Reducing Fringe Benefits via Employee Contributions

Journal Entry Contributions

Employees can reduce the taxable value of a benefit by making post-tax contributions—often recorded as journal entries in the accounting system.

For journal entries to be valid, they must:

• Be supported by an employee-employer agreement.
• Be processed before the financial accounts are finalised for the year.
• Have documentation showing entitlement (e.g., unpaid bonuses or employer loans).

Multiple Devices or Loans

Providing multiple similar devices (like laptops) is only allowed if the company’s revenue is under $50 million.

FBT applies when personal use of employer-provided items is significant—but liability may be reduced depending on business use proportion.

 

Contractor Classification and FBT

Do Contractors Pay FBT?

FBT typically does not apply to genuine contractors. However, it’s vital to verify their status, especially for:

• Directors
• Specified officeholders
• Long-term contractors

 

ATO Guidance on Classification

Two High Court rulings led the ATO to issue TR 2023/4, focusing on:

• The written contract (rather than actual behaviour).
• Clear agreement terms defining contractor or employee status.

Also, PCG 2023/2 defines four risk levels based on contract clarity and mutual understanding.

 

Record-Keeping and FBT Housekeeping

Capturing Odometer Readings

If your business has cars, ensure staff capture start and end-of-year odometer readings (31 March and 1 April) with a mobile phone photo, sent to a central point of contact.

 

High-Risk Areas for FBT

• Inconsistent entertainment deductions that lack FBT compliance.
• Mismatches in reporting can trigger ATO reviews.
• Deductibility of meal or entertainment costs often requires FBT treatment.

If the actual method is used and the benefit is below $300, no FBT may apply, especially for client-related entertainment.

 

FBT Return Compliance

Are You Registered for FBT?

If your business:

• Employs staff (including family members);
• Provides cars, parking, personal reimbursements, entertainment, discounts, etc.—

You likely have an FBT obligation.

Failing to lodge FBT returns can result in substantial liabilities. Common exemptions include:

• Safety gear
• Work tools
• Portable tech equipments (e.g., laptops)
• Minor benefits under $300

 

To Sum it Up

Accurate and timely record-keeping can help you avoid penalties and stay ATO-compliant. If you have any question about FBT 2025, please contact Bates Cosgrave team.