How do we help you comply with your Fringe Benefits Tax Obligations?

What can you do to comply with your Fringe Benefits Tax obligations?

Here at Pretium Solutions we want our clients to avoid becoming an ATO target for non-compliance. One key area where business owners get compliance wrong is Fringe Benefits. And with the ATO ramping up audit activities, we want you to avoid being targeted for a review or audit.

Business owners face a lot of red tape. The fringe benefits tax system is complex and at times very confusing. Whilst the ATO state that their focus is on help and education to ensure that employers  comply, they also conduct targeted risk-based reviews and audits. According to the ATO, they understand the complexity of the FBT system has resulted in a lot of business owners and employers NOT engaging with the system and meeting their FBT obligations correctly.

What is Fringe Benefits Tax?

Fringe benefits tax (FBT) is payable by employers on the value of certain benefits, known as ‘fringe benefits’, that have been provided to their employees or to associates of the employees, in respect of their employment. The purpose of FBT is to ensure the comparable tax treatment of cash and non-cash remuneration provided to employees.

An employer’s FBT liability is calculated by applying the FBT rate (47%) to the sum of the grossed-up taxable values of the fringe benefits provided. Some employers are exempt from FBT.

An employer is sometimes required to record the grossed-up taxable value of fringe benefits in an employee’s annual payment summary.

FBT is separate to income tax. It’s calculated on the taxable value of the fringe benefit.

As an employer, you must self-assess your FBT liability for the FBT year (1 April to 31 March). If you have an FBT liability, you must lodge an FBT return and pay the FBT you owe.

Helping you meet your FBT obligations

Ensuring that you are always up to date with your tax compliance obligations is key to business success. Helping you to comply with these obligations is a key process for Pretium Solutions in our efforts to make sure that your business operates smoothly.

We want you to avoid the risk at all times of a visit from the ‘tax man’.

Or if your business is actually selected for an audit or review, that you have nothing to worry about because you have met all of your obligations.

According to Accountancy Insurance data on Audit Shield claims in 2023, employment-related taxes (which include FBT) are the 4th most likely area to be audited

Now Accountancy Insurance provide what we call Tax Audit insurance which does help with this situation. It covers the cost to you in attending to the tax audit or review, which might be your accounting or legal costs (up to a limit).

But what tax audit insurance does not cover is as follows:

• Any tax shortfalls
• Any penalties that are levied as a result of the review or audit

So it’s important to get your compliance correct because you are liable to incur penalties if you fail to meet the obligations contained in the various tax laws.

So what do we do here at Pretium Solutions to make sure that you comply?

The first action is that we review all of the changes to legislation each year and we make sure that we are up to date with all of the new rules.

Then we communicate those new rules and implications to you through things like client newsletters or individual client meetings.

We then apply our 3-step program to make sure that you comply with your obligations:

Step 1: Client Survey

Each year we get our business clients to fill in a client survey. This client survey is necessary because there have been changes in FBT legislation which you may or may not know about. There have also been changes in the way your business operates. There will be changes in the benefits that you have provided to employees .

That’s why each year we ask all of our clients who are employers or who may be providing benefits to shareholders or their associates to complete this step. The survey is simple and should take you less than 10 minutes to complete.

Remember – If you’re not sure if a payment or an expense might be a fringe benefit, then we ask you to err on the side of caution and let us know what the new payment or expense might be.

Step 2: Review

We review your survey answers to help us identify any changes to your circumstances which may indicate you are now providing a fringe benefit. Our understanding of FBT legislation, along with knowledge of your business, gives us a strong grasp of any FBT implications for your business. We will then contact you to discuss any changes we see and to clarify if you are providing any fringe benefits.

Step 3: FBT Outcomes

Once we have reviewed your responses and discussed them with you, if you need to lodge a FBT return, we will send you a proposal to prepare the FBT calculations, journals, declarations and records.

Once you have accepted our proposal, we will then get to work preparing your FBT return.

Still have questions?

If you are currently a Pretium Solutions client, reach out to your client manager who will be happy to discuss your questions and concerns.

Not currently a Pretium Solutions Client?

If you would like to grow a profitable and thriving business, without stumbling and making errors with your compliance obligations, contact us today to start a conversation on how we can work together.

Check out our video on what you need to know about FBT: