FAQ on FBT
Fringe Benefits Tax can be confusing, particularly when it comes to understanding what counts as a fringe benefit, what is exempt, and what records are required.
Here, we’ve put together a list of key FAQs to help you navigate FBT time.
What is FBT?
Fringe Benefits Tax (FBT) is a tax that may apply when a business provides non-cash benefits to employees or directors, rather than paying them as salary or wages. Common examples include company cars, entertainment, staff gifts, or personal expenses paid by the business.
FBT is separate from income tax and is reviewed each year for the period 1 April – 31 March.
What are common fringe benefits in my business?
Some of the most common fringe benefits we see include:
Company cars available for private use
Entertainment, such as meals, drinks, or staff events
Staff gifts, including hampers or vouchers
Personal expenses paid by the business, such as private phone bills
Low-interest loans or accommodation provided to employees
Not all of these will result in FBT, but they do need to be reviewed each year.
What are exempt benefits?
Some benefits are exempt from FBT, meaning no tax is payable.
Common examples include:
work related items provided that item is used primarily for use in the employee’s employment like a laptop, protective clothing, and tools of trade
newspapers and periodicals used for business purposes
minor benefits under $300 per person, provided occasionally (e.g. small staff gifts)
Aren’t Utes always exempt?
This is a common misconception!
Some eligible commercial vehicles, like utes and vans, may be exempt from FBT if their private use is limited to work-related travel and minor personal use.
However, if the vehicle is used regularly for private trips, the exemption may not apply.
What is a valid Logbook for FBT?
A valid logbook records the business use of a vehicle over at least 12 consecutive weeks and must include the date of each trip, odometer readings, and the purpose of the journey.
The logbook must reflect a typical pattern of vehicle use and can generally be relied on for up to five years, provided the vehicle’s usage does not change significantly.
What’s the Otherwise Deductible Rule?
The Otherwise Deductible Rule reduces or removes FBT where the employee would have been able to claim a tax deduction themselves if they had paid for the expense personally. For example, if the business pays for a work-related expense that the employee would normally be able to claim as a deduction, the FBT liability may be reduced.
Why does our coding matter?
Correct coding in your accounting system helps us identify expenses that may create an FBT liability and apply the correct tax treatment.
For example, hospitality where food or drink is the main component such as staff celebrations at a restaurant should be coded to Meal Entertainment, while leisure activities, amusement or sporting events should go to Recreational Entertainment.
When coding your transactions, it’s best practice to record the number of staff and clients in attendance, and the purpose of the event.
Coding these items correctly during the year allows us to quickly identify reportable benefits, apply available exemptions, and complete your FBT review efficiently.
How can I reduce the burden of collating my FBT information?
A few simple habits make FBT season much easier:
✔ Code meal and recreation entertainment correctly during the year
✔ Record details of who attended events
✔ Track vehicle usage where applicable
✔ Provide your FBT information as early as possible
Small improvements during the year can make the FBT review process much smoother and quicker.
A simple way to get ahead
We’ve put together a short guide to help you quickly review your accounts before sending through your FBT information.
It covers:
• how to classify meals, activities and hospitality
• where gifts and travel typically sit
• the small details that help determine the FBT outcome.
Click the button below to download your copy of the FBT Coding Guide.
Have a question about FBT for your business? Reach out and we’ll nudge you in the right direction.