Fringe benefits tax - a guide for employers
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Chapter 3 - How fringe benefits tax works
Relying on this Guide
We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.
If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.
Some of the information on this Guide applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.
We recommend you register once you establish that you have to pay FBT. To register for FBT, complete an Application to register for fringe benefits tax and send it to the ATO.
Once you are registered, we will send you additional information to help you lodge your return. You don't need to make your first payment until you lodge your first FBT return.
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. Where 21 May falls on a weekend or a public holiday, your annual FBT return is due on the next business day.
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.
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 lodge a Notice of non-lodgment - Fringe benefits tax .
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 or employer
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).
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 FBT 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.
- We are 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 our assessment.
- The notice of assessment is regarded as having been served on you, the employer.
If you realise after lodging your return that you have made a mistake, request an amendment as soon as possible.
We 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 we can amend an assessment.
- Correct excise and FBT returns, non-BAS fuel scheme claims and PAYGW payment summaries - for information about how to submit an FBT amendment request and what to include in your request.
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 2016 to 31 March 2017, 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 and the activity statement was lodged on time, 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.
The instalment threshold is $3,000.
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.
Codes for variation
|Reason for varying||Code|
|Current business structure not continuing||22|
|Change in fringe benefits for employees||30|
|Change in employees with fringe benefits||31|
|Fringe benefits rebate now claimed||32|
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.
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. An objection 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, generally 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 ruling 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.
- Interest and penalties
- Law Administration Practice Statement PS LA 2008/3 Provision of advice and guidance by the Tax Office
|Section||Changes and updates|
|Throughout||Updated to provide consistency between chapters and style in accordance with corporate requirements|
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© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA
You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
NO Fringe benefits tax - a guide for employers
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© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).