Quick tips to get ready for the end of FBT year

What is ‘fringe benefits tax’?

Fringe benefits tax, or FBT, is a tax that gets applied to certain benefits you as an employee might get from your employer that aren’t your salary or wages. Your Oly novated lease is one of those benefits.

If you’ve got a petrol car, Oly uses the employee contribution method, or ECM, which takes some of your lease payments from your after-tax salary to help reduce your chances of incurring FBT on your novated lease.

Eligible electric cars under the government’s EV Discount are exempt from FBT, so your novated lease payments for an eligible electric car can be taken 100% from your before-tax salary.

What is end of FBT year and how does it affect me?

The Australian Tax Office (ATO) requires a certain amount of FBT to be paid on your novated lease.
The amount of FBT is based on the taxable value associated with your novated lease car. This must be collected (or offset) within the current FBT year, which runs from 1 April – 31 March.

To offset the FBT, an annual amount of after-tax, equivalent to the taxable value of your novated lease car, is deducted from your pay. This is known as the employee contribution method (ECM).

For most customers, there’s likely nothing you need to do prior to the end of the FBT year as Oly will have already taken steps to ensure everything runs smoothly. Please check any communications from Oly to see if any action is required from you.

Some customers - especially if you’ve recently entered into a novated lease - may need to readjust their after-tax contributions to meet ATO requirements and reduce any FBT amount payable.

Collecting your annual after-tax contribution

Under the salary sacrifice arrangement, if your novated lease uses the ECM method, then after-tax contributions are made to reduce the taxable value of your novated lease car. This offsets the amount of FBT you may need to pay, and you can use these after-tax funds for your novated lease expenses throughout the year. The funds are simply added to your balance for:

•    Lease payments
•    Maintenance
•    Running costs
•    Fuel
•    Claims for any eligible expenses such as registration and insurances

After-tax Shortfall

In some cases, too much after-tax (AKA an ECM excess) or not enough after-tax (AKA an ECM shortfall) is collected. An after-tax shortfall is not a penalty or fine. It can occur for a range of reasons, such as:

•    Income being missed (for example, taking leave without pay and Oly not receiving deductions from your employer during that time). Please ensure Oly is notified of any change in your employment that may impact the funds received for your novated lease.
•    The lease terminates before its planned end date and there are no pay cycles remaining to collect more after-tax.
•    A new novated lease is set up late in the FBT year and there are no more pay cycles remaining to collect the required after-tax.

If an after-tax shortfall is not resolved prior to the end of the FBT year, it will become an FBT liability for your employer. However, it's the employee’s responsibility to cover the after-tax shortfall difference, or pay the FBT liability to the employer to be remitted to the ATO.

How can I resolve an after-tax shortfall?

There are a few options that may be available if you experience an after-tax shortfall:

1.    You can choose to make additional after-tax contributions for the remaining pays in the FBT year to offset your after-tax shortfall.
2.    You can choose to pay the remaining after-tax amount directly to Oly. The after-tax must be received on or before 31 March. If the after-tax is received after, it will be counted towards the new FBT year.
3.    You can claim for unreimbursed running costs. Basically, these are costs incurred during the lease, but you have not claimed and received a before-tax reimbursement. This will reduce the after-tax shortfall by the claim amount that you have paid. Any claims used for this purpose cannot be claimed in the future.
4.    You may be eligible to claim days unavailable if your novated lease car was away for non-routine service and repairs, or if the car was left (with keys) with your employer. Days unavailable can only be applicable if the car was unavailable for 3 days or more (this does not include when you dropped off or picked up the car). Substantiation may be needed, for example a tax invoice from the mechanic showing the date the car was dropped off and picked up, or a letter from your employer confirming that they had the car on site and were in possession of the keys.

Please ensure that you read all communications received from Oly to know your options. It is important that you contact Oly prior to 31 March to discuss your options.

FBT liability

If Oly can’t rectify the after-tax shortfall, your employer will have to pay the FBT owing to the ATO, as the amount would become an FBT liability.

In most cases, the employee will pay the employer, who then pays the ATO. Under your novated lease agreement, the employee is responsible for payment of the liability to their employer.

If you have an FBT liability owing, Oly or your employer may contact you to discuss your options and organise payment.

Whilst an after-tax shortfall can be offset, a liability must be paid.

What happens if there is an FBT liability?

If you were unable to resolve your after-tax shortfall prior to the end of the FBT year, you will be required to cover the FBT liability.

Oly will notify you and your employer of any FBT liability incurred.

Depending on your account balance, Oly may be able to use some of the funds in your novated lease account. Your employer may also contact you to discuss your options and organise payment.

Why do my deductions differ from my proposal?

Each time Oly provides an estimate of your deductions, it’s based on the remaining pay cycles in the FBT year (ending 31 March) to calculate the numbers.

As it gets closer to March you may have fewer pay cycles than estimated. This is why there may be a difference in the estimate calculated a month ago and the contribution amount you started with.

We have therefore temporarily adjusted your deductions based on how many pay cycles are left and on the pro-rata after-tax requirement.

The reason for this adjustment is to minimise any after-tax shortfall and try to offset the amount of FBT you may need to pay.

Your deductions will automatically return to the proposed amount from 1 April.