FBT 2024

 Posted 15 Mar

The Fringe Benefits Tax (FBT) year ends on 31 March. We’ve outlined the hot spots for employers and employees.

The due date for lodgement and payment of FBT is the 25 June 2024.

FBT updates and problem areas:

  • Electric vehicles running costs and purchasing a second hand electric vehicle
  • Work from home arrangements
  • Common FBT errors
  • Exempt vehicle or not?
  • Keeping a valid logbook
  • Mismatched information for entertainment claimed as a deduction and what is reported for FBT purposes
  • Employee contributions by journal entry
  • FBT Housekeeping - Record odometer readings as at 31 March 2024

FBT exemption for electric cars

Electric cars have been exempt from FBT since 1 July 2022 if they meet the eligible conditions.

This also means that car expenses provided for an eligible electric vehicle are exempt from FBT where they are provided in connection with a car fringe benefit. However, it is to be noted that if an employer provides an employee with a home charging station then it is a fringe benefit, not an exempt running cost.

Second hand electric vehicles
An emerging issue is whether a second hand or used electric vehicle qualifies for the exemption. Questions might arise in proving when that vehicle was first held and used and whether LCT was payable.

Reasonable efforts should be made to obtain relevant records to support the exemption. If relevant records are not available, registration details might provide a reasonable estimate of when the vehicle may have been first held and used. Also, consider using publicly available information to check the value of the new vehicle when it was first purchased to determine whether LCT would apply.

Electric vehicles FBT exemption – key steps for employers

Although the private use of an eligible electric vehicle is exempt from FBT, the value of the benefit must be included when working out whether an employee has a reportable fringe benefits amount. This is because the value of the exempt benefit is still taken into account when calculating the reportable fringe benefits amount of the employee. While income tax is not paid on this amount, it can impact the employee in a range of areas (such as the Medicare levy surcharge, private health insurance rebate, employee share scheme reduction, and social security payments).

This means the employee’s own home electricity costs incurred on charging the electric vehicle would often need to be worked out. This figure can generally be treated as an employee contribution to reduce the value of the benefit. 

While this can be practically difficult to determine, the ATO has now finalised a guideline providing a 4.20 cent per km shortcut rate that can potentially help with the calculation.  These guidelines do not apply to plug-in hybrid vehicles.

Many electric vehicles are also packaged together with electric charging stations. Just be aware that the FBT exemption for electric cars does not extend to charging stations provided at the employee’s home.

Work from home arrangements

Many businesses continue to offer flexible work from home arrangements with team members working from home either on a full-time basis or for at least part of the work week. 

Some businesses may have provided their employees with work-related items to assist their employees when working from home.

Portable electric devices such as laptops and mobile phones are commonly used for work.  Providing such devices to your employees shouldn’t trigger a FBT liability, as long they are primarily used by your employees for work.

Where multiple similar items have been provided during the FBT year, the situation becomes more complex unless your business has an aggregated turnover of less than $50m (previously, this threshold was less than $10m).

If an FBT exemption isn’t available, it is often worthwhile instead considering whether the FBT liability of such items could be reduced to the extent the employee could claim a once-only deduction in their personal return (i.e., had they purchased the item themselves). 

ALERT: Common FBT errors

Motor vehicles is the most common area in which the ATO are seeing errors, this is why they are targeting their focus to this area. The most common errors are:

  • Incorrect classification of vehicles
  • Not keeping appropriate records such as valid logbooks
  • Providing employees with motor vehicles for private use but treating them as 100% business use.

 With this in mind, we strongly recommend that accurate records are maintained to ensure that benefits are recorded correctly.

Exempt vehicle or not?

The ATO will differentiate between vehicles that meet their definition of a car and workhorse vehicles with a carrying capacity of  more than 1 tonne  that have minor and infrequent personal use. Some dual cab utilities will be defined as cars under these rules.

If your vehicle is defined as a car, then it will not be exempt from FBT unless there is a log book that shows 100% business use. In the absence of a logbook , the FBT for a company car is worked out by using the statutory formula which is 20% of the purchase value of the vehicle. This can be significantly more for new cars with minor business use.

Keeping a valid logbook

The Australian Taxation Office (ATO) requires many businesses to maintain a logbook to determine the usage of a vehicle for Fringe Benefits Tax (FBT) purposes. A logbook is a written record of all business-related car trips taken over a 12-week period.

What is a logbook?

A logbook is a daily logbook (or similar document) used to support the purported ‘business use percentage’ of a car when calculating the taxable value of car fringe benefits under the Operating cost method. An employer (and, by extension, an employee) is generally required to maintain a valid logbook over 12 weeks that represents the car’s pattern of use in the FBT year, where the car has been held for less than 12 weeks, then the logbook period should cover the car’s entire holding period (instead of 12 weeks, as is ordinarily the case). A new logbook is needed at least once every five years.

 Logbook entries

In preparing the logbook, the individuals must ensure each business journey is undertaken during the ‘logbook period.’
These entries should contain the following details: 

  •        The date on which each journey begins and ends.
  •          The car odometer readings at the beginning and end of each journey.
  •          The number of kilometres travelled in the course of each journey.
  •          The purpose of each journey.

Entries in the logbook should sufficiently describe the purpose of the journey so it can be clearly determined as either business or private – not just ‘business’ or ‘miscellaneous business’.

Keep a separate logbook for each car

As the ATO is increasing their audit activity, in particular around car fringe benefits, it is critical that a logbook is completed for all vehicles held by the business to determine the business use percentage. This includes vehicles that are considered to be used only for work related purposes and where private use is minor, infrequent and irregular.

Mismatched information for entertainment claimed as a deduction and what is reported for FBT purposes

One of the easiest ways for the ATO to pick up on problem areas is where there are mismatches.

When it comes to entertainment, employers are keen to claim a deduction but this can be a problem if it is not recognised as a fringe benefit provided to employees.

Expenses related to entertainment such as a meal in a restaurant are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

Let’s say you have taken a client out to lunch and the amount per head is less than $300.  If your business uses the ‘actual’ method for FBT purposes then there should not be any FBT implications. This is because benefits provided to client are not subject to FBT and minor benefits (i.e., value of less than $300) provided to employees on an infrequent and irregular basis are generally exempt from FBT. However, no deductions should be claimed for the entertainment and no GST credits would normally be available either. 

If the business uses the 50/50 method, then 50% of the meal entertainment expenses would be subject to FBT (the minor benefits exemption would not apply). As a result, 50% of the expenses would be deductible and the business would be able to claim 50% of the GST credits.

Employee contributions by journal entry

Many businesses use after-tax employee contributions to reduce the value of fringe benefits.

It is also reasonably common for these contributions to be made by journal entry through the accounting system only (rather than being paid in cash).

While this can be acceptable if managed correctly, the ATO has a number of concerns in this area, including whether journal entries made after the end of the FBT year are valid employee contributions.

For an employee contribution made by way of journal entry to be effective in reducing the taxable value of a benefit, all of the following conditions must be met:

  • The employee must have an obligation to make a contribution to the employer towards a fringe benefit (i.e., under the employee’s remuneration agreement);
  • The employer has an obligation to make a payment to the employee. For example, the parties may agree that the employer will lend an amount to the employee or the employee might be entitled to a bonus that hasn’t been paid yet. If a loan is made by the employer then this could trigger further tax issues that need to be managed;
  • The employee and employer agree to set-off the employee’s obligation to the employer against the employer’s obligation to the employee; and
  • The journal entries are made no later than the time the financial accounts are prepared for the current year (i.e., for income tax purposes).

Failing to ensure that arrangements involving fringe benefits and employee contributions are clearly documented can lead to problems. For example, the ATO may ask to see evidence of the fact that the employer is actually under an obligation to make contributions towards a fringe benefit. If there is no evidence of this then significant FBT liabilities could arise.

FBT Housekeeping - Record odometer readings as at 31 March 2024

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time. If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.


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