Fringe Benefit Tax Return (FBT)

January 27, 2017

Fringe Benefit Tax Return (FBT)

As the end of March is fast approaching, we are writing to enquire as to whether your Company has an obligation to lodge an FBT return for the 2015 year. The FBT year runs from 1st April and ends 31st March each year.

A fringe benefit is a benefit that is provided by an employer to an employee or their associate in respect of their employment. There are many types of fringe benefits, eg, car benefits, forgiveness of debt, provision of cheap loans, payment of expenses, etc. However, for many businesses, the most common fringe benefit is a “car” benefit.

A “car” is defined as being a motor car, station wagon, four wheel drive, panel van, utility or other vehicle designed to carry less than one tonne or fewer than nine passengers.

If a company owns a car which is used by an employee (including directors) and the car is used, even partly for private purposes and/or is parked at the employee’s place of residence, then there is a “Fringe Benefit” provided by the employer. The employer then must, in most cases, lodge a fringe benefit tax return with the ATO. For FBT purposes, if a car is parked at the employee’s place of residence, it is regarded as being available for use by the employee and therefore, subject to FBT, even when the car is not actually used for private purposes.

Please examine your circumstances to ascertain whether your company has provided a “fringe benefit’ during the period 1st April 2014 to 31st March 2015. This would include those clients who have purchased a car in the period 1st April 2014 to 31st March 2015 where the car was being used by an employee or company director for private purposes as described above.

There are 2 methods for calculating the FBT payable on a car fringe benefit, being the statutory formula method and operating cost method. In order to utilise the operating cost method, an employer is generally required to keep a log book for each car for the first year the operating cost method is used and then every five years. The log book must be kept for a minimum period of 12 weeks. During the period the log book is being maintained, an entry must be made to record each business journey in the car concerned, detailing the date each journey began and ended, the various odometer readings and the purpose of each journey. Private journeys do not have to be recorded. If a log book has not been kept, the statutory formula method will need to be used, which may result in higher FBT payable.

For clients who have been lodging FBT returns, or purchased a car during this FBT year, please record the odometer reading of the vehicle as at 31st March, 2015.

If you have an obligation to lodge a Fringe Benefit Tax Return or you are uncertain of your position please contact us.