With another FBT year about to come to a close, employers are beginning to draw their attention to their reporting obligations for 2020. When compiling information for the FBT return, it can be useful to know what the Australia Taxation Office (‘ATO’) is focusing its attention on this FBT season.
Key areas of interest this year are:
1. Motor vehicle benefits
Again this year, the ATO is focusing on the private use of vehicles.
Employers should be aware that both the actual private use of a motor vehicle and its availability for private travel are considered fringe benefits.
Specifically, the ATO is concerned with situations where employers:
- fail to identify or report car fringe benefits;
- incorrectly apply exemption provisions for vehicles that are not eligible, or by treating all travel as business; and
- incorrectly claim reductions in taxable value without the appropriate records to support the reduction.
When applying an exemption to eligible commercial vehicles, employers should ensure that the principles contained in Practical Compliance Guideline 2018/3 are applied correctly and appropriate evidence is maintained to demonstrate that the private use of the vehicle is ‘minor, irregular and infrequent’.
2. Car parking
For car parking fringe benefits, the ATO will continue to focus on valuations.
In a FBT update released in January 2020, the ATO stated that employers who use an arm’s length valuer, as required under the market value method, may be contacted for further information. The valuation report required under the market value method must include:
- the date of the valuation
- the precise description of the location of the car parking facilities valued
- the number of car parking spaces valued
- the value of the car parking spaces based on a daily rate
- the full name of the valuer and their qualifications
- the valuer's signature
- a declaration stating the valuer is at arm's length from the valuation.
In addition employers must complete a declaration each FBT year that includes the:
- number of car parking spaces available to be used by employees
- number of business days
- daily value of the car parking spaces.
Where the ATO believes an invalid market valuation has been used, they may seek to amend an employer’s FBT liability based on a revised market valuation of their choice.
It is common for employers to provide employees or their associates food, drink, gifts or leisure activities throughout the year. What is often forgotten is that these instances (such as Christmas parties or business lunches) may attract a FBT liability.
The ATO looks for situations where entertainment is provided and:
- expenses are claimed as deductions in company’s tax return without correctly reporting and paying FBT; or
- expenses are classified as sponsorship or advertising where there is an entertainment aspect to the activity.
Employers should maintain detailed records throughout the year of the entertainment provided to employees and their associates to ensure the correct expenses are reported to the ATO, as well as minimising the FBT liability by applying the relevant exemptions where appropriate.
4. Employee contributions
The ATO will continue to monitor and data match the amount of employee contributions used in the FBT return to reduce the taxable value of benefits, to the amount that has been included in the company’s tax return.
They will also look to see that any GST on employee contributions has been appropriately accounted for.
We recommend reviewing the benefits provided to employees to confirm all benefits are appropriately reported in the 2020 FBT return.
As a reminder, ensure you obtain the necessary declarations from employees prior to lodging the FBT return (due 25 June). Please feel free to contact a member of our FBT team if you have any queries or concerns.