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Employers who are not lodging Fringe Benefits Tax (FBT) returns should be aware that this is a key risk and ongoing area of focus for the ATO. Not all employers are required to lodge FBT returns, however the ATO may require them to justify their decision not to lodge. To assist employers in navigating FBT requirements, we’ve outlined some key points and provided a checklist.
Whenever a benefit is provided to employees, the requirement to lodge an FBT return may be triggered. This requirement may be satisfied quite easily for a number of reasons:
Employers providing benefits that have nil taxable value for FBT purposes are not strictly required to lodge an FBT return. However, it may well be advisable to do so. Without lodgement of an FBT return there is no time limit on the ATO’s power to revisit prior years. In contrast, where returns are lodged the ATO review powers are generally limited to between three and six years prior.
This is particularly important when benefits have a nil value due to employee contributions. If an error is detected in how benefits have been calculated, the employee contribution could be insufficient to eliminate the amount of FBT payable. In this situation, there is no time limit on the ATO’s power to raise additional assessments of FBT for prior years.
Vehicle fringe benefits are very common and employers are provided choice as to the method they use to calculate the taxable value of car fringe benefits. However, the election which must be made in order to use one of these methods – the ‘operating cost method’ - can only be completed when lodging an FBT return. Employers that use the operating cost method, even where the taxable value of the benefit is reduced to nil via employee contributions, are effectively required to lodge FBT returns.