Reducing the FBT Record-Keeping Burden: A Guide for Employers
- Amanda Wren
- Mar 23
- 4 min read
Keeping track of Fringe Benefits Tax (FBT) records can often feel like a daunting task for many businesses, especially with the complexity of different benefits and varying requirements for record-keeping. Fortunately, starting 1 July 2024, businesses will have more flexibility when it comes to maintaining FBT records. You’ll now have a choice between using the existing FBT record-keeping methods, relying on your business’s existing records (provided they meet the necessary requirements), or a combination of both.
The new legislative instruments that come into effect from 1 July 2024 provide more flexibility for businesses to reduce their record-keeping burden while ensuring they stay compliant with FBT obligations.
New Options for Record-Keeping:
Existing Business Records: If your current business records meet the requirements set out by the legislative instrument, you can continue using them without needing to keep additional records.
Combination Approach: You can mix and match between using your existing business records and traditional FBT methods.
Legislative Instruments for Specific Declarations:
Travel Diaries (LI 2024/11)
FIFO/DIDO Declarations for living-away-from-home allowances (LI 2024/4)
Expense Payment, Property or Residual Benefit Declarations (LI 2024/6)
Private Use of Vehicles Declarations (LI 2024/7)
Car Travel to Employment Interviews or Selection Tests Declaration (LI 2024/14)
Overseas Employment Holiday Transport Declarations (LI 2024/13), and more.
By utilizing these new options, businesses can more easily maintain records, provided they follow the prescribed guidelines.
Tips for Streamlining FBT Record-Keeping
Managing FBT record-keeping can often feel overwhelming, but with the right systems in place, you can minimize the burden. Here are some practical tips for reducing your FBT-related record-keeping workload:
Simplify Car Odometer Recordings: If your business provides cars and you need to record odometer readings on specific dates (such as the first and last day of the FBT year), encourage your employees to take photos of the odometer readings on their phones and email them to a central contact person. This simple process can save time and help avoid missing crucial records when employees forget.
Use Technology for Travel Diaries: If your employees need to maintain travel diaries for business trips, consider using an app or digital tool to streamline the process. This can help employees track their travel in real time and ensure they have accurate records when needed.
Stay On Top of Key Deadlines: Keeping a calendar or automated reminder system can help ensure that all records are collected and maintained in time for FBT return preparation. Mark critical deadlines for specific declarations and record-keeping requirements to avoid last-minute scrambling.
Common FBT Risk Areas to Watch Out For:
Although the new rules offer more flexibility, there are still key risk areas that businesses need to watch out for to avoid FBT pitfalls.
1. Mismatched Claims for Entertainment
One of the most common issues the ATO flags involves mismatched claims for entertainment expenses. Here’s an example:
Let’s say you take a client out to lunch, and the cost per head is less than $300. If your business uses the actual method for FBT purposes, there should be no FBT implications for the meal provided to the client because benefits provided to clients are not subject to FBT. However, you cannot claim a deduction or GST credits unless the expenses are subject to FBT.
If your business uses the 50/50 method for entertainment, 50% of the meal expenses would be subject to FBT. This means that 50% of the expenses would be deductible, and the business would be able to claim 50% of the GST credits.
2. Employee Contributions via Journal Entry
It’s common for businesses to reduce the taxable value of fringe benefits by having employees make after-tax contributions. However, journal entries made after the end of the FBT year to record these contributions can lead to problems if not managed properly.
For a journal entry to be valid:
The employee must have an obligation to make a contribution towards a fringe benefit.
The employer must have an obligation to make a payment to the employee (such as a loan or bonus).
Both parties must agree to set off the obligations against each other.
Journal entries must be recorded before the financial accounts are prepared for the current year.
If these conditions aren’t met, the ATO may challenge the journal entries, potentially resulting in additional FBT liabilities.
3. Not Lodging FBT Returns
The ATO has raised concerns about some businesses failing to lodge their FBT returns when required. If your business provides benefits such as cars, car spaces, entertainment, or employee discounts, it's crucial to review whether you have an FBT liability.
Some benefits are exempt from FBT, such as portable electronic devices, protective clothing, and tools of trade. If your business only provides these exempt items or items valued under $300 on an infrequent basis, FBT may not apply. However, if your business provides benefits that do not fall into these exemptions, you’ll need to ensure your FBT returns are filed correctly.
While FBT record-keeping can be complex, the new changes to record-keeping requirements starting 1 July 2024 offer businesses greater flexibility and ways to streamline the process. By utilizing the new legislative instruments, implementing simple digital record-keeping tools, and staying aware of the common FBT risk areas, businesses can reduce the burden of compliance and avoid costly mistakes.
If you need assistance with managing your FBT obligations or have questions about specific record-keeping practices, don’t hesitate to reach out to us at admin@wrenchristou.com.au or call 08 8968 9047.
We’re here to help!
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