The Government is proposing to reduce the current record-keeping obligations for fringe benefits tax (FBT) returns by allowing employers to use existing corporate records, rather than employee declarations and other prescribed records.
These measures, announced in the recent Federal Budget, will come into effect from the start of the first FBT year (1 April) after the date of Royal Assent of the enabling legislation. Whilst the proposed measures aim to reduce the compliance burden for employers, until further clarification is provided, it is important for employers in the interim to appropriately address their current record-keeping processes. Below are some recommendations to help keep employers on top of their FBT filings.
1. Get organised.
Employers need paperwork to support claims for any applicable FBT concessions/exceptions, so it is important that your business is well organised. Decide what record keeping system works best for your organisation. Some employers may prefer to keep paper records, while others find electronic records more efficient for general tax purposes.
2. Set up a good filing system.
If you don’t record your transactions frequently, it is important to have a system for filing information that needs to be entered. A good filing system will help you follow up payments such as FBT quarterly instalments and know when your accounts are due to be paid (for example, FBT balancing payments when you lodge the FBT return). This will also help manage cash flow more efficiently.
3. Ensure anyone can understand your records.
Document how you keep your records, what they contain, where they are kept and where you keep your back-up records.
4. Obtain required paperwork at the time of a transaction.
Don’t leave it until the end of the FBT year to obtain these. These requirements are a major area of non-compliance and this remains an area of focus for ATO audits.
5. Ensure records contain all required information.
These requirements may include tax invoices, receipts, travel diaries, logbooks, odometer records and relevant employee declarations. For example, original invoice and/or receipts from the employee need to show the date of the receipt or invoice, the date of the expense, the name of the supplier, the amount paid etc.
6. Associates must provide record copies within 21 days.
Where a fringe benefit is provided by an associate of the employer, ensure the associate provides copies of the records to you within 21 days of the end of the FBT year. Both the employer and the associate must keep the records for five years from the date of the relevant transaction.
7. Understand the private/business use breakdown.
Sometimes you may have expenses that relate to both business and private use; for example, where your employees are claiming business use for a phone line for both business and personal purposes. In this case, you have to clearly work out how much of the expense is private and how much is related to your business because you can’t claim a reduction in FBT for the amount related to private use.
8. Ensure salary packaging and benefits have been approved.
We understand that implementing effective salary sacrifice arrangements, record-keeping and administrative processes may prove to be an administrative burden for some employers. Ensure that the relevant authority (e.g. Human Resources, Payroll Manager) has approved the employee to salary package the particular benefits. Establishing a separate payroll category for the salary-sacrificed benefit as a pre-tax deduction will further assist in tracking the salary-sacrificed benefits, particularly for FBT purposes.
The right time to get FBT-ready is now. BDO’s specialists can assist employers with strategies, process improvements and employee communications required for FBT record-keeping best practice.
For more information and assistance or to get in touch with your local BDO tax adviser.