When you operate a fleet, tax time generally means going over the previous year’s work history – not just punching a few digits into a formula and calling it a day. While the statutory fraction method is a common and simplified approach for calculating your Fringe Benefits Tax (FBT) return, defaulting to the 20 per cent flat rate means you might be paying more than you need to.
The problem is, few of us have the time or energy to manually scrawl down every cost in a logbook and it also leave businesses open to inaccuracies. No one wants to risk a penalty over a misplaced decimal from a job six months ago.
So, with the new FBT rules in effect from this month onwards, how can businesses make it easier on themselves when it comes to FBT while also getting the most out of their return?
Know The Rules
Knowledge is power and with the recent changes this is more important than ever. This is especially true if your fleet contains any utes that previously were exempt from FBT. First thing to do is review the changes to this years’ rates and thresholds from the ATO. Check that your business is using the correct rate and what your exemption thresholds are. Some notable changes across the board are:
- The overall FBT rate has reverted to 47 per cent and gross up rates have been changed accordingly, due to the temporary budget repair levy now being removed.
- Centrelink will now be using 100 per cent of the Reportable Fringe Benefits Amount (RFBA) to determine some family benefit payments (except for non-profits).
- There are now stricter limits on private use for employer-owned vehicles, such as utes, as personal use caps at 750km per year.
It’s important to start with a strong foundation before crunching the numbers to ensure your FBT is calculated correctly and your return is the best it can be.
Understand Your Fleet
A fleet is only as effective as its management, and your FBT return is more rewarding when that fleet is a tightly-run ship. Maximising your return means understanding vehicle use and if there are any activities that can be reduced or improved upon. Stricter rules mean personal use needs to be less than 15km per week to stay under the threshold, so it’s important to have a clear view on where some of those hours can be trimmed down. Installing vehicle tracking offers more visibility across the fleet and monitors much a vehicle is being used off the clock. If drivers are taking longer routes than needed or taking unnecessary detours, these can be picked up on and cut down on. Not only will your fleet operate more effectively, get to jobs quicker and complete tasks more efficiently, you may find yourself better off when tax time comes around.
Remove The Headache
If you’re still stuck on a statutory fraction method or poring over hours of paperwork to get your FBT return, then it’s time to consider digital alternatives. Logbooks can easily get out of hand and cause confusion and the formula can lead to paying up rather than paying off if you aren’t careful. Electronic logbooks capture all the necessary data and compile it for you into a report that’s ready to be delivered to the ATO in a snap. Drivers simply identify themselves using an individual PIN at the start of their journey and selecting the purpose of the trip, such as visiting customers and clients or heading to the main office. It creates a hassle-free and accurate reading of all vehicle use and helps cut any confusion over calculating FBT returns.
With the right mindset and tools in your arsenal, tax time needn’t be a stressful time of year. With technology and staying in the know, any current or future changes to FBT can be easily managed and understood, allowing you to calculate your return with confidence and, most importantly, not be out of pocket.