FBT returns – 1 simple thing you should do every quarter

FBT returns are pretty complicated. We aren’t that surprised at how many incorrectly filed returns we encounter. The result is usually underpaid FBT and GST – but every now and then we come across a pretty decent refund.

FBT returns – where they go wrong

FBT return errors are broadly in two areas. Fringe benefit identification errors and FBT calculation errors. Let’s concentrate on the former.

Fringe benefit identification errors are usually a result of an incomplete FBT return process. This is unsurprising given that FBT returns are annoying and add no real value to business operations. Typically, FBT return processes look like this

  1. Look at last quarters return to see what data to get
  2. Get data for this quarter
  3. Run FBT calculations
  4. File return

If your FBT return process looks something like this then you are missing a critical first step.

FBT return process – the missing step

  • Find out what benefits were provided this quarter.

It won’t necessarily be the same as last quarter so you can’t rely on last quarters return. Yes – most benefits are recurring (health insurance, private use of a motor vehicle, gym memberships etc.) but even those benefits appeared for the first time at some point.

You are probably the only person in your organisation who actually knows anything about FBT. Management, sales and even HR staff are constantly thinking about how to incentivise staff behaviour. But you can’t rely on them to come to you to tell you about anything new – they just won’t be thinking about FBT.

What you can do

Talk to people who are likely to provide and/or authorise fringe benefits. Do this as part of your return process every quarter (they won’t be able to remember anything you leave it to the end of the year.

Consistently document your efforts and put them on your FBT return file (email conversation is fine). Its evidence that you are making an effort to comply with FBT legislation (which is difficult due to its complexity).

Its simple – doesn’t take much time and can severely reduce the risk of filing incorrect FBT returns. And remember, Inland Revenue consider how robust your process is when looking at any errors you have made.