FBT Year-End Checklist

 

9 April  2022

March 31 marks the end of the 2021/2022 fringe benefits tax (FBT) year which commenced 1 April 2021. It’s time now for employers and their advisors to turn their attention to instances where non-cash benefits have been provided to employees, and also where private expenses have been paid on their behalf.

Although it will generally fall to your accountant to prepare the FBT return, it may not always be apparent to them from your software file or other records, all of the instances where you have provided employees and their associates (e.g. spouse) with a potential fringe benefit. To assist you in bringing these potential benefits to the attention of your accountant, following is a general checklist (non-exhaustive):

Cars

  • Did you provide or make available a car that your business (or an associate of the business) owned or leased, to an employee or their associate for private purposes?

Exemptions include minor, infrequent and irregular non-work-related use by an employee of certain commercial vehicles.

  • Did you as an employer reimburse expenses of an employee in relation to a car they owned or leased?

Exemptions include where the business compensates the employee on a cents per km basis for estimated travel and where the car has not been used for private purposes.

Loans

  • Did your business provide a loan to an employee or their associate?

Exemptions include where the loan is strictly related to meeting an employment expense (which must be incurred within sixth months of the loan being made).

Exemptions also include loans made by private companies to employees who are also shareholders but the loan is Division 7A compliant.

Debt waiver 

  • Did your business release an employee or their associate from paying an outstanding debt?

An exemption applies where the debt in question is genuinely written off as a bad debt (as distinct from waived for employment or personal reasons)

Housing 

  • Did your business or an associated entity provide an employee or their associate with the right to use accommodation by lease or licence?

The benefit may be exempt in the event that it relates to a remote area.

Living away from home allowance (LAFHA)

  • Did you pay an employee an allowance to compensate them for private non-deductible expenses because they are required to live away from their usual place of residence for work?

Strict exemption conditions can apply which your accountant can walk you through

Expense payments 

  • Did your business reimburse an employee or pay a third-party expense of theirs?

Exemptions include where the expense would have been otherwise deductible to the employee because it was work-related.

Car parking 

  • Did you pay for an employee’s car parking expenses or provide them with a car park during the year?

Various exemptions apply including where the benefit is for a disabled person, or provided by small businesses or certain non-profit employers, or the minor benefit exemption applies.

Entertainment 

  • Did your business provide an employee or associate (or in some cases third-parties with entertainment by way of food, drink or accommodation in connection with this?
  • Did your business provide an employee or their associate with a corporate box, a boat or plane for the purpose of providing entertainment, or other premises for the purpose of providing entertainment?

Record keeping 

Keeping good business records is important for a number of reasons. It assists you to:

  • comply with your tax and superannuation obligations
  • gain a greater insight into the financial health of your business, enabling you to make informed decisions
  • manage your cashflow
  • demonstrate your financial position to prospective lenders, and also potential buyers of your business.

ATO requirements

Broadly, the ATO requires that:

  • you keep most records for five years from when you obtained the records, or completed the transactions or acts that they relate to – whichever is the later
  • you be able to show the ATO your records if they ask for them
  • your records must be in English or be able to be easily converted to English.

Digital records

The ATO is reminding business owners that you can keep your records (paper/hard copies) digitally. The ATO accepts images of business paper records saved on a digital storage medium, provided the digital copies are true and clear reproductions of the original paper records and meet the standard record keeping requirements.

Once you have saved an image of your original paper records, you don’t have to keep the paper records unless a particular law or regulation requires you to.

However, if you enter information (for example, supplier information, date, amount and GST) from digital or paper records into your accounting software, you still need to keep a copy of the actual record, either digitally or on paper. Some accounting software packages may do both your accounting as well as your record keeping.

Storage options

  1. Cloud

If you use cloud storage, either through your accounting software or through a separate service provider, eg, Google Drive, Microsoft Onedrive or Dropbox, ensure:

  • the record storage meets the record-keeping requirements
  • you download a complete copy of any records stored in the cloud before you change software provider and lose access to them.
  1. E-invoicing

Regardless of your E-Invoicing software or system, your business is responsible for determining the best option for storing business transaction data.

You should:

  • ensure that your process meets the record-keeping requirements
  • discuss your options with your software provider
  • talk to your business adviser, if necessary.

Digital advantages 

As the ATO point out, there are many advantages to keeping your records digitally. If, for example, you use a commercially-available software package, it may help you:

  • keep track of business income, expenses and assets as well as calculate depreciation
  • streamline your accounting practices and save time so you can focus on your business
  • automatically calculate wages, tax, super and other amounts, including
  • develop summaries and reports for GST, income tax, fringe benefits tax (FBT) and taxable payments reporting system (TPRS), as required
  • be prepared to lodge your tax and super obligations, including your tax return, business activity statements (BAS) and taxable payments annual report (TPAR) if you are a business that is required to
  • send some information to the ATO online (if the package meets ATO requirements), for example, your activity statement
  • meet your legal Single Touch Payroll (STP) reporting obligations
  • back up records using cloud storage to keep your records safe from flood, fire or theft.