For 2021-22, the net fringe benefits tax (FBT) gap estimate was $1.9 billion or 34.8%. In other words, we expect to receive around 65% of the total amount of FBT we would expect to receive if everyone was fully compliant.
We have observed a gradual downward trend in FBT expected collections since a peak of $4.3 billion for the 2015–16 FBT year. In the latest year, there was an increase in expected collections to $3.5 billion, up from $3.3 billion.
Declines in FBT revenue over time are driven by large employers that generally provide car fringe benefits. There has been a reduction in the number of large employers providing car fringe benefits and a fall in the taxable value of car benefits provided per employer. The 2020–21 FBT year also saw sharp declines across reported fringe benefits more broadly, consistent with COVID-related disruptions to employee work patterns.
There has been a gradual upward trend in the estimated amount of unreported FBT, driven by growth in the estimated number of small-medium sized employers providing motor vehicle fringe benefits without registering for FBT.
It is important to recognise that the FBT system is a component of the broader PAYG withholding income tax on salary and wages regime. When we view PAYG withholding and FBT together, the integrated gap is approximately 2.5%. This means employers are voluntarily paying more than 97% of taxes related to their employees' remuneration.
This gap forms a part of our overall tax performance program. For more information about why and how we measure tax gaps see, latest available tax gap data.
|
Element |
2016–17 |
2017–18 |
2018–19 |
2019–20 |
2020–21 |
2021-22 |
|---|---|---|---|---|---|---|
|
Population |
848,840 |
852,807 |
855,751 |
898,049 |
932,724 |
947,857 |
|
Net revenue effect gross gap ($m) |
1,691 |
1,703 |
1,668 |
1,795 |
1,897 |
1,908 |
|
Amendments ($m) |
31 |
30 |
25 |
19 |
36 |
26 |
|
Net revenue effect net gap ($m) |
1,660 |
1,673 |
1,643 |
1,776 |
1,861 |
1,882 |
|
Expected collections ($m) |
4,160 |
3,859 |
3,911 |
3,913 |
3,261 |
3,524 |
|
Theoretical liability ($m) |
5,820 |
5,532 |
5,554 |
5,689 |
5,122 |
5,407 |
|
Net revenue gross gap (%) |
29.1 |
30.8 |
30.0 |
31.6 |
37.0 |
35.3 |
|
Net revenue net gap (%) |
28.5 |
30.2 |
29.6 |
31.2 |
36.3 |
34.8 |
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 2016–17 to 2021–22 (percentage)
What's driving the gap
The primary driver is employers not participating in the FBT system when they provide benefits to employees. An example of this is when an employer doesn't lodge an FBT return but provides motor vehicle benefits to their employees and has an FBT tax liability. In comparison, the FBT gap associated with those who are already in the FBT system, but have not reported their FBT liability correctly, is relatively low.
Contact between tax agents and their clients for FBT matters is often ad hoc in nature. This contrasts with the strong focus and regular contact on income tax and GST. Some employers may not want to engage a tax agent to undertake FBT work because they do not want the additional cost.
Around a third of FBT adjustments result from a lack of awareness by either the employer or the tax agent. There are issues in understanding:
- FBT law
- rules of valuing, calculating, reporting and paying FBT on benefits provided
- concessions and exemptions for example, car fringe benefits errors in relation to which vehicles are exempt.
Figure 2 below shows the relative contribution to the overall FBT gap of non-compliant employers outside of the FBT system (unregistered portion) versus non-compliant employers already participating in the FBT system (registered portion).
Figure 2: FBT net revenue effect gap, registered and unregistered portions