If you allow a staff member to use a work car for private purposes, give one of them a cheap loan, reimburse another for a private expense, such as school fees, or generally provide entertainment or recreation – you may be up for fringe benefits tax (FBT).
How do I know if I need to pay Fringe Benefits Tax?
The following checklist will help you work out if you are providing a fringe benefits to your employees. If you answer yes to any of the following questions, you may have to pay FBT.
⦁ Do your employees take cars home and garage them overnight, even if only for security reasons?
⦁ Do your employees use cars or other vehicles the business owns for private use?
⦁ Do you have a salary package arrangement with any of your employees?
⦁ Have you paid for or reimbursed any employees’ personal expenses?
⦁ Do you provide entertainment, such as food, drink or recreation to your employees?
⦁ Have you given property, such as electrical goods, to your employees either free or at a discount?
⦁ Do you provide any employees with a house or unit of accommodation?
⦁ Do you provide loans at reduced interest rates to any employees?
⦁ Have you released any employee from a debt they owed the business?
⦁ Do you provide any employees with living-away-from-home allowances?
⦁ Are you a tax-exempt organisation that has provided food, drink or accommodation to employees (even if they are client functions)?
FBT general record keeping requirements
If you provide the fringe benefit to your employees, then you need to keep records that show the following:
⦁ The taxable value of each fringe benefit provided to each employee. Examples of records you may need to keep are invoices, receipts, travel diaries, log books, odometer records and employee declarations.
⦁ The method of allocating the taxable value of a fringe benefit provided to two or more employees. This may include any reasonable agreement between an employer and an employee regarding the provision of fringe benefits.
⦁ That 100% of the taxable value of the benefits has been allocated to employees. The taxable value of excluded benefits (such as remote area housing assistance) doesn’t need to be allocated to individual employees.
FBT records timeline
For FBT purposes, these records must be kept for five years from the date they are prepared, obtained or the transactions completed, and in a form that tax officers can access and understand in order to determine your tax liability.