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  • Trends and latest findings

    Overall, we are seeing a gradual decline in the fringe benefits tax (FBT) gap estimate through the trend period. As shown in Table 1 below, the net gap has ranged between 26.8% and 21.2% over the four-year period between 2014–15 and 2017–18. The table shows the net revenue effect gap which accounts for the inherent deductibility of FBT by business.

    Table 1: Fringe benefits tax gap – 2014–15 to 2017–18

    Element

    2014–15

    2015–16

    2016–17

    2017–18

    Population

    832,330

    823,851

    845,328

    841,546

    Gross gap ($m)

    1,429

    1,607

    1,194

    1,058

    Amendments ($m)

    23

    23

    25

    23

    Net gap ($m)

    1,406

    1,584

    1,169

    1,035

    Tax paid ($m)

    4,163

    4,331

    4,150

    3,841

    Theoretical liability ($m)

    5,569

    5,915

    5,319

    4,876

    Net revenue gross gap (%)

    25.7

    27.2

    22.5

    21.7

    Net revenue net gap (%)

    25.2

    26.8

    22.0

    21.2

    Figure 1 displays the trend in the gross and net income tax gap over the same period as a percentage.

    Figure 1: Chart showing the gross and net gap in percentage terms as outlined in Table 1.

    What's driving the gap

    Overall our estimate shows that the primary driver of gap estimate is employers not participating in the FBT system where they are providing benefits to employees.

    Of the non-compliance identified, almost a third of the adjustments resulted from a lack of awareness by either the employer or the tax agent. These made up around half of the dollar value of the total adjustments.

    This indicates that employers experience significant issues around understanding FBT law, and the relevant rules around calculating, reporting and paying FBT, as well as claiming concessions and exemptions.

    Our engagement insights further support this. We found that contact between tax agents and their clients in relation to FBT matters was often on an ad hoc basis. This is in comparison to the strong focus and regular communications around income tax and GST. Some employers appear to be reluctant to engage a tax agent to undertake work in relation to FBT, as they do not want to incur the additional cost of doing so.

    We also found common errors that were made by employers, for example, in relation to car fringe benefits, and which vehicles are exempt.

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      Last modified: 19 Oct 2020QC 64017