The Fringe Benefits Tax (FBT) year ends on 31 March. We’ve highlighted some of the key fringe benefits tax hot spots to help you stay on top of your obligations – and avoid any surprises.
If you provide eligible electric vehicles (EVs) to your team, your business may qualify for a fringe benefits tax exemption. This should normally be the case where:
From 1 April 2025, plug-in hybrid electric vehicles will no longer qualify for the fringe benefits tax exemption unless:
If there is any change to that commitment from 1 April 2025 onwards, the exemption will generally no longer apply.
Builders and tradies often have questions around Fringe Benefits Tax exemptions for work vehicles, specifically regarding their carrying capacities. Generally, certain vehicles primarily designed for carrying loads rather than passengers may qualify for an FBT exemption.
To be eligible, the vehicle:
Vehicles with a carrying capacity under one tonne may still qualify for exemption if the private use is minor, infrequent, and irregular. Keeping accurate records of vehicle usage can help ensure compliance and clarity in your FBT obligations.
If you’re uncertain whether your vehicle qualifies for an exemption, it’s important to get specialist advice. Get in touch today to book a time to review your FBT position.
Many businesses continue to offer flexible work from home arrangements and employees are often provided with work-related items to support this. In general, if those items are primarily for work use, fringe benefits tax shouldn’t apply.
For example, portable electric devices such as laptops and mobile phones provided to employees shouldn’t trigger an Fringe Benefits Tax liability as long as they are primarily used by your employees for work. Multiple similar items can also be provided during the Fringe Benefits Tax year where required – for example multiple laptops have been provided to the employee – but only if the business has an aggregated turnover of less than $50m (previously, this threshold was less than $10m).
If the employee is using equipment provided by the business for their own private use, normally Fringe Benefits Tax would apply to the private use. However, the Fringe Benefits Tax liability can be reduced based on the business use percentage.
Fringe Benefits Tax (FBT) usually applies to benefits provided to employees and certain office holders, such as directors. Genuine independent contractors typically don’t attract FBT, but it’s essential to confirm whether your contractors truly meet the criteria.
Recent High Court decisions have led the Australian Taxation Office (ATO) to issue a clear ruling for identifying if a worker is an employee or an independent contractor.
If you have a written contract, you should rely primarily on its terms rather than the conduct of the worker and the business. Simply calling a worker an independent contractor doesn’t guarantee that they’ll be treated as one, especially if the contract terms suggest an employment relationship.
The ATO has also identified factors that lower your risk of misclassification:
Both parties have clearly agreed on the worker’s status.
If you engage contractors, implement a clear process to confirm the appropriate classification and regularly review these arrangements.
Keep in mind that even genuine contractors might still trigger employment-like obligations, such as superannuation guarantee contributions or payroll tax requirements.
Record keeping for Fringe Benefits Tax purposes can be time-consuming. Since 1 July 2024 however, Businesses have a choice to keep using the existing Fringe Benefits Tax record keeping methods, use existing business records where those records meet the requirements set out by the legislative instrument, or a combination of both methods.
It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time.
If your business has cars and you need to record odometer readings at the first and last days of the Fringe Benefits Tax year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person –it could save hours of admin later..
One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.
When it comes to entertainment, employers are often keen to claim a deduction but this can be a problem if it is not recognised as a fringe benefit provided to employees. Expenses related to entertainment, such as a meal in a restaurant, are generally not deductible and no GST credits can be claimed unless the expenses are subject to Fringe Benefits Tax.
For example, you have taken a client out to lunch and the amount per head is less than $300. If your business uses the ‘actual’ method for Fringe Benefits Tax purposes, then there should not be any Fringe Benefits Tax implications. This is because benefits provided to the client are not subject to Fringe Benefits Tax and minor benefits (i.e., value of less than $300) provided to employees on an infrequent and irregular basis are generally exempt from Fringe Benefits Tax. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either.
If the business uses the 50/50 method, then 50% of the meal entertainment expenses would be subject to Fringe Benefits Tax (the minor benefits exemption would not apply). As a result, 50% of the expenses would be deductible and the business would be able to claim 50% of the GST credits.
The ATO is keeping a close eye on employers who should be lodging Fringe Benefits Tax returns but aren’t.
If your business employs staff (even closely held staff such as family members), and is not registered for Fringe Benefits Tax, it’s essential to ensure that the position is reviewed to check whether the business could potentially have a Fringe Benefits Tax liability.
If the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then you are likely to be providing at least some fringe benefits.
There is a list of benefits that are considered exempt from Fringe Benefits Tax, such as portable electronic devices like laptops, protective clothing, tools of trade etc. If your business only provides these exempt items, or items that are infrequent and valued under $300, then you are unlikely to have to worry about Fringe Benefits Tax.
Whether you’re unsure about exemptions, contractor classifications or simply want peace of mind that everything’s covered, we’re here to help. We make fringe benefits tax compliance simple, so you can get back to focusing on your business. Contact us to arrange a discussion about your unique circumstances.
