Do I need to pay FBT
Scenario:
I provide car fringe benefits to a subcontractor who performs his duties within my business and bears no risk in respect of the duties he performs. The payment to the subcontractor is subject to payroll tax. Do I need to pay FBT on the subcontractor’s car benefit?
Explanation:
The term” subcontractor” means different things to different people. The critical issue to consider is whether or not the individual falls within the definition of “employee” for FBT purposes (Fringe Benefits Tax Assessment Act 1986 s 136(1)). The definition for FBT purposes is essentially the same as the definition that applies for PAYG withholding tax purposes (ITAA 1953 Sch 1 s 12-35). The risk for work performed is only one of the issued that needs to be examined (TR 2005/16 paragraph 44). Thus, whether or not a car fringe benefit arises in the circumstances will depend on whether the subcontractor is an employee and whether they are being provided with a car for their private use and not just their use in the business (FBT Act s 7).