One major challenge that the Australian Taxation Office has pinpointed involves a $2 billion revenue gap related to Fringe Benefits Tax. This gap propelled the ATO to set an ambitious goal for 2025: to fill the broad gap with greater compliance.
Poor compliance and understanding by employers and tax agents are the major causes of the FBT gap. Many employers who are normally compliant with their Income Tax and GST obligations fall short of performing their FBT obligations.
In most cases, as argued by the ATO, while being on range with their other tax obligations, they remain so far out of range with regard to FBT, in many cases not reporting any FBT at all.
The first and major factor contributing to the gap is a general lack of understanding regarding FBT law. There seems to be confusion in the following areas:
- Valuation
- Calculation
- Reporting
- Payment of FBT on Benefits Provided to Employees
This lack of comprehension also persists when it comes to being aware of the many concessions and exemptions regarding every benefit.
For example, frequent mistakes are made about car fringe benefits, specifically on which class of vehicle should be exempt. People take work vehicles, utes, or vans to attend their personal activities, such as rugby training or games, which is a clear contravention of their FBT obligations.
Throughout 2025, the ATO shall give more attention to compliance so as to help employers in addressing these issues and closing their knowledge gap. In line with these efforts, there shall be more stringent enforcement action to better educate employers and tax agents.
The ATO does ensure that all the players in the FBT system – whether a new, inexperienced employer or established practitioner – have the capability for meeting their respective obligations.
While the ATO does provide an extensive guide outlining FBT responsibilities for corporate entities, charities, government bodies, SMEs, accounting firms, and NFPs, our team at Advisory One can also provide resources to ensure you stay compliant.
The ATO’s initiative underscores the importance of staying informed and compliant with FBT regulations. By addressing the root causes of the $2 billion revenue gap, the ATO hopes to foster a more compliant environment where employers fully engage with the FBT system. This not only helps in closing the revenue gap but also ensures fair and equitable treatment across the board.
Want to ensure you’re staying compliant this tax year? Contact the team at Advisory One to find how our expert accountants can help your business in a challenging environment. Get in touch today and give us a call at 02 6324 5888.
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