I was recently asked – What are some practical tips on how to get my clients to take the need to register for FBT seriously?
My suggestions regarding the implications of not being registered and reasons for being registered:
- If your not registered for FBT then you won’t be thinking about FBT – ie there is no annual obligation. By registering for FBT, you need to be thinking about FBT at least once a year (hopefully more frequently)
- ATO are actively FBT auditing Small Businesses
- The ATO have identified a $1 billion FBT gap and attribute this loss of revenue to small business
- The ATO are extracting vehicle registration in each State and Territory and checking against FBT registration – this is real low hanging fruit
- If an employer is not registered for FBT, then the ATO has unlimited powers to audit past years – we are seeing some audits going back up to 12 years and in one current FBT audit 16 years
- If registered for FBT, the ATO will generally only look back at 2-3 years and be more accepting of genuine mistakes
- In addition to FBT liabilities, the ATO will charge penalties (up to 200%), accrued interest and failure to lodge penalties
- The ATO will expect any past Reportable Fringe Benefit obligations to be complied with in relation to current and former employees – this can get messy very quickly. Employees (and former employees) will expect the employer to foot the bill of any personal income tax return amendments, and request other compensation
- From the FBT audits we have been involved with, the ATO are also raising concerns with Income Tax deductibility and entitlement to claim GST credits
- There are 13 defined fringe benefit categories – FBT is not just about Motor Vehicles and Entertainment
- The grossed up value of Fringe Benefits must be included in the calculation of Taxable Wages for Payroll Tax liability calculation and calculating Workcover premiums
- The ATO are actively encouraging Tax Agents to ensure they have a “FBT Service Line” offering and that Tax Agents are engaging with their clients on FBT
- Reputational Risk and Business Disturbance, High Stress Levels
I hope the above helps. Happy to discuss further.