FBT issues on the ATO’s radar

The ATO has updated its list of ‘What attracts our attention’, with six items that specifically relate to 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 return 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.

Example

On 1 April 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 $2,500 (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).