Our approach to FBT compliance
We are committed to reducing non-compliance and increasing participation in the fringe benefits tax (FBT) system by:
Helping employers to get it right
The FBT law provides additional responsibilities and obligations on an employer. If employers choose to provide their employees with fringe benefits, we provide several resources to help them get their FBT obligations right. This includes publishing:
- Fringe benefits tax information on our website
- Fringe benefits tax – a guide for employers
- online learning content in Essentials to strengthen your small businessExternal Link
Correcting employers who don't get it right
We analyse data and information reported to us to identify employers who may not be complying.
If we find a concern, we’re increasingly reminding employers of their FBT obligations by letter, email or phone call. We give them the opportunity to review their records and voluntarily correct mistakes.
For employers that do not respond or are not willingly participating and voluntarily complying with their FBT obligations, we take firmer action to ensure they pay the correct amount of tax.
What attracts our attention
As an employer, when you choose to provide fringe benefits you will need to correctly:
- identify the type of fringe benefits
- determine the taxable value for each benefit
- lodge your FBT return and pay on time
- include the reportable fringe benefits amounts in single touch payroll or the employee’s payment summary.
We publish information on the behaviours of employers that attract our attention to help you get things right and be transparent in our dealings with you.
Current behaviours attracting our attention include:
Nil lodgment
We see employers lodging nil returns when they haven’t taken the required steps to determine if they have an FBT liability.
Before lodging a nil return, or sending us a Fringe benefits tax – notice of non-lodgment (NAT 3094), it's essential that you have identified whether a benefit has been provided, determined the taxable value and kept the required records for FBT.
You can’t simply lodge a nil return by the due date and work out if you have an FBT liability later. Lodging an incorrect return is subject to penalty.
Employee contributions
Employee contributions are one of the main ways employers can reduce their FBT liability.
Situations that concern us include when employers:
- apply an estimated employee contribution with the intention to reduce their FBT liability to nil, but they don't calculate their liability first
- you need to identify what type of benefit has been provided and its taxable value by the time your return is due
- you can't work out the FBT liability later and then apply a matching employee contribution afterwards
- seek to amend past income tax returns, by including employee contributions
- once you have finalised your financial statements for a financial year, you can’t discharge a past year FBT obligation through journal entries
- we provide clear guidelines in Miscellaneous Taxation Ruling MT 2050: Fringe benefits tax: payment of recipients contribution by journal entry
- report employee contributions in their FBT return but don't report the corresponding amount in their income tax return, or reporting at the incorrect label
- we use a range of data sources, including income tax returns, to check if employers are meeting their FBT obligations
- incorrect reporting may trigger compliance action.
For more guidance, see FBT guide: 1.7 What are the income tax consequences of providing benefits?
The provision of motor vehicles
We see a significant level of non-compliance involving motor vehicles.
Situations that concern us include when employers:
Motor vehicles classified incorrectly
There are 3 different types of motor vehicles for FBT purposes:
- cars that are designed to carry fewer than 9 passengers (including the driver) – for example, most sedans, hatchbacks and SUVs
- cars that are not designed to carry passengers, but have a goods-carrying capacity of less than 1 tonne – for example, most dual cab utes
- all other vehicles with higher goods or passenger carrying capacities – for example, 1-tonne utes.
The type of motor vehicle determines the methods that can be used to calculate the FBT and whether certain exemptions can apply, so it’s important to get this right.
Private use treated as business use
We regularly see employers incorrectly treating an employee’s private use of a motor vehicle as business use.
A simple way to work this out is to ask yourself: if the employee had paid for the costs of using the car, could they have claimed an income tax deduction?
This means that things like home to work trips, going and grabbing your lunch, and picking up the kids up from school are generally all private trips which are subject to FBT.
Logbook errors
Logbooks need to contain enough detail to clearly demonstrate the usage of the car during the logbook period.
The key details to include are:
- dates the journey started and ended
- odometer readings at the start and end of each journey
- kilometres travelled
- purpose of the journey.
Common logbook errors we see include:
- insufficient information about the purpose of the journey – simply saying it was a 'business’ journey isn’t enough
- co-mingled business and private trips listed as one entry
- discrepancies and inconsistencies – the logbook entries should match the actual travel.
If you are using a logbook, you also need to record odometer records at the start and end of the FBT year.
To make it easy to comply, the ATO app includes myDeductions, a free record keeping tool that includes a log book function.
To find out what you need to do, see FBT on cars, other vehicles, parking and tolls.
Example: motor vehicle classified incorrectly
Brock is the owner and sole director of FTE PTY LTD (FTE).
Brock works in the office full-time. He decides to purchase a medium-size SUV through the company, to help with the commute and undertake some business errands.
Brock does some research and reads that FBT does not apply when vehicles are only used for:
- travel between home and work
- travel that is incidental to travel in the course of employment duties
- other private travel is limited to less than 1,000 kms.
Brock does not keep any FBT records.
Based on our data and risk models, we send FTE a letter, advising them to review their FBT obligations regarding the vehicle, otherwise further action will be taken.
Brock wants to ensure FTE is doing the right thing, so he calls us to advise why he believes FBT does not apply to the vehicle.
We advise Brock that the type of motor vehicle determines the method that can be used to calculate the FBT and whether certain exemptions can apply, and the exemption he is referring to only applies to eligible vehicles. It doesn't apply to standard passenger cars.
This means a car fringe benefit has been provided and FBT applies. The home to work travel is private travel, and the other private use is not exempt from FBT.
While Brock indicates that he undertook some business errands, he did not keep a logbook to demonstrate the business use. We provide Brock with information about how to calculate FBT using the statutory formula method and he agrees to lodge an FBT return for FTE.
End of example
Example: limited private use of eligible vehicles
BTE is an engineering business. It has a fleet of dual cab utes (with a carrying capacity of less than 1 tonne) and sedans, which its employees use to attend business sites and visit clients.
BTE considers that FBT doesn’t apply to the vehicles because the utes are commercial type vehicles and the sedans are only used for business purposes. Therefore, BTE does not lodge an FBT return.
Based on our data and risk models, we select BTE for an FBT car review to check if the business is meeting its FBT obligations.
The review identifies that the sedans remain at the office and the utes are taken home by employees and used for private purposes (such as weekend sport and camping trips).
We advise BTE that the private use of the utes must be limited to be an exempt benefit. (See PCG 2018/3 Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles.)
The utes were used for extensive private purposes therefore these conditions have not been met. This means a car fringe benefit has been provided and FBT applies.
We provide BTE with information about how to calculate FBT and the business lodges their outstanding FBT returns.
End of exampleCorrecting an error
If you have made an error on your FBT return, you can amend it or make a voluntary disclosure.
If you need to discuss your circumstances or require advice, you can contact us for tailored technical assistance.