Communicating with other work areas
A number of work areas within entities may have responsibility for some aspects of FBT administration. As FBT can effectively double the cost of providing a fringe benefit, work area managers may need to consider FBT costs when developing a budget for their work area. For example, the FBT payable by an Australian Government entity on the provision of a fringe benefit valued at $220 for which there is an entitlement to claim an ITC will be $211.21. The total cost after claiming the relevant ITC will be $411.21.
Some entities budget for FBT in a central finance area. Under such an FBT management structure, the central finance area should consider the potential FBT costs for the entity and include them in its budget.
Other work areas need to be made aware of their roles and responsibilities in the context of the overall FBT process and their needs and expectations should also be managed.
Human resources work area
Regular communication between FBT staff and human resources staff may help ensure that FBT issues are considered when making remuneration decisions. The human resources work area may make decisions regarding remuneration that have an FBT impact. For example, changing living-away-from-home entitlements may impact the FBT liability due to the LAFHA provisions, the expense payment fringe benefit provisions and/or the residual fringe benefit provisions.
An entity needs to be satisfied that managers who are involved in issues of remuneration and the provision of benefits recognise potential FBT implications and have a process for obtaining assistance in relation to FBT issues. When in doubt, staff should be encouraged to seek assistance from the FBT Manager or FBT work area.
Fleet management work area
The fleet management work area may be required to provide data in relation to car fringe benefits provided. Therefore, managers who are responsible for managing the entity's vehicle fleet need an understanding of the FBT implications of providing a vehicle for private use (such as home-garaging a car) and the classification of journeys, and be able to explain this to work area managers or refer the work area managers to the FBT Manager.
FBT Managers should be proactive in providing information to all relevant work area managers.
Communicating with other Australian Government entities
It may be necessary to communicate with other Australian Government entities to provide details of fringe benefits provided to the employees of the associated entity, or to clarify responsibilities where structural changes have resulted in employees being transferred between entities during the year.
Communicating with service providers
Australian Government entities generally rely on information provided by a number of external service providers in preparing their FBT return. The relationship with these providers needs to be managed so that the information provided by them is accurate and timely. Wherever possible, the contract with the external service provider should contain specific provisions making the service provider responsible for any costs arising as a result of incorrect information provided by them.
Salary packaging providers
Salary packaging providers are used by a number of Australian Government entities. Benefits managed by salary packaging providers often constitute a significant proportion of the total fringe benefits provided by entities.
It is important that information received from a salary packaging provider is timely, correct and in a form that is easily imported into the entity's FBT return preparation process.
Entities should gain an understanding of the processes and controls used by salary packaging providers to help gain assurance that the information received is correct. This review should be undertaken for each benefit type. In the event that weaknesses in processes and controls are identified, entities should resolve these issues with the salary packing provider. It is better practice to review, at least on a sample basis, the data collated by the salary packaging provider for reasonableness and accuracy.
Fleet providers will generally provide FBT information for vehicles leased from them, such as executive vehicle scheme vehicles. Entities need to ensure that the fleet manager has processes to collate FBT data in a form that can be easily imported into the entity's FBT return preparation process. This should be done prior to the commencement of the FBT year, because changes to reporting formats can be costly and time consuming.
The list below is an example of a schedule of deliverables that could be agreed with an external service provider such as a salary packaging or fleet provider. Wherever possible, better practice entities would agree many of these issues at the time of entering into contractual arrangements with the external service provider. Otherwise, the deliverables should be agreed as soon as possible after entering into contractual arrangements. Better practice entities will review these items annually or as otherwise required.
An example of a schedule of deliverables that could be agreed with an external service provider includes:
- agree the form that data should take to enable it to be easily imported into the entity's FBT return preparation process
- obtain an outline of the processes and associated controls the external service provider has and assess whether they are adequate to produce accurate data
- agree a timetable for the provision of data to assist in preparing an interim FBT return (if applicable)
- agree a timetable for data to be provided to enable the timely preparation of the year-end FBT return.
External technical support
Better practice entities will seek external advice to clarify the treatment of items that are of a high dollar value or are considered high risk items. Entities can seek advice from a number of external sources, including:
- an external tax adviser
- the ATO.
Seeking advice from a tax adviser will result in a cost to the entity. Requesting a private ruling from the ATO may not result in any direct cost, but will require the FBT Manager or other staff to prepare the request.
Advice from a tax adviser will generally be appropriate where the FBT Manager considers that there may be more than one way to provide the same benefit type. For example, an entity may be reviewing its living-away-from-home benefits and determining what amounts will be paid as an allowance and what amounts will be paid as an expense reimbursement. In this situation, the tax adviser can provide guidance on the FBT implications of each option and advise on any other issues that should be considered.
When an external service provider is engaged to provide advice or to help an entity to meet its FBT obligations, the exact nature of the services to be provided, the costs, and the timeframes should be included in a contract. Entities should also consider the need for the service provider to have an appropriate level of professional indemnity insurance.
Seeking a private ruling from the ATO will generally be appropriate where the FBT Manager is reasonably sure of the correct FBT treatment of an item but requires certainty from the ATO. Where a private ruling has been obtained from the ATO, it may be appropriate to ask for a further private ruling following changes to the FBT legislation, or to the arrangement. A private ruling provides guidance on a particular set of facts for specified years. It cannot provide guidance on alternative ways of providing a certain benefit type.
Consideration should be given to the most appropriate time to seek a private ruling. Wherever possible, the process should not be undertaken at the same time as preparing the annual FBT return. Background research and drafting a request for a private ruling can be time consuming and it is important that entities submit fully considered requests. The Taxpayers' Charter states that the ATO will aim to provide a response within 28 days of receiving all necessary information in relation to the ruling request.