The ATO has updated its list of ‘What attracts our attention’, with six items that specifically relate to fringe benefits tax (‘FBT’), as follows:
- Failing to report motor vehicle fringe benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits.
- Incorrectly calculating car parking fringe benefits due to:
– significantly discounting market valuations;
– using non-commercial parking rates; or
– parking rates not being supported by adequate evidence.
- Mismatches between the amount reported as an employee contribution on an FBT return compared to the income amounts on an employer’s tax return.
- Claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses as sponsorship or advertising.
- Not reporting fringe benefits on business assets that are provided for the personal enjoyment of employees or associates.
- Not lodging FBT returns (or lodging them late) to delay or avoid payment of tax.
FBT: Record-keeping exemption threshold
The exemption threshold for the FBT year commencing 1 April 2019 is $8,714 (up from the amount of $8,552 that applied in the previous year).
FBT: Benchmark interest rate
The benchmark interest rate for the FBT year commencing on 1 April 2019 is 5.37% per annum (up from the rate of 5.20% that applied for the previous FBT year).
This rate is used to calculate the taxable value of:
- a fringe benefit provided by way of a loan; and
- a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
On 1 April 2019 an employer lends an employee $50,000 for five years at an interest rate of 5% p.a. with interest charged and paid six-monthly, and no principal being repaid until the end of the loan.
The actual interest payable by the employee for the current year is $2,500 (i.e., $50,000 x 5%).
However, the notional interest, with a 5.37% benchmark rate, is $2,685, so the taxable value is $185 (i.e., $2,685 – $2,500).
We are in the process of preparing FBT returns for the year ended 31 March 2019. Make sure you get in touch before 25th May to sort out your affairs.
For family businesses we are able to calculate contributions towards private use of vehicles which keep your FBT liabilities at minimum and the ATO happy. We normally do this as part of year end process, but if your accountant did not do this for you last year, make sure to give us a call.
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