With the FBT reporting season done and dusted for another year, it would be easy to close the 2017 FBT file and forget all about it until April next year.
However, this once-a-year approach to FBT compliance and reporting fails to account for the myriad of lessons that could be learnt by reflecting on the past season. By really considering the challenges encountered and the approaches taken to overcome them, it is possible to identify value add opportunities to be addressed next year.
Challenges faced tend to fall under four distinct categories:
The majority of FBT returns are prepared by people with a finance role or within a finance team. This assumes that their core role and responsibility is accounting and systems – quite separate from having a technical tax background. Therefore, employers are required to invest in extra training and/or ensure adequate support from the tax team or external advisors.
Furthermore, the person preparing the return must continue their business as usual activities whilst going through the 6-8 week FBT return preparation process, thereby necessitating good juggling skills and/or the working of long hours.
Some businesses fail to clarify who is responsible for the annual FBT return and FBT compliance in general, leading to conflict amongst employees. To an extent, responsibility for FBT lies with the Tax, Finance, HR, Remuneration, Payroll and Shared Services functions. Management should encourage cross-functionality and develop clear output goals to avoid confusion.
If the challenge of responsibility is too great, then the most beneficial option may be outsourcing the reporting.
In general, businesses tend to follow last year’s FBT process without any adjustment for changing circumstances. Whilst this may seem prudent, this approach does not provide the flexibility to identify changes in benefit offerings, new benefit offerings or business changes.
Thus, when developing an FBT process, businesses should try to keep it as dynamic as possible so they are able to respond to change quickly and effectively.
Effective policy is crucial to having a framework for benefits and ensuring that exemptions and concessions can be claimed to manage cost and eliminate FBT shock. At a minimum, policies are required simply to ensure everybody is clear on what can or can’t be provided, in what circumstances, to whom, for how long, and what the requirements are. This ensures budgets are adhered to as closely as possible by employees.
Policies should be in writing, comprehensive and current; as well as supported by a culture that promotes compliance and punishes deviations.
Technology is often well integrated in other areas of businesses, but is not utilised for FBT reporting and compliance, or is ineffective due to implementation issues.
Technology can be harnessed to achieve compliant FBT savings for Motor Vehicles and Car Parking benefits, and to maximise exemptions for Entertainment. Often, businesses will find the benefits of implementing technology for FBT purposes outweigh the initial outlay.
The above challenges are faced by an overwhelming proportion of businesses, either in isolation or combination with each other. Take the time to consider this past FBT season and whether there are any actions you could implement next year in order to improve efficiency and save costs. FBT should not be considered a once-a-year issue, but rather one that is constantly evolving and in need of the people, process, policy and technology to support it.
Join the FBT 2017 Key Learnings webinar for key areas of risk, misunderstanding and unbudgeted FBT cost that we identified throughout the 2017 FBT season.