Tips in Preparing the 2024 FBT Return

FBT registration

The first thing businesses should check is whether they are registered for FBT. Many business owners, particularly those who have recently set up a business, don’t think that they will provide their employees with fringe benefits, and therefore don’t register.  But as the year progresses, they may realise that an FBT return is necessary.

If the business isn’t registered, registration forms can be accessed on the Australian Taxation Office (ATO) website – go to https://www.ato.gov.au/Forms/Application-to-register-for-fringe-benefits-tax/. Alternatively contact your tax agent who can process the registration.

Lodgement and payment dates

Where businesses lodge their own FBT returns, the final date for lodgement of their 2024 FBT return and payment of any outstanding FBT is 21 May 2024.

If the 2024 FBT return is lodged by a tax agent, the lodgement due dates are: 

- 25 June 2024 for electronic lodgement

- 21 May 2024 for paper lodgement

Businesses who are registered and do not provide any fringe benefits during the year must still fulfil their lodgement obligations by submitting a “notice of non-lodgement” with the ATO to avoid follow up action.

If businesses are liable to pay FBT for the FBT year or have paid FBT instalments for the year, a Fringe Benefits Tax (FBT) return must be lodged.

MAJOR CHANGES - 2023 AND 2024 FBT YEARS

Car in workshop for extensive repairs

The ATO has updated their FBT Guide for Employers to confirm that no car fringe benefit will arise during the period the car is at a workshop to have extensive repairs. This concession does not include routine servicing or maintenance or even to undertake minor repairs. There are two reasons FBT will not arise due to a car being held for extensive repairs:

1. The car is not applied for private use and is not deemed to be available for private use.
2. The car is not held by the employer during this period.

The unavailability of the car during this period is relevant for both the statutory formula and operating cost methods.

Under the operating cost method, the car will not be taken to be “held” by the employer for the 4-week period on the basis it is not being held to provide fringe benefits during this time. Therefore, operating costs relating to the car for this time frame (e.g. registration, insurance) are not included in the taxable value calculation.

Implications when an employee acquires a car at the end of a lease or Hire Purchase Agreement

	Summary of FBT implications
Bona fide Novated lease	There are no FBT implications when the employee pays out the residual value to acquire the car as no benefit has been provided.
Bona fide Operating lease	A property fringe benefit can arise due to employer providing a car to an employee. The taxable value of the resulting fringe benefit is nil, as employee is taken to have paid market value to acquire the motor vehicle.
Hire Purchase agreement	At the end of the agreement ownership transfers to the purchaser, whereby the employer provides to the employer. A property fringe benefit can arise at the end of a hire purchase agreement. The taxable value is based upon the market value less the employee contribution.

ATO finalises guidelines on how electricity costs may be calculated for charging electric vehicles at home

Employers that provide a qualifying electrical car to a current employee (and associate) is exempt from paying fringe benefits tax. This exemption is also available to a second-hand qualifying that was used on or after 1 July 2022.

The exemption from Fringe Benefits Tax (FBT) for plug-in hybrid vehicles expires on March 31, 2025, unless the vehicle is provided under a binding financial agreement has been established before April 1, 2025 and continues to remain until 1 April 2025.

Costs incurred with respect to charging the battery of an electric car is a car expense under the FBT rules. The ATO has issued a PCG 2024/2 which provides a “Short-cut method” to simplify the process of calculating the cost of electricity when an electric vehicle is charged at an employee's home as follows:

       Electrical vehicle home charging rate x Total number of relevant kilometres travelled in the FBT year

• The electric vehicle home charging rate for the 2024 FBT year is 4.20 cents per kilometre.
• The total number of kilometres directly refers to the distances travelled by employee and/or associate.
• Evidently, ATO further advises, employers wishing to use the shortcut method will be required to obtain a record of the distance travelled by the car, through service records, logbooks, or other available information.
• Excluded benefits, such as a car benefit covered by the pooled or shared car exclusion do not count towards the $2,000 individual fringe benefits reporting threshold.

New guidance to determine when a person is an employee or contractor for FBT purposes

On 6 December 2023, the ATO released TR 2023/4 to better explain the definition of an employee. TR 2023/4 determines whether a person is an employee through the following:

1. Identifying the legal rights and obligations that each party has in respect of the other; and
2. Assess whether those legal rights and obligations support a conclusion that the worker is working in the business of the engaging entity.

The distinction between an employee and an independent contractor is:

• An employee serves in the business for the employer, performing their work as a representative of the business; and
• An independent contractor provides services to a principal’s business

TR 2023/4 further confirms that a business can alter the status of an employee by using an interposed entity (e.g. a company or trust), and the agreement must be between the business and the interposed entity.

Recent developments with car parking fringe benefits

On the 8  November 2023, the ATO released guidance with respect to car parking facilities that have multiple purposes. Further a car parking facility may still be a “commercial parking station” even if the facility is a dual-purpose facility in the instance where:

• The parking station offers all-day parking but is used by local commuters as part of a park-and-ride scheme.
• A car park reserves a majority of its car parks for particular persons (e.g., medical persons) and only a minority of the car spots are available to the public.

Employers who provide car parking to employees need to carefully assess the extent to which the facilities may be classified as “special purpose”, or “dual purpose” as they could potentially qualify as a commercial parking station and be subject to fringe benefits tax.

Recent decision in Bechtel’s case creates dangers for employers paying for employee travel

The Full Federal Court in Bechtel Australia Pty Ltd v Commissioner of Taxation [2024] FCAFC 33 considered the FBT treatment of travel that was provided to the taxpayer’s fly-in-fly-out employees and whether the otherwise deductible rule could apply to reduce the taxable value of the benefit.

The employer both organised and paid for an employee’s travel between their home airport and the project site where they commenced their roster and shift.

The taxpayer argued that FBT did not apply due to the otherwise deductible rule, based on principles established in the Full Federal Court decision in John Holland Group Pty Ltd v Commissioner of Taxation [2015] FCAFC 82. The John Holland case involved similar circumstances where certain fly-in-fly out workers were responsible for making their own way to an agreed departure point (e.g.  Perth airport) from which the employer transported them to their place of work.

The main issue in the Bechtel case was that the employees did not commence their roster and shift until they arrived at the project site. This was critical to the Full Federal Court’s conclusion that the employee’s travel was undertaken before the employee commenced their employment duties. 

Accordingly the travel expenses would not have been deductible to the employee personally and were therefore not “‘otherwise deductible” for FBT purposes.

Employers who operate in the mining and exploration sectors (because they generally engage staff on a FIFO basis) may be affected by this Full Federal Court decision.

New ATO draft ruling on deductibility of self-education costs creates FBT issues for employers

In September 2023, the ATO released a Draft TR 2023/D1, which sets out the principles and application for deducting self-education expenses. This draft ruling also has FBT implications for employers who pay/reimburse their employees for these expenses.

For example, if an employer pays for the MBA costs of an employee, each subject within the course must be reviewed to determine whether they relate directly to the employee’s income producing activities to qualify for the otherwise deductible rule.

TR 2023/D1 (when finalised) will replace the ATO's more comprehensive Ruling on self-education expenses (being TR 98/9).

Updated FBT rates and Thresholds for the 2024 FBT year

Updated ATO benchmark interest rate

The benchmark interest rate for the 2024 FBT year has increased to 7.77% per annum, which has increased from 2023 FBT rate of 4.52%.

The interest rate is used to calculate the taxable value of:

1. Where a loan fringe benefit arises under S. 136 of the ITAA1936 or
2. A car fringe benefit which you are using the operating cost method

Cents per km method for valuing a residual fringe benefit for a hire car

An employer’s FBT liability is calculated by using the private kilometres travelled multiplying by the prescribed rate set out in TD 2023/1 which is summarised as follows:

• 62 cents per kilometre for a 0-2500cc engine capacity; and
• 73 cents per kilometre for an engine capacity over 2500cc.

Taxable value of motor vehicles that are not cars

The taxable value of providing a motor vehicle other than a car to an employee can be calculated by multiplying the private number of kilometres against the prescribed ATO set rate per kilometre as follow:

Engine capacity	Rate per Kilometre
0-2500cc	62 cents
Over 2500cc	73 cents
Motorcycles	18 cents

Reasonable food and drink component of LAFHAs (within Australia) for the 2024 FBT year

Circumstance	Per Week
One adult*	$316
Two adults	$474
Three adults	$632
One adult and one child	$395
Two adults and one child	$553
Two adults and two children	$632
Two adults and three children	$711
Three adults and one child	$711
Three adults and two children	$790
Four adults	$790

*For the purposes of FBT, an adult is a person of 12 years or older

With respect to larger family groups, the ATO has advised it accepts a food component based on the table above, along with $158 for each additional adult and $79 for each additional child where applicable.

Non-remote area housing- indexation factors

State/Territory	Indexation factor
NSW	1.009
VIC	1.006
QLD	1.046
SA	1.039
WA	1.087
TAS	1.055
NT	1.100
ACT	1.053

The table above is used to determine the taxable value of a non-remote area housing benefit under the Statutory Annual Value method.

Car parking threshold increase

The car parking threshold for the FBT year commencing 1 April 2023 has increased to $10.40 from $9.72.

Record-keeping exemption threshold for the 2024 FBT year

The record-keeping exemption threshold for the FBT year commencing 1 April 2023 is $9,786, which has increased from last year’s threshold of $9,181.

CHECKLIST OF COMMON BENEFITS PROVIDED

Following is a checklist of the more common benefits provided together with some useful tips:

MOTOR VEHICLES

Cars are the most common type of fringe benefit provided to employees and therefore planning for FBT can save money.

Electric vehicles (EVs)

For an EV to be exempt from FBT, employers need to ensure that the EV falls under the definition of “zero or low emissions vehicle”, as follows: 

• A battery electric vehicle; or
• A hydrogen fuel cell electric vehicle; or
• A plug-in hybrid vehicle (only until 1 April 2025).

For new electric vehicles acquired after 1 July 2022, employers will need to obtain the odometer reading as at 31 March 2024 and retain the purchase invoice of the car including a breakdown of all non-business accessories. 

The cost of the EV for FBT purposes includes:

• GST
• Non-business accessories
• Dealer & delivery charges
• Luxury car tax

The cost of the EV for FBT purposes excludes:

• Stamp duty on transfer
• Registration or insurance

The FBT exemption applies to both new and second hand EV’s (including demo cars and second-hand imported cars) if the relevant conditions are satisfied:

• the first time the car must be both held and used, is on or after 1 July 2022;
• The car is used by a current employee or their associates (e.g. a family member); and 
• Luxury Car Tax (LCT) has never been payable on the importation or sale of the car. The current LCT threshold for fuel efficient vehicles is $89,332 in 2023-24.

Noting that LCT value does not include:

• The LCT itself
• Other Australian taxes, fees or charges such as state base stamp duty, transfer fees and registration
• Compulsory third-party insurance (CTPI)
• Extended warranties
• Costs associated with financing the purchase of the car
• Service plans

Unlike other exempt benefits, although the private use of an eligible electric car, including the associated expenses is exempt from FBT, it is still a reportable fringe benefit.

This means employers will need to work out the notional taxable value of the benefit associated with the private use of the exempt EV and whether it is reportable.

Motor vehicles

For each motor vehicle acquired before 10 May 2011 when using the statutory formula method and in all cases when using the operating cost method, obtain the odometer reading as at 31 March 2024.

For new motor vehicles acquired during the FBT year, retain the purchase invoice of the car including a breakdown of all non-business accessories (e.g. window tinting or a CD player).

The cost of the car for FBT purposes includes:

• GST
• Non-business accessories
• Dealer & delivery charges
• Luxury car tax

The cost of the car for FBT purposes excludes:

• Stamp duty on transfer
• Registration or insurance

Review entitlements to any FBT reductions. For example, if the car has been owned for more than four full FBT years, the cost or “base value” is reduced by one-third under the statutory formula method. Also no car benefit arises during the period the car is at a workshop to have extensive repairs under both the statutory formula and operating cost methods.

Choose whether to use the “statutory formula” or the “operating cost” method to calculate the FBT payable. Generally speaking, the statutory formula method is more advantageous when the car is used primarily for personal use while the operating cost method is usually best when the car is used mainly for business purposes. Note that the statutory rates changed for cars purchased from 10 May 2011, moving to a single statutory rate of 20% regardless of the distance travelled.

(i) Statutory formula method

If using the statutory formula method and the car was acquired before 11 May 2011 and was sold during the year ending 31 March 2023, the kilometres travelled will need to be annualised.

The Old Statutory % rates only apply to vehicles with a pre-existing commitment before budget night of 11 May 2011.

Where there is a change to a pre-existing commitment (e.g., car refinanced) for a motor vehicle acquired before 11 May 2011, the 20% statutory rate will apply.

The following statutory rates apply for cars acquired from 7.30pm on 10 May 2011 under the transitional provisions and for cars that continue to apply the old rules:

Total km’s travelled in FBT year	Old Statutory % (for pre 11 May 2011 cars)	New Statutory % (for post 10 May 2011 cars)
0 - 14,999	26	20
15,000 - 25,000	20
25,000 - 40,000	11
Over 40,000	7

Note that cars provided under pre-existing commitments (i.e. owned prior to 11 May 2011) will continue to use the old statutory fractions, unless there is a change to that pre-existing commitment. A change in pre-existing commitment could extend to having the vehicle re-financed after 10 May 2011.

(ii) Operating cost method

If using the operating cost method, ensure that the employee has maintained a log book for a 12 consecutive week period within the FBT year or a previous FBT year. A log book is valid for a period up to 5 years. Make sure to maintain adequate records of: 

• Repairs
• Maintenance
• Fuel
• Registration and insurance
• Lease payments or deemed interest/depreciation   
• Other vehicle expenses     

It is important to check whether the employee has made any contributions to the business for the provision of the car as this can significantly reduce the FBT liability. These contributions can even take the form of any non-reimbursed expenses the employee has paid for such as fuel or repairs. It’s important to account for the contributions as income in the profit and loss and disclose the GST on your next BAS. 

MEAL ENTERTAINMENT

Most businesses provide Meal Entertainment to staff and clients during the course of the year.  Unlike many other business expenses, meal entertainment is not tax deductible. Generally, you are only allowed a tax deduction when FBT has been paid on the particular expense. 

Again, a bit of planning and good record keeping can assist in limiting unnecessary tax when it comes to meal entertainment. There are three methods which can be used to calculate FBT for meal entertainment and businesses should choose the one which is most beneficial in their particular circumstances. It is best practice to calculate meal entertainment using all the methods available, and simply applying the most tax effective method in your FBT return.

(I) 50/50 method

The total meal entertainment benefits inclusive of GST amount provided is divided by 2, and FBT is paid on 50% of the total meal entertainment. This method is most beneficial when meal entertainment is provided mainly to employees. The use of this method however will deny the employer the ability to apply the $300 ‘minor and infrequent’ and in-house property benefit exemptions that may otherwise have been available.  

(II) Actual method

FBT is calculated only on meal entertainment benefits (inclusive of GST amount) provided to employees. This method is most beneficial when providing meal entertainment mainly to non-employees or when most meal entertainment provided is provided infrequently and costs less than $300 (inclusive of GST) per person. When using this method, the $300 ‘minor and infrequent’ and in-house property benefit exemptions can be used to reduce each fringe benefit provided.

(III) 12 week register

This method is not commonly used but works by keeping a logbook of meal entertainment for 12 consecutive weeks and determining what percentage of meal entertainment relates to employees. That percentage is then applied to the total meal entertainment (inclusive of GST amount) at the end of the FBT year. This is the least popular method due to the record keeping requirements.

Issues to consider

It is useful to note the following considerations when calculating any meal entertainment FBT: 

• Was meal entertainment (by way of food or drink) provided to employees on or off the business premises? This can include Christmas parties, Friday night drinks, etc. 
• Did the business reimburse an employee’s restaurant bill, for instance when entertaining clients? 
• Was a “recreation”benefit provided to an employee? This could include a ticket to watch the football or a concert. If so, ensure that this type of entertainment is recorded separately to meal entertainment.  
• You should maintain a register of employees, associates and non-employees who attended functions where meal entertainment and non-meal entertainment was provided.
• Have you considered the GST implications? The GST treatment of meal entertainment related expenditure will depend on the meal entertainment method used:

           - if using the 50/50 method, only 50 percent of the GST can be claimed. The other half is added back to the profit and loss account and is not available as a tax deduction.

          - If using the actual method, only claim the GST on that portion of entertainment that is subject to FBT. Otherwise, GST is treated as a profit and loss expense and is not available as a tax deduction.

FBT EXEMPTIONS

There are some employee benefits which are exempt from FBT and could be considered as part of a salary package arrangement for employees. Generally speaking, these benefits must be primarily used for work purposes, or to enable staff to do their job more efficiently. These exempt benefits include:

• Mobile phones
• iPads
• Laptop computers
• Briefcases
• Membership expenses, items such as a subscription to a trade, professional body or even an airport lounge membership
• Other work related items or tools of trade (e.g. power drill) 

The employer can generally only provide each item “once” to an employee per FBT year to take advantage of the FBT exemption. For example, the employee can receive both a laptop computer and mobile phone in the one FBT year. 

These benefits do not need to be recorded on the FBT return as they are “exempt” benefits and are also not reported fringe benefits included on the employee’s PAYG Payment Summary. They are also not counted as wages for payroll tax and work cover purposes.  

Where employees are provided with items to work from home, the ATO has stated that these items would usually be exempt from FBT if the equipment’s use is primarily for an employee’s work. This could include items such as:

• Laptops
• Portable Printers
• Other Electronic Devices

The ATO also advises that the Minor Benefits Exemption or otherwise deductible rule may apply for other items that may be provided to employees to work from home such as:

• Monitor, mouse, keyboard or other equipment they otherwise use in the workplace
• Stationary, computer consumables and potentially a portion of the telephone and internet costs where a logbook of usage can be supplied by the employee.

OTHERWISE DEDUCTIBLE RULE

The Otherwise Deductible Rule applies to reduce the amount of FBT payable by an employer where a benefit provided to an employee would ordinarily be deductible in their name.

That is where an employee is provided with a fringe benefit (such as paying their professional membership fees), and the benefit provided to the employee would be an item or expense that would be tax deductible by the employee if they were to claim a deduction in their personal tax return (such as membership fees required for their employment), the otherwise deductible rule would apply. For an employer, this means that the FBT taxable value would be reduced by the portion of the expense that is otherwise deductible by the employee.

Employers should obtain a signed employee declaration to confirm that their treatment is correct before lodgement or the due date of the FBT return. The Fringe Benefit would still need to be reported in the employer’s FBT return, however the deductible portion would be used to reduce the FBT taxable value on the FBT return.

This article is tailored to FBT taxable employers and does not provide guidance for employers who are wholly or partially exempt from income tax. Your specific circumstances should be reviewed by a fringe benefit tax specialist.