FBT Return – To Lodge or not to Lodge?
Should You Lodge an FBT Return? The Golden Rule for Staying ATO Compliant
Fringe Benefits Tax (FBT) might not be top of mind for every business owner, but overlooking it can lead to costly mistakes. Lodging an FBT return isn’t just about compliance—it’s a safeguard for your business. So, should you lodge an FBT return, even if you have no tax to pay? Let’s break it down.
What is Fringe Benefits Tax (FBT)?
FBT is a tax employers pay on certain benefits provided to employees or their associates (such as family members). It is separate from income tax and covers non-cash perks such as:
- Private use of a business-owned vehicle
- Discounted goods or services for employees
- Employer-covered personal expenses
- Rent-free or subsidised accommodation
- Low-interest loans
- Entertainment, including food, drinks, and event tickets
- Salary packaging arrangements
If your business provides these perks, FBT may apply, and you could be required to lodge an FBT return.
Do You Need to Lodge an FBT Return?
The Australian Taxation Office (ATO) states that businesses with no FBT liability are not required to lodge a return. However, if you don’t have an FBT liability and haven’t paid FBT instalments, you should submit a Fringe Benefits Tax – Notice of Non-Lodgment instead of an FBT return. This informs the ATO that no return is necessary while ensuring your business remains compliant.
That said, lodging an FBT return can be a strategic move, even if you don’t owe anything. Here’s why:
1. Lodging Limits ATO Audits to Three Years
Without lodging an FBT return, the ATO can audit your business indefinitely. If a mistake is discovered years down the track, you could be liable for back taxes, penalties, and interest. Lodging a return closes the window of ATO scrutiny to just three years, protecting you from unnecessary stress and financial risk.
2. Common FBT Mistakes Could Cost You
Even well-managed businesses make FBT mistakes. One of the most common errors involves calculating the private use of company vehicles. Many businesses use the logbook method but forget to factor in deemed depreciation correctly. If this mistake is found, the ATO can reassess your FBT liability for every year the vehicle was in use.
Another common issue is failing to track meal entertainment expenses. Not all entertainment benefits are treated equally for FBT purposes. For example:
If an employee, John, wines and dines clients, those expenses may be subject to FBT. If another employee, Dave, attends the annual office Christmas party, those expenses could be exempt.
FBT Compliance: The ATO is Watching
The ATO has signalled increased scrutiny on FBT compliance this year. If your business provides fringe benefits, taking a proactive approach is essential. Lodging an FBT return ensures you are on record as meeting your obligations, reducing audit risk and protecting your financial future.
The Golden Takeaway: Protect Your Business
Lodging an FBT return is like keeping a golden safety net around your business. It protects you from unlimited audits, reduces financial risk, and ensures you stay ATO compliant. However, if you don’t have an FBT liability and haven’t paid FBT instalments, lodging a Fringe Benefits Tax – Notice of Non-Lodgment is sufficient to keep the ATO informed and maintain compliance.
If you’re unsure about your FBT obligations, our team at DJ Grigg Financial can help you navigate the process and keep your business on solid ground.
Contact us today to discuss your FBT compliance and secure your business’s financial future.