2014 FBT return planning tips

The 2014 fringe benefits tax ( FBT) year ended on 31 March 2014, therefore businesses should now be planning to ensure that documentation is in place to accurately prepare and lodge the FBT return on time.

The two most common benefits provided are cars and entertainment.

Lodgement & payment dates

Where the business lodges its own FBT return, the final date for lodgement and payment is 21 May 2014.

If the 2014 FBT return is lodged by a tax agent, the lodgement dates are:

  • electronic returns – 25 June 2014
  • paper returns – 21 May 2014

The due date for payment is 28 May 2014.

Businesses that are registered and didn’t provide any fringe benefits during the year must still lodge a ‘notice of nonlodgement’ with the ATO to avoid follow-up action.

Cars

Cars are the most common type of fringe benefit provided to employees and therefore planning for FBT can save money. This includes:

  • Obtain the odometer readings for each motor vehicle as at 31 March 2014.
  • For new motor vehicles, retain the purchase invoice of the car including a breakdown of all nonbusiness accessories (e.g. window tinting or a CD player). The cost of the car for FBT purposes should include:

o   GST

o   Nonbusiness accessories

o   Dealer & delivery charges

o   Luxury car tax

  • Review entitlements to any FBT reductions. For instance, if the car has been owned for more than four ‘FBT years’, the base value or cost is reduced by one-third under the statutory formula method.
  • Choose whether to use the ‘statutory formula’ or the ‘operating cost’ calculation method to calculate the FBT payable. Generally speaking, the statutory-formula method is more advantageous when the car is used primarily for personal use while the operating-cost method is usually best when the car is used mainly for business purposes.

ATO audit focus on cars

The ATO continues to target cars from an FBT compliance perspective. The main areas of focus include:

  • Car logbooks The ATO is focusing on the business-use percentage claimed over the particular three-month logbook period to ensure that this takes into account any variations in the pattern of use for the current FBT year and the next four FBT years. In other words, employees cannot simply choose to use a three-month period when business use is the highest.
  • Exempt cars  The ATO is targeting employers who have claimed an FBT exemption for certain cars (e.g. dual cabs and utes with a carrying capacity greater than one tonne) as well as utes and panel vans that carry less than one tonne.
  • Employee contributions  These contributions reduce the taxable value of the car fringe benefit. The ATO are concerned that many employers are not reporting these contributions as assessable income and also not including the GST component on their next BAS.

Entertainment

Most businesses provide entertainment to staff and clients during the course of the year. Unlike many other business expenses, it is not tax deductible, unless FBT has been paid on the particular expense. Again, a bit of planning and good record keeping can assist in limiting unnecessary tax.

Some questions for business owners to consider when calculating any entertainment FBT include:

  • Has the business provided entertainment by way of food or drink on or off the business premises to employees? This can include Christmas parties, Friday-night drinks etc.
  • Has the business reimbursed an employee’s restaurant bill, for instance when entertaining clients?
  • Has the business provided a benefit that is ‘recreation’ to an employee? This could include a ticket to the football or a concert. If so, ensure that this type of entertainment is recorded separately to meal entertainment.
  • Has a register been maintained of employees, associates and nonemployees who attended functions where meal entertainment and nonmeal entertainment was provided?
  • Have the GST implications been considered? The GST treatment of ‘meal entertainment’ related expenditure will depend on the meal entertainment method used:

o   If using the 50/50 method, only 50% of the GST can be claimed. The other half is added back to the profit-and-loss account and is not available as a tax deduction.

o   If using the actual method, only claim the GST on that portion of entertainment that is subject to FBT. Otherwise, GST is treated as a profit-and-loss expense and is not available as a tax deduction.

Joe Kaleb, CEO Australianbiz

http://www.australianbiz.com.au/