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  • Trends and latest findings

    As shown in Table 1 below, the net gap has ranged between 22.0% and 26.7% over the five-year period between 2014–15 and 2018–19. The latest estimate is closer to the lower end of that range which tells us there was no significant change in the overall compliance with FBT. 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 2018–19

    Element

    2014–15

    2015–16

    2016–17

    2017–18

    2018-19

    Population

    832,574

    824,595,

    847,118

    848,839

    844,691

    Net revenue effect gross gap ($m)

    1,417

    1,601

    1,203

    1,131

    1,157

    Amendments ($m)

    19

    24

    28

    24

    24

    Net revenue effect net gap ($m)

    1,398

    1,577

    1,175

    1,107

    1,134

    Tax paid ($m)

    4,164

    4,333

    4,155

    3,844

    3,880

    Theoretical liability ($m)

    5,563

    5,911

    5,330

    4,951

    5,014

    Net revenue gross gap (%)

    25.6

    27.1

    22.6

    22.9

    23.1

    Net revenue net gap (%)

    25.1

    26.7

    22.0

    22.4

    22.6

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

    Figure 1: FBT net revenue effect gap summary diagram 2014–15 to 2018–19 (percentage)

    Figure 1shows 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.

    We estimate almost a third of FBT adjustments result from a lack of awareness by either the employer or the tax agent.

    This indicates that employers and tax agents experience significant issues around understanding FBT law, and the relevant rules around calculating, reporting and paying FBT on benefits provided, 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 2021QC 64017