Key compliance considerations for completing your 2023 Fringe Benefits Tax return

Stephanie Kalavritinos, Senior Manager, Employment & Expatriate Taxation | Ben Watkinson, Director, Tax | Andrea Ross, FTB Risk & Product Manager, ATO

The 2023 Fringe Benefits Tax (FBT) year has recently come to an end so now is the time for organisations to start preparing their 2023 FBT return.

In the latest episode of our Working in Australia webinar series, we take a deep dive into the world of FBT and outline the ATO’s current areas of focus, explore common compliance failures and provide key insights into some recent developments for the 2023 FBT year.

Watch the webinar or read our summary below to find out more.

ATO focus areas around FBT

When it comes to preparing FBT returns, there are several key considerations employers should take into account. Two questions often asked around FBT - as well as taxation as a whole - are:

  1. What do authorities care about most?
  2. What has the ATO observed in terms of common non-compliance issues?

To help organisations navigate the complex world of lodging their FBT, we outline the ATO’s current areas of focus and some of the common errors organisations make when completing their return.

Current focus areas

The ATO identified four areas they’re currently focusing on in assessing FBT returns:

  • Not reporting benefits offered to employees and failing to keep adequate records
  • Registering motor vehicles in ways inconsistent with their actual use, treating them as exempt when, in fact, they attract FBT obligations
  • Incorrect recording of employee contributions on income tax returns
  • Missing or incorrect reporting of employee reportable fringe benefits amounts (RFBAs).

Common errors

Some common errors observed by the ATO include:

  • Failure to correctly identify the types of benefits being provided to employees
  • Incorrect calculations around the taxable value of benefits
  • Returns not being lodged, notwithstanding the organisation has disclosed RFBAs for employees
  • Inadequate record-keeping.

Compliance failure examples

To assist organisations with identifying areas for stronger governance and review within their own business, the ATO also shared recent case studies of their ATO compliance activity.

Incorrect vehicle exemption case study

A company claimed its vehicles did not count as employee benefits for FBT purposes as they were utes that were simply used to travel between home and work. Upon further examination, it was determined that company-owned utes were being used by employees for personal camping trips.

Invalid logbook entries case study

A business claimed motor vehicle expenses on its FBT return, stating the cars were used between 94 per cent and 100 per cent for business use. However, the logbooks themselves weren’t valid, and the odometer readings did not match up with the purchase or usage records in the log.

Improper business travel claims case study

A restaurant claimed expenses for its staffs’ overseas travel and meal costs. While the organisation

claimed it was performing research on other restaurants, investigators found the expensive trip was centred around an employee’s significant life event, and there were no records kept.

Reviews of these scenarios and similar can result in amended FBT returns and expose an organisation to interest and penalties.

Recent law changes affecting FBT

As an employer, it is important to be aware of three recent FBT developments when preparing your returns:

  • Car parking: The definition of a ‘commercial parking station’ has changed following a number of recent cases and ATO rulings. The effect of these changes is that several car parks such as shopping centres and hospitals may now be considered commercial car parking stations, resulting in an FBT liability for many organisations. The law applies from the 2022/23 FBT year (i.e. from 1 April 2022) so it is important employers determine whether car parks that offer employees spaces now trigger an FBT liability
  • Electric vehicle benefits: From 1 July 2022, eligible electric cars are exempt from FBT when provided to employees, where the vehicle is a low or zero-emissions vehicle, and Luxury Car Tax has never been payable on the importation or sale of the car. Notwithstanding that these vehicles are exempt from FBT, they are still considered a reportable fringe benefit. As such, organisations need to ensure they appropriately communicate this with employees and that the appropriate data is obtained to be able to calculate the employee’s RFBA
  • Record-keeping proposals: There are new record-keeping rules currently moving through the Senate that could change the way employers file records to verify their FBT liability. If approved, the rules will go into effect from the next FBT year after the Bill receives Royal Assent.

Assistance with your FBT compliance

Contact your local BDO adviser today to find out how we can assist you in navigating your FBT compliance obligations to ensure a seamless tax season for your organisation.

Register now for the final session in our ’Working in Australia’ webinar series, where our expert panellists will discuss end-year employer obligations.