THE NECESSARY FBT RECORDS Under tax law, you must keep sufficient records to enable your FBT liability to be assessed. You must keep your records in English. If your records are not in a written form (for example, you keep electronic computer records), they must be in a form that is readily accessible and easily convertible into English. Provided the electronic form of the record kept by the employer is able to be relied upon as a true and clear reproduction of the original paper record and/or the source electronic declaration from the employee is able to be verified as authentic, the FBT record keeping requirements will be satisfied. Generally, you must keep your records for at least five years from the date of the relevant transaction. You must also keep specific records if you want to take advantage of various exemptions or concessions to reduce the FBT you need to pay. These documents must be retained for five years from when the relevant FBT return is lodged. Examples of these records are: all documents you are required to obtain from employees, such as declarations, invoices and/or receipts, bills of sales, lease documents, travel diaries, copies of logbooks, odometer records, and where the benefit is a car fringe benefit valued under the operating cost method, fleet management records, logbook records and odometer records. 1 Some concessions and exemptions require you to obtain documentary evidence of expenditure by an employee. Broadly, you are required to obtain the original invoice and/or receipt from the employee. This must show the date of the receipt or invoice, the date of the expense, the name of the supplier, what was bought and the amount paid. You must make elections and declarations no later than the day on which your FBT return is due to be lodged with the Tax Office or, if you do not have to lodge a return, by 21 May. There is no need to notify the Tax Office of the election or declaration as your business records are sufficient evidence of this. You must also obtain all employee declarations no later than the day on which your FBT return is due to be lodged with the Tax Office or, if you do not have to lodge a return, by 21 May. Later sections of this guide explain what special records you need to keep for the most commonly provided fringe benefits. Since 9 April 1999 certain employers have been able to use an alternative way of calculating how much FBT they have to pay, rather than keep full FBT records. You will find more information about these record keeping exemption arrangements and who may use them in Fringe benefits tax: a guide for employer s (NAT 1054) 1 For this method you will need the ATO s deemed interest rate. It is available from the ATO website each year. http://www.ato.gov.au - 1 -
Special records you need to keep for car fringe benefits Employee contribution records Record any contributions the employee has made during the year towards the cost of running the car. If you are using expenses paid for by an employee as an employee contribution, you must have documentary evidence of the expenditure (for example, receipts, invoices or tax invoices, journal entries or cheque butts). In the case of petrol and oil costs, the employee can give you a declaration in the following format. You must obtain any declarations by 21 May. Fuel expenses declaration I declare that (employee s full name) expenses of $ (state whether fuel and/or oil) (amount in figures) were incurred by me during the period from 20 to 20 in respect of registration number (make and model of car) Signed If the employee is responsible for all fuel and/or oil costs, you can accept a declaration based on a reasonable estimate based on the total kilometres travelled, average fuel costs and fuel consumption. In these cases, the employee should add the following to the declaration: I also declare that the total kilometres travelled during the period was If the employee makes cash payments to you towards the running costs of the car, you will need to record these payments for each employee in such a way that they can be totalled easily at the end of the year. Details of cash payments are usually recorded in a business s cash receipts book, as these payments are assessable income for business income tax purposes and may have GST consequences. There is an example of a cash receipts book in Record keeping for small business (NAT 3029). Percentage of business use records All costs associated with running each car need to be recorded in such a way that the cost for each car can be totalled at the end of the FBT year. - 2 -
If you use the operating cost method to calculate the taxable value of a car fringe benefit, you have to keep: logbook records, and odometer records. Logbook records contain a record of business use and are usually maintained for a continuous 12-week period. records are a record of the total distance travelled during the same 12 weeks the logbook records are maintained, and also of the total distance travelled each year. The twelve-week period must be representative of the travel undertaken during the year (i.e. you should neither should the busiest period nor holiday leave period). In a logbook year, you have to keep both types of records. In a year other than a logbook year, you keep odometer records. A year is a logbook year if: none of the previous four years was a logbook year of tax for that car you choose to treat the year as a logbook year (for example, to increase the nominated percentage of business travel), or the Commissioner of Taxation, by written notice, requires you to treat the year as a logbook year. A logbook year commonly occurs when you use the operating cost method to value a car fringe benefit for the first time. As part of your business records you should also record additional information such as the car s make, model and registration number. What information to record in logbooks The Tax Office doesn t produce an official logbook but they have provided a sample one below that you can use. You can also design your own logbook or buy one of the commercial products available. Regardless of which type of logbook you use, you must keep a record of the following details for each business journey during the 12-week logbook period: the dates on which the journey began and ended the odometer readings at the start and end of each journey the kilometres travelled, and the purpose of the journey. The logbook records must be in English and entries must be made at the end of the journey or as soon as reasonably practicable afterwards. Where two or more business journeys are undertaken consecutively in any day, only one entry for the series needs to be recorded in the logbook. For example, a salesman who called on 10 customers while working in the Bathurst Orange area of New South Wales could record the odometer readings at the start and end of the consecutive journeys and describe the purpose of the travel as 10 customer calls, Bathurst Orange area. - 3 -
The 12-week continuous period during which the logbook is kept must be specified, but may overlap two FBT tax years. SAMPLE CAR LOGBOOK Employer name FBT year ended 31 March Make: Model: Engine Type: Registration number: trip began trip ended start end Kilometres travelled Purpose of journey Business km Private km * You don t have to record private travel, but it may help with your calculations. You need to keep a separate logbook for each car. What information to record in odometer records records are a record of the total kilometres travelled by the car during the whole FBT year, or for that part of the year it was used to provide fringe benefits. records should also be kept for the 12 weeks for which a logbook is kept. As with logbooks, the Tax Office doesn t produce an official odometer record form but we have provided a sample one below that you can use. If you prefer, you can design your own form or buy one of the commercial products available. Regardless of which type of odometer record form you use, the following details must be entered for each period (that is, year, partyear or logbook period): the date the period began and ended, and the odometer reading at the start and end of the period. The odometer records must be in English, and the entries should be made at, or as soon as reasonably practicable after, the times to which the readings relate. If you replace a car during the year and transfer the business percentage to the new car, the odometer records must show odometer readings for the replaced car and the new car on the replacement date. - 4 -
SAMPLE ODOMETER RECORD Employer name FBT year ended 31 March Car Make: Model: Registration number Start reading End reading * You can record details for more than one car on the same odometer record. Don t add together kilometres travelled by old and replacement cars. Special records you need to keep for vehicles other than cars You don t have to keep such detailed records as you do for car fringe benefits. However, if you do keep logbook records, use these to determine the extent of private use of the vehicle. Otherwise, you can estimate the number of private kilometres travelled. For example, you could determine the home to work component of private use by multiplying the number of journeys during the year by the distance between the employee s residence and place of employment. If you are making a reduction for business travel, you must obtain a declaration from the employee, in an approved format, specifying the deductible percentage of the operating costs. If using the cents-per kilometre method, the declaration could state the number of private kilometres travelled rather than the deductible percentage. Here is an approved format for an employee declaration for a vehicle other than a car: Residual benefit declaration vehicles other than cars I declare that during the period 20 (name of employee) to 20 that (show details of vehicle) was provided to me by or on behalf of my employer. The total number of private kilometres travelled was or I would have been entitled to claim an income tax deduction equal to % of the operating costs. Signature - 5 -
Special records you need to keep for expense payment fringe benefits Make sure you obtain any declaration from employees before the due date for lodging your FBT return or, if you are not required to lodge a return, by 21 May. You should obtain proof that the payment was made. This is often difficult for regular payments such as monthly payment to loan accounts. A record should be dept in such situations of the loan contract or loan account statement. If you use the otherwise deductible rule to reduce the taxable value of a fringe benefit, you must have documentation to show how much of the expense would have been otherwise deductible to the employee. If the documentation is a declaration by the employee, it must be in an approved format (see below). Employee declaration You have to obtain an employee declaration in all cases except where: the employee s expense (other than an expense incurred in respect of a car owned or leased by the employee) is incurred exclusively as part of their employment (for example, protective clothing, tools of trade) there is a requirement to keep a travel diary the requirement to keep a travel diary is waived because the employee is a member of an international aircrew, or the provision of the fringe benefit is covered by a recurring fringe benefit declaration. Here is an example of an approved format for an employee declaration. Expense payment benefit declaration I, declare that (name of the employee) (show nature of expense, for example, telephone rental and/or calls) were provided to me by or on behalf of my employer during the period from 20 to 20 and the expenses were incurred by me for the following purpose(s) (Please give sufficient information to demonstrate the extent to which the expenses were incurred by you for the purpose of earning your assessable income.) I also declare that the percentage of those expenses incurred in earning my assessable income was % - 6 -
Signature MORE INFORMATION - Fringe benefits tax: a guide for employers (NAT 1054) Records you need to keep for Tax-exempt body entertainment fringe benefits You should record information relating to tax-exempt body entertainment so that the taxable value of the fringe benefit can be calculated. You should record the following details: the date you provided the entertainment who is the recipient of the entertainment (are they an employee, associate of the employee or another person) the cost of the entertainment the kind of entertainment provided, and where the entertainment is provided. Are you Exempt from record Keeping requirements? Certain employers are exempted from the record-keeping requirements and are not required to keep or retain FBT records for the current year. Instead, these businesses are able to calculate their FBT liability based on the aggregate fringe benefits amount for an earlier year (called the "base year") when such records were maintained. To be eligible for the exemption, the organisations must: * have established a base year; * have established that the aggregates fringe benefits provided and employees or their associates does not exceed the exemption threshold. In 2005/2006, the record keeping threshold is $6,223 (Taxation Determination TD 2005/11). More information Taxation Determination TD 94/25 and addendum TD 94/25A Fringe benefits tax: where an employer provides entertainment to both employees and non-employees, what is an acceptable method of determining the portion applicable to the employees for the purposes of the Fringe Benefits Tax Assessment Act 1986? Taxation Determination TD 93/195 Income tax: to what extent is a registration fee for a Continuing Professional Development (CPD) seminar deductible if a part of the fee represents the cost of food and drink to be provided as part of the seminar? Taxation Ruling TR97/17 and addendum TR97/17A Income tax and fringe benefits tax: entertainment by way of food or drink Taxation Ruling IT2675 Income tax and fringe benefits tax: entertainment morning and afternoon teas; light meals; and in-house dining facilities Fringe benefits tax: a guide for employers (NAT 1054) Taxation Ruling TR 2002/10: Capital Gains Tax: Asset Register - 7 -