Fringe benefits tax - a guide for employers
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Chapter 4 - Fringe benefits tax record keeping
4.1 General record keeping requirements
There is a general requirement that you must keep records that are adequate to enable your fringe benefits tax (FBT) liability to be assessed. Your records must be written in English or, if in electronic form (for example, on computer), made readily accessible and convertible into written English. For record keeping purposes, electronic records (including encrypted records) are subject to the same record keeping requirements as paper records.
For FBT purposes, these records must be kept for five years from the date they are prepared, obtained or the transactions completed, and in a form that tax officers can access and understand in order to determine your tax liability.
You need to keep records that show the following:
- The taxable value of each fringe benefit provided to each employee (that is, its value before it is grossed up). Some examples of records you may need to keep are invoices, receipts, travel diaries, log books, odometer records and employee declarations.
- The method of allocating the taxable value of a fringe benefit provided to two or more employees. This may include any reasonable agreement between an employer and an employee regarding the apportionment of fringe benefits.
- That 100% of the taxable value of the benefits has been allocated to employees. The taxable value of excluded benefits (such as remote area housing assistance) doesn't need to be allocated to individual employees.
Where a fringe benefit is provided by an associate, the associate is required to provide copies of the records to you within 21 days of the end of the FBT year. Both you and the associate are required to keep the records for five years from the date of the relevant transaction.
You must also keep records if you want to take advantage of various exemptions or concessions that reduce your FBT liability. These documents must be kept for five years from when the relevant FBT return is lodged. Examples of these records are:
- all documents you are required to obtain from employees, such as declarations, invoices and/or receipts, bills of sale, lease documents, travel diaries, copies of log books, and odometer records
- where the benefit is a car fringe benefit valued under the operating cost method, fleet management records, log book records and odometer records.
For some concessions and exemptions, you have to obtain 'documentary evidence' of expenditure by an employee. Broadly, you are required to obtain the original invoice and/or receipt from the employee. This must show the date of the receipt or invoice, the date of the expense, the name of the supplier, what was bought and the amount paid.
You must make elections and declarations and obtain all employee declarations no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return, by 21 May. There is no need to notify us of the election or declaration as your business records are sufficient evidence of this.
4.2 Log book records and odometer records
Log book and odometer records are kept when you use:
- the operating cost method to calculate the taxable value of a car fringe benefit (refer to section 7.5 of Car fringe benefits)
- the first method for employee cars when applying the 'otherwise deductible' rule (refer to section 21.1 of Employee cars - applying the 'otherwise deductible' rule).
In a log book year, you must keep both types of records. In a year other than a log book year, you need keep only odometer records.
A log book year commonly occurs when you use the operating cost method to value a car fringe benefit for the first time. The term is dealt with in more detail in section 7.8 of Car fringe benefits.
Log book records contain a record of business use and are usually maintained for a continuous 12-week period. Odometer records are a record of the total distance travelled during the same 12 weeks that log book records are maintained, and the total distance travelled each year. The 12-week period chosen should be representative of the car's business use.
You should keep records of additional information such as the car's make, model, registration number and percentage of business use as part of your business records.
Information to be recorded in log book records
We don't produce an official log book, but we have provided a sample that you can use. If you prefer, you can design your own log book or buy one of the many commercial products available. Regardless of which type of log book you use, all of the following details must be recorded for each business journey:
- the dates on which the journey began and ended
- the odometer readings at the start and end of each journey
- the kilometres travelled
- the purpose of the journey.
When recording the purpose of the journey, an entry stating 'business' or 'miscellaneous business' will not be enough. Your entry should sufficiently describe the purpose of the journey so that it can be classified as a business journey.
Your log book records must be in English and entries should be made at the end of a trip or as soon as reasonably practicable afterwards.
Where two or more business trips are undertaken consecutively on any day, only one entry for the series needs to be recorded in the log book. For example, an entry for a salesman who called on 10 customers while working in the Bathurst-Orange area of New South Wales could record the odometer readings at the start and end of the consecutive journeys and describe the purpose of the travel as '10 customer calls, Bathurst-Orange area'.
The period during which the log book is kept must be specified. This continuous period may overlap two tax years. You can keep your log book for up to five years (assuming there is no major change in the pattern of use). After the fifth year, you will need to keep a new log book.
Sample car log book record
Here is a sample record from a log book:
FBT year ended 31 March 2018
Date trip began
Date trip ended
Purpose of the journey
Visit mechanic, ATO
Private travel is not required to be shown, but you may include it in your records to help with calculations.
You need one log book per car.
Information to be recorded in odometer records
Odometer records are a record of the total kilometres travelled by a car during the FBT year or for that part of the year when it was used to provide fringe benefits. Odometer records should be kept for the same period for which a log book is kept.
As with log books, we don't produce an official odometer record form. You are entitled to keep records of your own design, or to purchase one of the many commercial products available. However, the following details must be recorded for the beginning of each period (that is, year, part-year or log book period) and also for the end of each period:
- the date the period began, or ended
- the odometer reading at the start of the period.
The odometer records must be in English, and the entries should be made at, or as soon as reasonably practicable after, the respective times to which the readings relate.
If you replace a car during the year and the business percentage is transferred to a new car, the odometer records must also include an entry showing odometer readings of the replaced car and the new car on the replacement date.
Sample odometer reading
Here is a sample odometer reading, showing the type of odometer records you need to keep:
FBT year ended 31 March 2018
An odometer record can be used for more than one car.
4.3 Living away from home allowances and benefits
You and your employee must meet certain record-keeping requirements for the relevant living away from home concessions to apply if you provide your employee with:
- a living-away-from-home allowance (refer to chapter 11 )
- food because their employment duties require them to live away from home (refer to section 19.4 of Reductions in fringe benefit taxable value)
- accommodation because their employment duties require them to live away from home (refer to section 20.4 of Fringe benefits tax exempt benefits).
Substantiating exempt accommodation and exempt food components
Employee living away from home from 1 October 2012
To reduce your FBT liability on the living-away-from-home allowance by any exempt accommodation component and any exempt food component, your employee must meet certain substantiation requirements:
- Your employee must substantiate the accommodation expenses incurred while living away from home in full.
- Your employee only needs to substantiate food or drink expenses if the expenses incurred while living away from home exceed an amount the Commissioner considers reasonable - if so, your employee needs to substantiate the full amount of the expenses incurred, not just the excess amount.
The Commissioner issues advice specifying reasonable amounts for food or drink expenses in an annual Taxation Determination.
Your employee satisfies the substantiation requirements if they give you, before the declaration date for the relevant FBT year, either:
- documentary evidence of the expense - that is, either the actual receipt or other evidence as appropriate (for example, receipts, tax invoices, credit card or bank statements), or a copy of these documents, or
- an appropriate declaration in a form approved by the Commissioner setting out information about the expense.
If your employee gives you an appropriate declaration, they must retain the relevant documents to substantiate the expense incurred for a period of five years from the declaration date. However, this is not required if your employee gives you the documentary evidence of the expense - in that situation, you must keep the evidence for five years.
Declaration about living away from home
Your employee must give you an appropriate declaration about living away from home in the approved form if any of the following apply:
- They maintain a home in Australia at which they usually reside and the fringe benefit relates to the first 12 month period.
- The transitional rules apply and they are not required to maintain a home in Australia and/or the 12 month period does not apply.
- They work on a fly-in fly-out or drive-in drive-out basis.
- Declarations - for copies of these approved forms, including an explanation when each should be used.
You must obtain all employee declarations no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return, by 21 May.
4.4 The 'otherwise deductible' rule and travel diaries
If you use the otherwise deductible rule, you must have certain documentation to substantiate the extent to which the benefit provided would have been 'otherwise deductible' to the employee. You must obtain the documentation from the employee before lodging the relevant FBT return.
A 'travel diary' is a diary or similar document that you must obtain from an employee where:
- you provide a fringe benefit for travel within Australia for more than five consecutive nights and the travel is not exclusively for performing employment-related duties (the fact that the business travel requires the employee to stay away over a weekend will not, in itself, mean the trip is not undertaken exclusively in the course of their employment)
- you provide the benefit for travel outside Australia for more than five consecutive nights.
In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.
Example: travel more than five consecutive nights
An employee lives in Brisbane and travels to Hawaii for work purposes. The employee's flight to Hawaii departs from Sydney. The employee leaves their home in Brisbane on 2 April, flies to Sydney, and departs for Hawaii on 3 April. The employee returns directly to Brisbane on 8 April. The employee is away from their home for six nights in total and would need to keep a travel diary.
A travel diary shows where the activity took place, the date and the approximate time when the activity commenced, the duration and the nature of the activity.
If the provision of the expense payment or residual benefit is subject to a consistently enforced prohibition on private use and would result in a taxable value of nil, the requirement to obtain a travel diary will be waived. In such instances, you will then be able to make an annual no private use declaration stating that the benefit which was provided was only for employment related purposes and there was no private portion.
A travel diary is used to substantiate the following fringe benefits:
- airline transport (refer to Airline transport fringe benefits )
- expense payments (refer to Expense payment fringe benefits )
- property (refer to Property fringe benefits )
- residual (refer to Residual fringe benefits ).
4.5 Reportable fringe benefits
If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year, you must report the grossed-up taxable value of fringe benefits on the employee's payment summary for the corresponding income year (1 July to 30 June). These are called reportable fringe benefits.
You will need to keep records in sufficient detail to be able to report each individual's fringe benefits amount.
Correcting an amount on a payment summary already issued
Where you have inadvertently understated an employee's reportable fringe benefits amount by $195 or less, you don't have to amend the employee's payment summary unless the Commissioner is of the view that you deliberately understated the amount of fringe benefits provided to the employee.
To correct a reportable fringe benefits amount on a payment summary already issued to an employee, you need to complete a new payment summary, marking the amending a payment summary box.
When you complete amended payment summaries, you must:
- complete all payee, payment and payer information on each amended payment summary
- send it to us
- give a copy to the payee.
If the employee has already lodged their tax return, they should request an amendment to their reportable fringe benefits amount.
If the change alters the amount of your FBT payable, you also need to request an amendment to your FBT return (refer to section 3.4 of How fringe benefits tax works).
4.6 Electronic records
Electronic record keeping systems
The information recorded in a computerised accounting system is generally the same as that contained in a manual accounting system. If you choose to keep your business records electronically, your records must be in a form that tax officers can access and understand in order to determine your FBT liability. You can choose at any time to satisfy access requests by providing a printed copy of your electronic records and, where necessary, system documentation.
Essential elements of an electronic record keeping system
There are important guidelines you need to follow in electronic record keeping. These include the following.
You should retain electronic records for the same length of time that you retain paper records. For FBT purposes, this is for a period of five years.
Data security and integrity
You should be able to demonstrate that your electronic records system is secure from both unauthorised access and data alterations.
The entire electronic records system should be documented, including physical and logical descriptions of the system's structure and programs, including all inputs and outputs.
Retaining archival copies
It is generally not necessary to keep a hard copy of the information contained in an electronic record unless a particular law or regulation requires you to keep paper copies.
Electronic records should be readily accessible. To this end, you should ensure the conversion of electronic records to a compatible format when upgrading or changing data-processing capabilities.
Storing paper records electronically
Whether you use a manual or a computerised accounting system, you may want to store and keep paper records electronically. Advances in technology, such as the internet, have meant that many business transactions are processed and kept electronically rather than through a paper-based system. This includes encrypted records. These records must be in a form that we can access and understand.
Where paper records are produced or received in the course of carrying on a business you may scan the paper records onto an electronic storage medium, provided the electronic copies are a true and clear reproduction of the original paper records.
Where paper records are scanned and stored electronically, record keeping requirements are satisfied if the electronic records are:
- not altered or manipulated once stored
- retained for the statutory period of five years
- capable of being retrieved and read at all times by tax officers. You are expected to provide appropriate facilities for viewing electronic records kept in that format and, where necessary, for printing a paper copy or providing an electronic copy.
Paper records that can be scanned and stored include:
- invoices, purchase orders, receipts, vouchers, credit notes, delivery dockets and other such records
- bank statements and other bank records and documents
- any other paper source documents produced or received in the course of carrying on a business.
You don't have to keep original paper records once they have been scanned onto an electronic storage medium.
Internet and electronic data interchange
Many businesses transfer data and information electronically to both internal and external sources. This process is commonly referred to as electronic data interchange (EDI). If you do conduct business transactions through the internet or by EDI you are required to keep records explaining all relevant transfers. All other requirements relating to electronic record keeping systems explained above still apply.
If electronic information systems are used to conduct business transactions such as those that may be conducted by websites, there will be no evidence of those transactions. Without this evidence your organisation or business may not be considered to have complied with its record keeping requirements. Some businesses, however, use electronic information systems that have special functionality for maintaining the integrity of the digital data as electronic records over time to conduct business transactions. These organisations will have developed software integration between record keeping systems and other corporate systems to ensure that data can be seamlessly and deliberately captured as electronic records.
- TR 2018/2 Income tax: record keeping and access - electronic records
4.7 Record keeping exemption arrangements
The record keeping exemption arrangements provide certain employers with an alternative means of calculating their FBT liability. These arrangements mean that an employer is not required to keep full FBT records.
If you use the record keeping exemption arrangements, you may still be required to record the value of fringe benefits on employees' payment summaries (refer to Reportable fringe benefits ).
Who may use the record keeping exemption arrangements?
You can elect to use the record keeping exemption arrangements if:
- you are not a government body or income tax exempt at any time during the current year
- the Commissioner has not issued a notice requiring you to resume keeping records
- you were in business for the whole of the base year
- you kept FBT records in the base year
- you lodged the FBT return for the base year by the due date
- the aggregate fringe benefits amount (total of taxable values of all fringe benefits, refer to section 2.10 of Calculating fringe benefits tax) in the base year did not exceed the exemption threshold
- you have elected that the record keeping exemption arrangements apply in all years from the most recent base year to the current year
- the aggregate fringe benefits amount for benefits provided in the current year is not more than 20% greater than it was in the most recent base year, unless the difference is $100 or less, and
- the above conditions are also satisfied for all years between the base year and the current year.
The base year
The base year is any FBT year that meets the required conditions. The most recent record keeping exemption thresholds are available in Fringe benefits tax - rates and thresholds.
Records relating to the base year
Records kept in the most recent base year must be kept for five years after the end of any year in which the record keeping exemption arrangements applied.
Records relating to years where the exemption arrangements are applied
If you elect to use the record keeping exemption arrangements, you are required to keep records of benefits provided to employees by your associates.
It is important to note that you may still need to keep records for income tax or other purposes.
Calculating FBT liability under the exemption arrangements
In calculating your FBT liability in the current year, you use the aggregate fringe benefits amount for the most recent base year.
Determine whether the aggregate fringe benefits amount has increased by more than 20%
You use special rules to calculate the taxable value of car fringe benefits under the statutory formula and the operating cost methods to determine whether the aggregate fringe benefits amount in the current year has exceeded the 20% or $100 tolerance limit.
For the statutory formula method (refer to section 7.4 of Car fringe benefits) the statutory fraction established for a car in the most recent base year may be used for that car (or a replacement car) in the current year, provided the annualised number of kilometres in the current year is at least 80% of the annualised number of kilometres in the base year.
Where you first provide the car benefit in a year later than the base year, you may use the statutory fraction established in that later year, provided the number of annualised kilometres in the current year is at least 80% of the number of annualised kilometres in the first year.
For the operating cost method (refer to section 7.5 of Car fringe benefits), the business use percentage used for calculating a car benefit in the most recent base year may be used for that car (or a replacement car) in the current year, provided the business use percentage in the current year is at least 80% of the business use percentage in the base year.
Where you first provide the car benefit in a year later than the base year, you may use the business use percentage established in that later year, provided the business use percentage in the current year is at least 80% of the business use percentage in the first year.
Employer is not in business throughout current year
If you are not in business for the whole of the current year, you must adjust the aggregate fringe benefits amount in the base year in accordance with the following formula.
Aggregate fringe benefits amount in most recent base year
Number of days in the current year during which the employer carried on business operations
Number of days in current year
4.8 Employee declarations
It is not necessary for you to send employee declarations to us. However, you should keep them as part of your tax records. These declarations must be in a form approved by the Commissioner.
The approved wording and information to be contained in these employee declarations are included throughout this guide, or by referring to Declarations.
4.9 Electronic declarations
You can receive employee declarations electronically. However, the declaration still must be signed by the employee using an electronic signature.
This means that employees can provide employee declarations to you, in the format approved by the Commissioner, electronically with their electronic signature if:
- you consented to the method of electronic signature
- the electronic declaration is readily accessible and understandable, and convertible into written English, in order to determine your FBT liability.
Format of declaration and form of electronic signature
The electronic declaration must contain the same information as is required for approved paper declarations.
The electronic declaration must be provided using a secure system, and in a way that clearly identifies the employee and indicates their approval of the information being provided. A secure system could be a system that requires a personal identification number, access code or password to use.
Example: electronic declaration provided from work email address
An employer agrees to an employee declaration being provided to them electronically in the body of an email or as an attachment to an email. This is an acceptable method of receiving the declaration where:
- the employees have work email addresses that are password protected
- the employee's name appears either in the 'From' line or in the body of the email, or both, as the method for identifying the person and indicating the person's approval of the information communicated.
Example: electronic declaration provided through payroll system
An employer has an electronic form available through their payroll system that allows employees to provide the same information as required by paper declarations. This is an acceptable method of receiving employee declarations where:
- the employer agrees to employees providing electronic declarations through this system
- in order to complete the form, employees must log on to their account using a password
- completion of the form is linked to the employee's user identification or their name, as the method for identifying the person and indicating their approval of the information communicated.
Example: electronic declaration provided from employee's home email address
An employer agrees to an employee providing their employee declaration from their home email address. This would be an acceptable method of receiving an employee declaration where the employer is satisfied that the declaration was provided by the employee, using a secure system.
Example: electronic declaration provided on behalf of another employee using their work email address
An employer has an email system that allows employees to action emails on behalf of other employees. Pam Smith, an employee, is given permission by her manager Jim Jones, to action emails on Jim's behalf while Jim is on leave. The 'From' line of emails actioned for Jim appears as 'Pam Smith on behalf of Jim Jones'. An employee declaration received via email with the 'From' line 'Pam Smith on behalf of Jim Jones' would not be acceptable because it doesn't contain the employee's approval of the information communicated.
- How to complete the PAYG payment summary - individual non-business form
- TR 2018/2 Income tax: record keeping ance access - electronic records
- TR 96/7 Income tax: record keeping - section 262A - general principles
- TD 2018/3 Fringe benefits tax: reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 for food and drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit for the fringe benefits tax year commencing on 1 April 2018
Changes and updates
Changes and updates
Revised to reflect changes to Rulings.
NO Fringe benefits tax - a guide for employers
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|Chapters 1 , 2 , 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , and 21 have been updated. See the Changes and updates sections in the relevant chapters for details.|