Step 1: assign responsibility for the management of FBT
To help ensure that management arrangements in relation to FBT administration effectively meet the needs of the entity, responsibility for managing FBT should be assigned in a way that provides clear responsibilities and accountabilities. This becomes essential where structural changes occur, including where employees are transferred between entities, with more than one entity being responsible for accounting for the benefits provided to employees during the year.
Documenting FBT responsibilities can also help entities to identify whether additional resources, training and/or procedures may be required.
Entities should clearly define and document the answers to the questions:
- Who carries overall managerial responsibility for FBT administration and compliance?
- Who carries specific operational responsibility for FBT administration and compliance?
For entities to implement an effective internal control structure, overall responsibility for FBT compliance should be formally assigned to a person or work area. If responsibility is unclear, there is a risk that there is a lack of ownership or accountability in relation to FBT, compromising the effective management of FBT administration.
In smaller entities, overall responsibility for FBT will typically be assigned to the CFO. In larger entities, it may be a Finance Manager or similar position. This person is often a qualified accountant who has a general understanding of tax requirements, as well as the operational requirements of processing transactions and reporting obligations. This person is frequently helped by a person responsible for managing FBT on a day-to-day basis (referred to in this information as the FBT Manager).
There may be a number of people responsible for various aspects of FBT administration, including:
- work area managers who certify that fringe benefits provided by their work area have been recorded correctly
- salary packaging providers who certify that salary packaged fringe benefits have been correctly reported to the FBT Manager
- fleet providers who certify that vehicle data provided to the FBT Manager is correct
- the FBT Manager who certifies to the CFO or Finance Manager that technical issues have been addressed correctly and that the FBT data is accurate and complete
- the CFO or Finance Manager who certifies that the entity's FBT return is correct.
Entities should document key responsibilities for FBT management in formal job descriptions or similar documents. These responsibilities can then be linked to duty statements, annual work plans, performance plans and key performance indicators, as appropriate.
A record should also be kept of the officer who is registered with the ATO as the signatory on FBT returns and associated documentation. These records should be reviewed regularly so that FBT documentation is executed appropriately.
Specific FBT responsibilities
In determining the allocation of specific responsibility for FBT compliance, entities will typically either centralise responsibility for:
- all FBT data collection, reporting and advice, usually within the finance function
- FBT advice and reporting within a central work area, and devolve responsibility for data collection to relevant line areas.
Better practice is to have FBT managed by the same person or group that manages the entity's GST and PAYG obligations. This enables the entity's total taxation obligations to be effectively coordinated and managed. For example, an election to use a particular method to value meal entertainment, such as the 50/50 method, impacts on the input tax credits (ITCs) that can be claimed in the business activity statement.
Irrespective of how responsibility for FBT management is assigned, FBT Managers will generally rely on a number of staff throughout the entity to provide input into the FBT administration process, including:
- human resources managers who prepare AWAs and CAs
- managers who prepare fleet management and salary packaging contracts, organise social functions or take other action that may result in an FBT liability
- staff responsible for FBT data collection
- data entry personnel who enter FBT transactions into information systems
- internal auditors who conduct periodic compliance reviews.
Staff with any responsibility for the administration of FBT should be provided with training commensurate with their level of responsibility and the level of complexity of the entity's FBT environment.
Staff responsible for FBT data collection should be provided with clear instructions on the FBT information they are to collect. Better practice is to provide guidance material and a data collection mechanism (such as standard spreadsheets or access to a commercial software package) so that information is collected in a standard form and can be readily collated as required.
The level of resources entities require to meet their FBT responsibilities depends on a number of factors, including their size and complexity, the types of benefits they provide, whether salary packaging is managed in-house or by an external provider and whether the FBT function is managed centrally.
The larger and more complex an entity is, the greater the need for a dedicated Tax Manager. Larger and more complex entities may also use other tax staff, finance staff or external contractors to help prepare the FBT return. Such entities should preferably have more than one staff member involved in managing FBT so that, in the event of staff absences or staff turnover, resources are available to meet short-term needs.
Smaller and less complex entities may have a number of staff involved in FBT processes throughout the year with FBT administration being only a small part of their overall responsibilities.
All entities should document FBT processes so that, in the event of staff absence or staff turnover, another staff member can prepare the FBT return.
One of the issues facing Australian Government entities is finding staff that are adequately trained and have sufficient FBT knowledge and experience to perform an FBT Manager's role. This will impact on the structure used for managing FBT, and the extent of reliance placed on external service providers.