FBT issue on the ATO’s radar
The ATO has updated its list of ‘What attracts our attention’, with six items the specifically relate the fringe benefits tax (FBT), as follows:
- Failing to report motor vehicle fringe benefits, incorrectly applying exemptions for vehicles or incorrectly claiming reductions for these benefits.
Incorrectly calculating car parking fringe benefits due to:
- significantly discounting market valuations;
- using non-commercial parking rates; or
- parking rates not being supported by adequate evidence.
- Mismatches between the amount reported as an employee contribution on an FBT returns compared to the income amounts on an employer’s tax return.
- Claiming entertainment expenses as a deduction but not correctly reporting them as a fringe benefit, or incorrectly classifying entertainment expenses as sponsorship or advertising.
- Not reporting fringe benefits on business assets that are provided for the personal enjoyment of employees or associates
- not lodging FBT returns (or lodging them late) to delay or avoid payment of tax.
FBT: Record-keeping exemption threshold
The exemption threshold for the FBT year commencing 1 April 2019 is $8,714 (up from the amount of $8,552 that applied in the previous year).
FBT: Benchmark interest rate
The benchmark interest rate for the FBT year commencing on 1 April 2019 is 5.37% per annum (up from the rate of 5.20% that applied for the previous FBT year). This rate is used to calculate the taxable value of:
- a fringe benefit provided by way of a loan; and
- a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
On April 1 2019 an employer lends an employee $50,000 for five years at an interest rate of 5% p.a. with interest charged and paid six-monthly, and no principal being repaid until the end of the loan. The actual interest payable by the employee for the current year is $2,5000 (i.e. %50,000 x 5%). However, the notional interest, with a 5.37% benchmark rate, is $2,685, so the taxable value is %185 (i.e. $2,685 – $2,500).
The Money Edge | Bundaberg