Late last year the ATO announced an estimated FBT gap of $1.3 billion, which was an increase of 8.1% from the previous announcement. 1 The ATO has a focus on closing this gap, and every year, receives more money to put behind audits to do so.
The ATO also has an expectation that Accountants are helping to educate employers on FBT requirements, as businesses are not aware and not engaged in FBT, so it’s more important than ever for Accountants to be up to date with FBT information and educating their clients.
FBT in a Nutshell
FBT is separate from income tax. It is a tax paid on certain benefits provided to employees or employees' associates because of the employee's employment. Employees' associates are typically their family members. The employer must self-assess their FBT liability for the FBT year (1st of April to 31st of March) and lodge an FBT return by the 25th of June each year.
For a more in-depth look at the FBT process, check out this guide: The Hidden Liability of FBT.
Areas of Focus in 2024
Motor Vehicles
At the moment, the ATO is very focused on motor vehicles, especially utes and vans.
They are conducting a data matching program to capture benefits that aren’t currently being reported through FBT.
For example, if a company has a car registered in its name, the ATO will check if it’s registered for FBT to identify those that are not. Or they will check logbooks against etag (electronic tag for toll road payment) records to ensure the logbook entries are correct. These are only a few examples. They’re coming at it from multiple angles to ensure they cover it thoroughly!
There is also a myth circulating that workhorse vehicles and utes, are except from FBT, but in many cases, they may not be.
There are different rules depending on whether the vehicle is under one tonne or one tonne or greater. While there are exceptions available for both, personal use is generally limited to driving to and from work, with no detours of more than two kilometres, and the 2018 guideline, PCG-2018/3, allows no more than 1 000 kilometres in private use. However, PCG-2018/3 also puts in place a whole range of requirements, including that the vehicle must be provided for work, the employer must have a written policy, the employer needs to obtain a declaration from the employee, and it can’t be a luxury vehicle.
We recommend that every vehicle should have a logbook, no matter the type. The logbook only needs to be kept for at least a rolling 12 weeks of the FBT year, but it must be representative of your usual travel. Any type of logbook is acceptable to the ATO, but there are risks associated with some. For example, if spreadsheets are being used, you need to be confident they are being completed correctly, but there are also lots of great FBT tracking apps on the market.
For non-exempt vehicles over one tonne, the Statutory Fraction of 20% cannot be used. Either a logbook or the cents per kilometre method must be used, but the cents per kilometre method can only be applied if there is extensive business use. It’s safer to keep a logbook because you can’t fall back on anything else and if there are no reliable records, the expenses will be deemed 100% private use.
Electric Vehicles
The electric vehicle (EV) FBT exemption is now law.
Many Accountants believe that because EVs are exempt from FBT, no actions need to be taken, but this is not correct. Although private use is exempt from FBT, an employer still needs to include the notional value of that benefit when calculating the employee’s reportable fringe benefits amount and include it in single touch payroll (STP).
ChangeGPS contains workpapers that help you work out the value of the reportable fringe benefit amount.
The FBT exemption is available to new and secondhand vehicles, but the same rules apply if the car is either new or secondhand.
- The Luxury Car Tax was not relevant for the vehicle when new, and
- The vehicle was held and used by the first owner after the 1st of July 2022, which will need to be confirmed by the employer.
The areas mentioned are high alert areas for 2024, but in general, we need to start paying attention to FBT and including it in our workflows, if we haven’t already. As well as the ATO’s renewed attention in this area, the urgency is that STP requires accurate recording through payroll, and that the reportable fringe benefit needs to be in STP form.
If you’re looking for steps to start implementing FBT for your clients, download this guide: The Hidden Liability of FBT, A Guide to Help Shield Your Practice and Your Clients
Or book a Discovery Call to see how the resources within Core by ChangeGPS can streamline your approach to FBT.