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Time to benefit from sound FBT processes

Time to benefit from sound FBT processes

David Sofrà and Paul Hum discuss setting up sound processes before the end of the 2018 FBT year.

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Easter this year coincides with the end of the 2018 fringe benefits tax (FBT) year. Tax and finance teams can make sure they are not left with egg on their faces by taking steps now to keep the information analysis moving.

Firstly some good news – the FBT rate for the current year has reduced to 47 percent (previously 49 percent), and the Type 1 and Type 2 gross-up rates have also reduced accordingly.

Many employers have used the safe harbour statutory formula for calculating the number of car parking fringe benefits arising from their available spaces over the year. Technically, a car parking fringe benefit only arises if a car is parked in the space for at least 4 hours between 7am and 7pm on a working day, and the space is in the vicinity of the employee’s principal place of employment on that day.

Consequently, the statutory formula may calculate a larger number of benefits than have actually occurred, if spaces are available, but unused from time to time. There is an opportunity to consider how the employer can use vehicle-tracking technology and card-entry records to calculate the actual number of benefits swiftly and accurately.

Employers have also taken advantage of the ‘50/50’ method of calculating meal entertainment fringe benefits on a widespread basis, often because they have simply not had the resources to calculate the actual taxable expenditure on employees within the time allowed for lodgement of the return. For some, it has been enough of a challenge to isolate the total expenditure on meal entertainment, so that the 50/50 rule can be applied to that amount.

Developments in data analytics technology now enable much faster identification of the relevant entertainment expenditure, and also facilitate a more robust assessment of which benefits may be eligible for the minor benefits exemption. This exemption potentially applies to any benefit with a GST-inclusive value of less than $300, which the particular employee only receives on an irregular and infrequent basis.

KPMG’s market-leading analytics tools enable clients to not only streamline the path to optimising their FBT spend, but also obtain a greater level of assurance on their other employee-related obligations such as payroll tax and superannuation contributions.

© 2018 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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