FBT returns are required to be submitted annually, for the FBT year (1 April to 31 March) by the 21 May. While it may seem peculiar to file a return when the FBT liability for the year is zero, this practice is routine for most businesses.
Calculating Your FBT Liability
As an employer, you must self-assess the amount of fringe benefits tax (FBT) you have to pay.
To work out how much FBT you have to pay, you ‘gross-up’ the taxable value of the benefits you’ve provided. This reflects the gross salary your employees would have to earn, at the highest marginal tax rate (including Medicare levy), to buy the benefits themselves.
The FBT you owe is the grossed-up amount multiplied by the FBT rate.
Mistakes That Could Lead To An FBT Audit
Employers are obligated to maintain comprehensive records, including logbooks, signed statements, and other documentation supporting FBT liabilities. Even when an employee has left the organisation, these records must be retained, preventing businesses from recovering costs associated with prior employees. Timely FBT lodgement is not only a legal requirement but also a strategic move to safeguard against potential disputes and liabilities.
Despite internal reviews, mistakes can occur, particularly concerning liabilities related to car fringe benefits. The private use calculation, determined by the operating cost (logbook) method, often leads to errors. Depreciation claimed on financial statements may differ from FBT purposes, resulting in an unintentional FBT liability.
Lodging an FBT return not only rectifies these errors but also streamlines the auditing process, focusing on the most recent three years.
If you have employees who are the recipients of meal entertainment benefits, maintaining a register of these individuals is a crucial aspect of FBT compliance.
Neglecting this record-keeping responsibility may lead to an unexpected FBT liability. Lodging FBT returns aids in showcasing adherence to regulations, reducing the likelihood of oversights and ensuring a systematic approach to compliance.
Why Should You Still Lodge An FBT Return If The Liability Is Zero?
Submitting a return with zero FBT liability serves as an acknowledgment to the Australian Tax Office (ATO) that thorough consideration has been given to potential fringe benefits, ensuring compliance with tax regulations.
Failing to lodge an FBT return can draw the attention of the ATO, potentially triggering reviews and audits of past returns. On the contrary, filing a return acts as a safeguard, as the ATO can only audit up to three years prior to the last lodgement of an FBT return. This limitation serves as a protective measure, providing businesses with a buffer against extensive investigations into historical activities.
If you’re unsure about your FBT liability or your FBT return or just need guidance, why not consult with a trusted tax adviser (like us)?
