The fact that the vehicle is a “workhorse vehicle” (a utility, 4WD etc) does not change this. If these vehicles are only used for business trips, home to work travel and minor and infrequent private travel then they may qualify as an exempt fringe benefit.
However if your employee uses the vehicle to pick up the kids from school, to drive to sport, do the shopping then their private travel would be more than minor and infrequent and a fringe benefit may arise. The ATO released information in 2018 which outlines “safeharbour” guidelines to assist in determining whether the use of a workhorse vehicle may be treated as an exempt benefit.
Benefits can be exempt where they are considered to be minor, that is less than $300, GST inclusive. This means that if you occasionally give your employee a gift of under $300 then you may be able to claim it as a tax deduction, claim the GST and not have any FBT liability.
However, if you pay for “entertainment” such as a meal in a restaurant or Christmas party and it was under $300 per head, GST inclusive, then you cannot claim it as a tax deduction. Nor can you claim the GST, however you still would not have any FBT liability.
If you have provided employees with items to allow them to work from home (such as laptops, portable printers etc) then they may be exempt provided they are primarily used for work. The minor benefits exemption or otherwise deductible rule may apply if you pay for their phone or internet access.
In relation to your record keeping, declarations for expense benefits can be in the form of a recurring declaration which may last for five years (unless the deductible portion changes by more than 10 percentage points).
Please note that this is the only recurring declaration, all other declarations are required annually. Other annual records which must be kept are odometer readings for your vehicles.
If you need support with or would like to discuss your FBT obligations, contact your Johnsons MME advisor.