Detailed instructions for completing your Fringe Benefit Tax Return
The instructions for completing your Fringe Benefits Tax (FBT) return are provided annually and include step-by-step guidance along with examples to assist you in preparing and lodging your FBT return. These instructions are updated each year to reflect any changes in legislation or rates and to provide the most current information for employers.
If in doubt, ask LodgeiT Tax Genii.
Benefits to consider –
Occur when you, as an employer, make a car you own or lease available for the private use of an employee. Private use includes any use of the car that is not strictly for business purposes, as well as home-to-work travel. To calculate the taxable value of car fringe benefits, you can use either the statutory formula method or the operating cost method. The statutory formula method is based on a percentage of the car’s cost price, while the operating cost method is based on the actual costs of operating the car. There are also certain exemptions and concessions that may apply, such as for zero or low emissions vehicles.
The information provided does not contain specific details about debt waiver fringe benefits. To give you an accurate description, I would need the relevant sections from the Fringe Benefits Tax Assessment Act or other specific ATO guidelines that cover debt waiver fringe benefits.
Would you be able to provide the specific details or direct me to the relevant section of the legislation or ATO guidelines that discuss debt waiver fringe benefits?
A loan fringe benefit
May arise when you, as an employer, provide a loan to an employee and charge no interest or a low rate of interest. During the FBT year, if you provide a loan under such terms, it’s important to assess whether this constitutes a fringe benefit.
To determine the taxable value of this benefit, you would typically compare the interest rate charged on the loan to a benchmark interest rate published by the Australian Taxation Office (ATO). If the interest rate on the loan is less than the benchmark rate, the difference is considered the taxable value of the benefit.
It’s essential to keep records of all such transactions, including the terms of the loan and how you calculated the taxable value. If you’re unsure about how to calculate the taxable value or if any exemptions apply, it’s advisable to consult the ATO’s guidelines or speak with a tax professional.
Remember, if you have provided such benefits between 1 April 2022 and 31 March 2023, you need to lodge an FBT return and pay any liability by 22 May, unless you have a different due date through a tax agent.
Expense payment fringe benefits -
Occur when an employer pays for, or reimburses, an expense incurred by an employee. These benefits can include payments that the employer makes to third parties for expenses incurred by the employee or direct reimbursements to the employee for expenses they have incurred.
The taxable value of an expense payment fringe benefit is generally the amount of the payment or reimbursement, less any employee contribution. However, there are various methods to calculate the taxable value, and certain exemptions and concessions may apply to reduce the FBT liability. Employers must keep records of the benefits provided and how the taxable value was calculated.
For example, if an employer pays an employee’s private phone bill, the amount paid would be considered an expense payment fringe benefit. The employer would need to calculate the taxable value of this benefit and report it accordingly on their FBT return.
To ensure compliance with FBT obligations, employers should assess whether they have provided any expense payment fringe benefits during the FBT year and calculate their liability using the appropriate methods and considering any applicable exemptions or concessions.
Expense payment fringe benefits -
occur when an employer pays or reimburses an employee for expenses they have incurred. These benefits are subject to FBT and must be reported on the employer’s FBT return. The taxable value of these benefits is generally the amount of the payment or reimbursement, but there are various methods and rules that can affect this value, including any exemptions and concessions the employer may be eligible for.
To accurately report and calculate FBT on expense payment fringe benefits, employers should keep detailed records of all payments and reimbursements made to employees. These records will help determine if any exemptions apply and ensure the correct amount of FBT is paid. Employers can find more information on how to calculate the taxable value of these benefits and what records need to be kept in the FBT return instructions and by using resources available on the ATO website.
occurs when you provide free or discounted property to an employee or their associate. Property includes goods, real estate, and rights to property. It does not include services, money, or items that are cash equivalents.
The taxable value of a property fringe benefit is generally the market value of the property at the time it is provided, less any amount the employee pays for the property. However, if the property is an in-house benefit, the taxable value may be calculated at a discount.
For example, if you give an employee a product that your business sells, the taxable value is 75% of the lowest price that is not less than the cost price to you and that the public can purchase the product for during the FBT year. If the employee contributes to the cost of the product, the contribution is subtracted from the taxable value.
It’s important to note that there are exemptions and concessions available that may reduce the taxable value of property fringe benefits. These include certain work-related items, protective clothing, and briefcases, among others.
What are the FBT rates and thresholds for the current year?
The Fringe Benefits Tax (FBT) rate for the years ending 31 March 2020, 2021, 2022, 2023, and 2024 is 47%. The FBT year runs from 1 April to 31 March.
For the FBT year ending 31 March 2024, the Type 1 gross-up rate is 2.0802, and the Type 2 gross-up rate is 1.8868. The Type 1 rate is used when the benefit provider is entitled to a Goods and Services Tax (GST) credit, and the Type 2 rate is used when the benefit provider is not entitled to claim GST credits.
If you provide certain fringe benefits with a total taxable value of more than $2,000 during the FBT year, you must report the grossed-up taxable value of the fringe benefits on the employee’s income statement or payment summary for the corresponding income year. The reportable fringe benefits are grossed-up using the lower gross-up rate.
For the FBT year ending 31 March 2024, the record-keeping exemption threshold is $9,786.
What are the methods available for calculating the taxable value of fringe benefits?
The methods available for calculating the taxable value of fringe benefits depend on the type of fringe benefit being provided. Generally, you can calculate the taxable value of a fringe benefit using the actual cost, the statutory formula, or the operating cost method. For example, for car fringe benefits, you can use either the statutory formula method or the operating cost method. It’s important to choose the method that best reflects the circumstances of the benefit provided and to apply it consistently.
For other types of benefits, such as loan fringe benefits, the taxable value is typically calculated using the benchmark interest rate provided by the ATO. For housing fringe benefits, the taxable value may be determined based on the market value of the housing less any employee contributions.
To ensure you are using the correct method and calculating the taxable value accurately, you should refer to the specific guidance provided by the ATO for each category of fringe benefits, as the rules can vary significantly.
How does the 'otherwise deductible' rule apply to residual fringe benefits?
The ‘otherwise deductible’ rule applies to residual fringe benefits when an expense that would have been deductible to the employee is incurred. If the recipient of the benefit is the employee, the taxable value of a fringe benefit may be reduced by the amount that would have been deductible to the employee had they incurred the expense themselves. This rule is used to avoid double taxation by ensuring that FBT is not paid on the portion of the benefit that would otherwise have been claimed as a tax deduction by the employee.
To apply the ‘otherwise deductible’ rule, the employer must obtain a declaration from the employee stating the portion of the expense that relates to their employment duties. The taxable value of the fringe benefit is then reduced by the amount specified in the declaration that would have been deductible to the employee.
For example, if an employer reimburses an employee for a work-related course costing $1,000, and the entire amount is related to the employee’s employment and would have been deductible to the employee, the taxable value of this fringe benefit can be reduced to nil under the ‘otherwise deductible’ rule.
It is important for employers to keep appropriate documentation, such as declarations from the employee, to support the application of the ‘otherwise deductible’ rule when calculating the taxable value of residual fringe benefits.
What are the exemptions and concessions available for expense payment fringe benefits?
Expense payment fringe benefits may arise when an employee incurs expenses and the employer either reimburses them for the expense or directly pays a third-party for the expense. However, there are certain exemptions and concessions available that can reduce the amount of Fringe Benefits Tax (FBT) an employer has to pay.
Common exemptions for expense payment fringe benefits include:
- Portable electronic devices: Items primarily for use in the employee’s employment, such as laptops, tablets, and mobile phones. This exemption is limited to one item per FBT year unless it’s a replacement item. Small businesses can provide their employees with more than one work-related portable electronic device each FBT year without incurring FBT.
- Computer software: Software provided to employees that is primarily for use in the employee’s employment.
- Protective clothing: Clothing and items that protect the employee from the risk of injury or illness posed by the activities they undertake as part of their employment.
- Briefcases: Provided primarily for use in the employee’s employment.
- Tools of trade: Tools and equipment provided primarily for use in the employee’s employment.
- Taxi or ride-share travel: Travel in a taxi or ride-share vehicle is exempt if the travel is a single trip beginning or ending at the employee’s place of work. This exemption does not include travel in a limousine.
These exemptions are subject to certain conditions and may vary depending on the specific circumstances of the benefit provided. Employers should ensure they meet all the requirements to qualify for these exemptions and keep appropriate records to substantiate their claims.
What are the specific valuation rules for residual fringe benefits?
The taxable value of a residual fringe benefit is the GST-inclusive value of the benefit. There are specific valuation rules for each fringe benefit category, and for residual fringe benefits, these rules are outlined in the Fringe Benefits Tax Assessment Act. The valuation rules take into account the actual cost to the employer of providing the benefit, less any amount that the employee contributes towards that cost.
When the ‘otherwise deductible’ rule applies, the taxable value of the residual fringe benefit is reduced by the amount that would have been deductible to the employee if they had incurred the expense themselves. This rule is designed to prevent double taxation by ensuring that FBT is not paid on benefits that would otherwise have been deductible to the employee.
