Fringe benefits tax - a guide for employers
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Chapter 3 - How FBT works
Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee (for example, a relative).
We recommend you register once you establish that you have to pay FBT. To register for FBT, complete an Fringe benefits tax - application to register (NAT 1055) and send it to the ATO.
Once you are registered, we will send you additional information to help you lodge your return. We also notify you if there is a change to any of the rates you need to calculate the FBT you have to pay. You don't need to make your first payment until you lodge your first FBT return.
Your FBT number is the same as your tax file number.
3.2 Annual return
The FBT year runs from 1 April to 31 March each year. You must lodge your annual FBT return with the ATO by 21 May each year, unless you have made an arrangement with us for an extension of time to lodge, or you lodge via a tax agent who has been given another lodgment date. Any returns that we receive later than the first business day after 21 May, without prior arrangement, may incur an administrative penalty.
Using the rules explained in this guide, you can calculate the FBT you have to pay. This amount is shown on your annual return and is the basis of your assessment. You are also required to provide some other brief details on your annual return, such as the different categories of fringe benefits provided, the total taxable value of each category, and the total employee contributions for some categories.
Tax agents can send clients' FBT returns directly to us via the electronic lodgment service (ELS), in the same way they lodge income tax returns electronically. If you are lodging a paper return, mail you're completed and signed return to:
Australian Taxation Office
GPO Box 9845
IN YOUR CAPITAL CITY
You don't need to lodge an FBT return if your fringe benefits taxable amount for the year is nil. If you are registered for FBT but don't need to lodge an FBT return, you must complete a Fringe benefits tax - notice of non-lodgment (NAT 3094) and send it to:
Australian Taxation Office
PO Box 3006
PENRITH NSW 2740
However, if you had FBT instalment obligations during the year and did not vary those instalments to nil, lodging an FBT return will allow us to update your account to ensure these credits are made available to you.
Request for deferral of time to lodge
If you prepare and lodge your own return and need additional time, phone us before the due date on 13 11 42 between 8am and 6pm, Monday to Friday.
You will be granted a deferral only where there are extenuating circumstances.
Organisations with more than one office
You lodge one FBT annual return, covering the fringe benefits provided to all your employees. This is the case even if you have decentralised operations (for example, you own several branch offices or businesses).
On the other hand, employers who form part of a corporate group (that is, a group of associated companies) must lodge a separate FBT annual return for each employer in the group that provides employees with fringe benefits.
3.3 FBT assessments
We don't usually issue FBT assessment notices. This is because the tax is self-assessed by employers. In effect, assessment occurs when you lodge a properly completed annual return.
The basis of this self-assessment lies in the following steps that are taken to occur on the day your annual return is lodged with us.
- The Commissioner of Taxation is regarded as having made an assessment of your fringe benefits taxable amount and also of the total amount of tax payable
- The annual return is regarded as being a notice of the Commissioner's assessment.
- The notice of assessment is regarded as having been served on you, the employer.
If you don't lodge a self-assessed FBT return, the Commissioner may assess your FBT payable and serve notice of that assessment.
If you realise after lodging your return that you have made a mistake, request an amendment by writing as soon as possible to:
Australian Taxation Office
PO Box 3004
PENRITH NSW 2740
If you request an amendment, you must provide the reason for the amendment and sufficient information about the changes to the taxable values of the affected benefits. You must sign the request or have your tax agent sign on your behalf, and provide the following information:
- name of employer
- the FBT year the mistake relates to
- employer's tax file number
- reason for the amendment
- exact adjustment to each benefit type, including the corrected taxable values
- whether the benefits are type 1 or type 2
- the amended taxable value.
The Commissioner may amend an FBT assessment if:
- you don't disclose benefits or wrongly valued benefits
- you request an amendment to your FBT payable (for example, because you have overpaid or underpaid FBT).
As you may incur a penalty for an incorrect return, it is important to advise us of any mistakes early. An amendment can usually be made only within three years from the date an FBT return is lodged. However, where tax has been avoided, the amendment can be made within six years of lodgment. In cases of fraud or evasion, there is no time limit on when the Commissioner can amend an assessment.
3.5 Paying FBT
If you have not previously paid FBT or if the amount of FBT payable in the previous year was less than the instalment threshold (currently $3,000), you pay the tax once a year when you lodge your annual FBT return.
If you had to pay FBT of $3,000 or more in the previous year, you pay the tax quarterly with your activity statement. This is the case even if you estimate you will pay less than $3,000 FBT in the current year.
Instalments on the activity statement
If you have to pay your FBT liability in quarterly instalments, we will send you an activity statement with your instalment amount printed on it. The amount on which instalments are based is called the notional tax amount . Generally, this amount is the same as your previous year's liability.
The instalment amount is simply one quarter of the notional tax amount. For example, if you had to pay $20,000 FBT for the year 1 April 2008 to 31 March 2009, the instalments payable for the following year would be $5,000 each quarter. You make any balancing payment when you lodge your annual return. If your instalments are more than your annual liability and you have no other taxes outstanding, we will refund you the difference.
Varying instalments on the activity statement
If you estimate that your FBT payable will be less than the notional tax amount, you may vary your quarterly instalment on your activity statement. However, you may vary an FBT instalment only if you lodge your activity statement by the due date. To do this, you must record on your activity statement the estimated amount of tax payable for the whole year, the varied FBT instalment and a reason code for the variation.
The amount payable as a varied instalment is a quarter of the estimated FBT liability for the year.
An employer's notional tax amount is $20,000. The instalment ordinarily payable is $5,000. However, before paying the first instalment, the employer estimates that their FBT liability for the year will be $16,000. Provided the variation is notified on the activity statement, the employer may pay varied instalments of $4,000.
If you vary your instalment on the second or third quarter activity statement, you can use the excess paid on any earlier instalments as part-payment of the varied instalments. However, the amount of a varied instalment must be sufficient to ensure that:
- for the quarter ended 30 June, 25% of your estimated liability for the year is paid
- for the quarter ended 30 September, 50% of your estimated liability for the year is paid
- for the quarter ended 31 December, 75% of your estimated liability for the year is paid
- for the quarter ended 31 March, 100% of your estimated liability for the year is paid.
An employer's notional tax amount is $20,000. They:
- pay $5,000 as the first instalment, based on the notional tax amount, and
- when the second instalment is due, lodge a variation based on an estimated annual tax payable of $16,000.
The amount payable for the second instalment is half of the estimated liability, less the amount already paid (that is, half of $16,000, less $5,000). Therefore, the amount payable is $3,000.
Similarly, the amount payable for the third instalment is three-quarters of the estimated liability, less the amounts already paid (that is, three-quarters of $16,000, less $8,000.) Therefore, the amount payable is $4,000.
You can lodge more than one variation during the year and can even vary each instalment payment.
It is important to take care when estimating your instalment amount as you may incur a general interest charge if you underpay your FBT liability for the year.
Variation below instalment threshold
Where your notional tax amount (based on your previous year's liability) is more than the instalment threshold, you must pay your annual FBT liability in quarterly instalments. This is the case even where your estimated liability for the year is less than the instalment amount.
An employer's notional tax, based on the previous year's liability, is $4,000. At the time of the first instalment, the employer estimates that their liability for the year will be $2,400 and lodges a variation to that amount.
Even though the estimated notional tax is less than the instalment threshold, the employer still has to pay instalments of a quarter of $2,400 (that is, $600).
Reason code for variation
If you vary your FBT instalment amount, you must explain why by showing on your activity statement the reason code that best describes your circumstances.
Reason for varying
Current business structure not continuing
Change in fringe benefits for employees
Change in employees with fringe benefits
Fringe benefits rebate now claimed
How to pay
You must pay the total amount of FBT payable by 21 May or the first business day after, unless you have made other arrangements with us.
All FBT payments can be rounded down to the nearest multiple of five cents.
We offer several different payment methods.
BPAY allows you to transfer funds electronically from your cheque or savings accounts to the ATO using your financial institution's phone or internet banking service.
- the ATO biller code (75556), and
- your payment reference number (PRN) as shown on the front of the payment slip.
We recommend you check processing deadlines with your financial institution to ensure your payments reach us on or before the due date.
You can make your payments by direct credit if you have:
- a desktop computer banking software package, or
- access to a 'third party/pay anyone' option through your internet banking facility.
Send payments from a cheque or savings account to our direct credit account:
- BSB - 093 003
- Account - 316 385.
You must enter your PRN (as shown on the front of the payment slip) in the lodgment reference field.
You can send a cheque or money order to the address printed on your payment slip forwarded by the ATO. If you don't have a payment slip, supply the following details:
- tax file number (TFN), Australian business number (ABN) or client identification number, and
- type of payment.
Cheques and money orders must not be post-dated and must be:
- payable to the 'Deputy Commissioner of Taxation'
- crossed 'Not negotiable', and
- tendered in Australian dollars.
Send your payment to either:
WA, SA, NT, TAS and VIC clients:
Australian Taxation Office
ACT, NSW and QLD clients:
Australian Taxation Office
You must allow sufficient time for your payment to reach us on or before the due date. Late payments may be subject to the general interest charge.
Post office payments
If you have a pre-printed payment slip with a barcode, you can pay in person at any Australia Post outlet. Photocopies of payment slips are not accepted. A receipt is issued for any payment you make in person at a post office. You can make payments with:
- cash (a $3,000 limit applies)
- money orders
- EFTPOS (available at most Australia Post outlets).
If you use EFTPOS, you can only make payments (up to your daily withdrawal limit) using savings or cheque accounts.
Please don't present returns at post offices or licensed agencies.
For more information about BPAY, direct credit payments, mail payments or paying in person at an Australia Post outlet, phone 1800 815 886 .
If you can't pay your FBT on time, you should phone 13 11 42 between 8.00am to 6.00pm, Monday to Friday and explain your reasons.
3.6 Objection, review and appeal rights
You can object to a decision relating to an assessment or an amendment to an assessment in the following ways.
We recommend you use our objection forms. If you wish to prepare your own document, it must:
- be in writing
- be lodged with the Commissioner within certain time limits (if you have not requested an extension of time), and
- state the grounds for the objection fully and in detail.
You must lodge objections within four years of the date of your notice of assessment or self-assessment.
If the objection relates to an amended assessment, you must lodge it within four years of the date of the notice of the assessment that was amended, or within 60 days of the notice of the amended assessment, whichever is the later. The time limit may be extended, but this will only be done in limited circumstances - for example, where you can show that the delay in lodging the objection was due to circumstances beyond your control.
When we provide you with our decision on your objection, we will include information that explains what you can do if you are dissatisfied with the objection decision.
If you are dissatisfied with the decision on an objection, you may seek a right of review by the Administrative Appeals Tribunal or appeal to the Federal Court.
To obtain a review by the Administrative Appeals Tribunal, you should lodge an appeal directly with the tribunal, within 60 days from the date the notice of decision on the objection was served. A referral fee applies, but is refunded if your appeal is successful. If you are dissatisfied with the decision by the Administrative Appeals Tribunal on a question of law, you have the right to appeal to the Federal Court.
If you appeal to the Federal Court against our decision on an objection, you must lodge an application directly with the Federal Court within 60 days of the date the notice of the decision on the objection was served. You must then serve a sealed copy of the application on the Commissioner of Taxation at the office of the Australian Government Solicitor.
Under either alternative, you can request an extension of the 60-day referral period. In doing this, you must supply full details of the reasons why your request for referral of the matter to the tribunal or court was not lodged within the 60-day period. The tribunal or court will decide whether an extension of time will be granted.
3.7 Taxation rulings
We issue rulings and determinations to advise taxpayers of our views on the interpretation and application of tax law, including FBT law.
A public ruling is a written expression of the Commissioner's opinion of the way in which a relevant tax law applies, or would apply to:
- any person in relation to a class of arrangements
- a class of persons in relation to an arrangement, or
- a class of persons in relation to a class of arrangements.
An 'arrangement' includes a scheme, plan, proposal, course of action, course of conduct, transaction, agreement, understanding, promise or undertaking. It also includes part of an arrangement.
A public ruling is binding on the ATO where the ruling is favourable to you, the employer. For example, if the amount of your tax payable under a proper application of the law is more than the amount payable in accordance with the ruling, your FBT liability is determined as if the ruling were correct.
If there are conflicting public rulings, the ruling most favourable to you applies for the purposes of assessing your FBT liability.
Class rulings are a form of public rulings that enable the Commissioner to provide legally binding advice, in response to a request from an entity seeking advice about the application of a relevant provision to a specific class of persons, in relation to a particular arrangement.
The purpose of a class ruling is to provide certainty to participants and prevent the need for individual participants to seek private rulings.
A private ruling is a written expression of the Commissioner's opinion of the way in which a relevant provision applies, or would apply, to you in relation to a specified scheme. It may deal with anything involved in the application of relevant provision, including issues relating to liability, administration, procedure and collection, and ultimate conclusions of fact.
The difference between a private ruling and a public ruling is the private ruling deals with a specific course of action by a particular person, whereas a public ruling is provided for the information of a person or class of persons generally.
Typically you can apply for a private ruling when you want certainty about the way a tax law applies to your particular circumstances. For example, if you are uncertain about the FBT liability that may arise from an existing or proposed arrangement, you may apply for a private ruling on that arrangement.
You must apply in the approved private ruling application form and provide the required information and supporting documents.
If your affairs are based on a private ruling that applies to you, the Commissioner will be bound to act in the way set out in the ruling even if the private ruling is later found to be incorrect.
Objection to a private ruling
You can object to most private rulings in the same way as you can object to a tax assessment. You must lodge your objection before the later of:
- 60 days after notice of the ruling is served on you, or
- four years from the last day allowed for lodging a return for the FBT year covered by the ruling.
If dissatisfied with the decision on the objection, you may apply to the Administrative Appeals Tribunal for a review of the decision, or appeal to the Federal Court against the decision.
3.8 Compliance measures
There are penalties for lodging incorrect returns or late returns, or failing to lodge returns. A general interest charge applies to all outstanding amounts of FBT, including FBT instalments and understatements of FBT instalments. In addition, there are substantial penalties for underpayments of tax arising from false or misleading statements.
Changes and updates
The electronic version of the guide is reviewed on a quarterly basis. The following table details any major changes and updates made to this chapter at each review.
Changes and updates
3.2 Annual return
Updated addresses and included the phone number to call for requests for deferral of time to lodge.
Address to send amendments updated.
Information that needs to be provided in an amendment request updated.
3.5 Paying FBT
Under 'How to pay', updated various payment methods and associated information.
Inclusion of 'More information' at end of chapter.
Last Modified: Wednesday, 24 February 2010
NO NAT 1054
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|Chapters 6 , 9 , 10 , 12 , 17 , 18 , 19 and 20 have been updated. See the Changes and update sections in the relevant chapters for details.|