2024 FBT Series: Navigating Fringe Benefits Tax (FBT) - Essential steps for Preparation and Compliance
2 April 2024
Share this article
As we find ourselves at the end of the 2024 FBT year, it will soon be time to turn our minds to the annual FBT return preparation process and establish a game plan to set yourself and your business up for success.
What are Fringe Benefits?
Broadly speaking, fringe benefits refer to the rights, privileges, salary-sacrifice or employment-related items (i.e. meal entertainment) provided by an employer to their employee (or associate), in respect of their employment. There are many categories of fringe benefits, including:
- Cars
- Debt waiver
- Loans
- Expense payments
- Housing
- Living-away-from-home-allowances (LAFHA)
- Airline transport
- Board
- Meal entertainment
- Tax-exempt body entertainment
- Car parking
- Property
- Residual
Where to start
The starting point will depend upon your level of experience - is this your first time preparing an FBT return? Or do you have experience with the FBT process, but find yourself faced with having a responsibility for a new organisation with a different benefit spread, all the while trying to get your head around the series of developments over the past 12 months?
Whatever your circumstances, we have put together a series of articles addressing all things FBT - ranging from preparatory basics (being the subject of this article), through to key changes and developments affecting 2024 (and subsequent) FBT returns.
Know your deadlines
The current FBT year runs 1 April 2023 – 31 March 2024. During this period, all fringe benefits provided to employees need to be assessed, to determine if they are taxable, or eligible for an exemption or reduction.
FBT returns are due to be lodged and paid to the Australian Taxation Office (ATO) each year by 21 May, or, if being lodged electronically by an appropriate registered tax agent, by an extended deadline of 25 June. Regardless, there is always a tight turnaround between year-end (31 March) and these lodgement/payment due dates. Therefore, it is crucial that you establish a timeline which will enable you to collate, question and analyse the necessary information, prepare your calculations, seek review (whether internal or external), finalise and lodge the FBT return, and settle any remaining liability, by the relevant due date.
What can easily be overlooked is the extent to which other stakeholders may influence your existing time requirements. For example, how much of the information you require is dependent on another team within your organisation, or are there other internal deadlines or resource constraints (for example, key personnel having planned leave, end-of-year financial statements preparation, etc) which may cut short the time you have available to finalise FBT figures?
A helpful approach is to work backwards from the lodgement due date when preparing your FBT compliance timeline, allowing sufficient time for approvals and authorisations for the return, as well as enough time to cater to any other relevant considerations, including those referenced above.
Request information early
Preparing an FBT return usually requires input from a variety of different data sources. This includes (but is not limited to) general ledger transactions, payroll data, asset/fixed asset registers, car parking information, vehicle leasing schedules, benefit/compensation data from overseas parent entities or associates, or even incentive data from third parties. Simply finding the right contacts internally may be time consuming - particularly as contacts can change each year, so we always recommend starting this process at the onset of the FBT compliance season (or earlier, where possible).
In planning your FBT compliance timeline, it is ideal to initiate any requests for information as soon as possible. Where appropriate, be clear on the deadlines you are working with, so that stakeholders supporting the FBT process (whether directly or indirectly) understand your requirements and can prioritise their own workloads to the extent possible.
An approach that can help keep things moving, is to get requests out to other stakeholders in the first instance, so that those requests can progress while you turn your mind to other activities which are within your own control (e.g. reviewing ledger accounts).
A further point on interpreting information received from third parties, is that the responsibility ultimately falls on the employer to ensure the accuracy and completeness of the FBT return. As such, it remains important to sense-check and to review, with a critical mindset, any information or reports received to ensure it provides you with what you require and clarity around the data that requires further work. For example, when reviewing novated lease reports received, can all vehicles in this years’ report be reconciled to the information used in last years’ FBT return?
Prior year records and learnings for the current year
In beginning the preparation of the FBT return, it may be helpful to start working from prior year FBT return working papers. By considering the prior year return, you will be afforded the opportunity to familiarise yourself with the types of benefits provided in the most recent year, along with a range of critical organisation-specific references and file notes that may require consideration year-on-year. This may include crucial information that may have carry-over into the current FBT year, such as:
- For cars and other vehicles - base values, dates first held, and odometer readings;
- Car parking locations and numbers of spaces held;
- Employee loan registers and carrying balances;
- Expatriate and travelling employee schedules;
- Wage codes from payroll data identified as falling within the FBT regime (e.g. living away from home allowances, reimbursements, post-tax deductions etc);
- Configurations from expense reimbursement systems;
- HR records of any long service awards issued to employees outside of the Payroll system;
- General ledger account mapping for FBT sensitive accounts; and
- Benefits provided to your employees by related entities or third parties.
Prior year information can also assist in simplifying the nature of requests that you send to other stakeholders - which may, in-turn, improve your chances of receiving responses in a timely manner.
Once you have reviewed prior year information and formulated your game plan for the current year, you should then investigate current year information and any changes that may have taken place, which could impact the 2024 FBT return. For example:
- Have there been changes to the law since last year, or has the ATO released guidance that was not available in the prior year? (for example, the ATO has updated Chapter 16 – Car parking fringe benefits of its Fringe benefits tax — a guide for employers following the Virgin case and subsequent amendment to Taxation Ruling TR 2021/2 that addressed the concept of “primary place of employment” and to provide further guidance on contemporary car parking arrangements).
- If you use excel-based formulas, be sure to update your calculations for days held to reflect that this year has 366 days as a leap year.
- Have any new GL codes been added during the year, and could they be ‘FBT sensitive’?
- Have initiatives dealing with reward and recognition or wellness changed during the year?
- Has the location of car parking spaces provided to employees changed during the year - or have spaces in certain locations ceased?
- Has there been a change in fleet providers during the year?
- Has there been an increase in business travel and/or secondments, with the relaxation of the travel restrictions?
- What are the current rates and thresholds that apply to the 2024 FBT year? Note the updated reasonable travel and meal allowances for 2023-24 set out in TD 2023/3.
- Review the ATOs guidance ‘What attracts the ATO’s attention’ with FBT preparation.
Identifying the types of changes which are relevant to the types of benefits in the current year FBT return will play an important role in establishing your strategy for completing the return in an accurate, efficient and timely manner.
Think about employee declarations
The process of collating employee declarations can be lengthy. Determining who to send declarations to, which declarations to send, sending follow-ups, or querying received declarations, can cause critical delays throughout the FBT compliance process. Therefore, it is best to get employee declarations out of the way as early as possible.
It is important to note that you may not be able to identify the requirement to obtain declarations from certain employees until you are much further along the compliance process, so it may be helpful to consider requesting employee declarations in tranches where possible. Furthermore, some declarations will require the signature of the organisation’s public officer. Depending on how accessible they are at that time of the year, you should schedule time with them in advance, so that lodgement will not be delayed. For a full list of the ATO approved employee declarations, please refer to the ATO website.
For completeness, the ATO had issued fringe benefits tax (FBT) legislative instruments on records that can be used as an alternative to employee declarations for consultation, with an effective date of 1 April 2024. Whilst these rulings won't alleviate record keeping requirements for the 2024 FBT year, they are a welcome relief for the 2025 FBT year.
Familiarising yourself with your internal benefit policies
While important, internal policies are often overlooked as a data source for the FBT return process - especially those that surround the provision of benefits, expense claims/reimbursements and travel-related support.
Policies can provide valuable insights into the types of benefits which could be provided by an employer, and the circumstances under which those benefits may be provided. For example, ‘Working from home support’ or ‘Client entertainment’ policies may highlight the types of benefits that could have been provided to employees during the year, and the occasions during which employees can make related claims. These may offer additional insights into the extent to which exemptions or concessions may be available. As such, being conscious of the types of benefits provided to employees, understanding the potential for exemptions/concessions to be available to these benefits, and approaching your analysis of current year transactions with such context, can help aid efficiency in preparing the return.
With the ATO’s proactive approach in its review for employer non-compliance, it remains important that you give yourself every chance for success throughout the FBT compliance process. Having a well thought out strategy with a thorough understanding of the technical developments arising over the past 12 months will be critical to lodging an accurate FBT return, on time.
ATO focus areas
The ATO Deputy Commissioner Superannuation and Employer Obligations (Emma Rosenzweig) recently published this article on LinkedIn regarding the ATO’s focus areas for employers. In relation to FBT, the ATO is still looking to dispel the common myth that utes provided to employees are exempt from FBT. This is only the case where private use of the ute is minor and infrequent. The ATO’s guidance on what constitutes minor and infrequent use is available in PCG2018/3 - this is something to be mindful of during your preparation.
If you encounter any uncertainties or have any further questions about FBT or Employment taxes more generally, please don't hesitate to reach out to your PwC representative.
Lastly, we hosted the PwC Employment Taxes Annual Update in early March and this is now available to watch on-demand by clicking here.
