FBT hotspots for retailers: Staff discounts and car parking
FBT hotspots for retailers: Staff discounts and car parking
Retailers often offer staff benefits, usually this includes staff discounts and onsite car parking. Understanding how Fringe Benefits Tax (FBT) applies to these benefits is essential to managing risk. This article outlines how FBT applies to staff discount and car parking, some common errors, and how to stay compliant as ATO scrutiny increases.
Staff discounts
Staff discounts are one of the most common employee benefits offered by retailers. Although employees are not taxed on the discount they receive, the business may be taxed based on the taxable value, and this can vary depending on the retailer’s role in the supply chain.
Where a retailer manufactures, produces, processes or treats goods (in-house goods) and sells to manufacturers, wholesalers or retailers, the taxable value is usually the lowest price paid by those buyers. Where in-house goods are not sold to those groups, it is generally 75 per cent of the lowest selling price around the same time. For retailers who do not manufacture or process goods, the taxable value is typically the cost of the product. The line between producing and not producing can be blurred, such as product designed in-house but manufactured by a third party. Careful analysis is required to determine the correct treatment.
Car parking
While staff discounts are the most common staff benefit, parking arrangements can also create FBT exposure if they are not correctly assessed.
A car parking fringe benefit may arise where an employer provides parking at or near the employee’s workplace, a commercial parking facility is located within one kilometre, and that facility charges more than the legislated all-day parking threshold for the relevant FBT year.
Recent changes to the ATO’s interpretation of what constitutes a commercial parking facility mean that many shopping centres and special‑purpose car parks operating under penalty‑rate regimes may now fall within scope. This has increased potential FBT exposure for retailers located in or near these sites.
FBT generally does not apply where parking is available to the public at large, unallocated and not monitored or preferentially allocated to staff. However, risk increases where informal practices develop. For example, where staff routinely use bays closest to staff entrances, or signage implies staff priority, as these can indicate a specific benefit is being provided.
Common FBT errors and risk areas
Common errors include:
- Overlooking certain staff benefits when assessing FBT exposure
- Systems not set up to track staff benefits
- Incorrectly valuing employee discounts
- Misapplying in‑house concession rules
- Informal parking practices that unintentionally give staff preferential access
- Issues arising from group or consolidated reporting
- Inadequate documentation to support the tax position taken.
Given the ATO’s ongoing focus on employment related benefits, robust records are essential.
How BDO can help
We help retailers and e-commerce businesses navigate the complex tax rules that apply to staff benefits. Our retail team can:
- Review existing arrangements to confirm the correct FBT treatment
- Undertake risk assessments and control testing
- Support remediation of past errors and manage interactions with the ATO
- Advise on the design and implementation of compliant staff discount programs
- Draft policy documentation, employee communications and/or FAQ documents
- Provide training and updates for your finance and HR teams.
BDO works closely with retailers to identify FBT hotspots and implement practical controls. Contact us to discuss how we can support your business.
