Fringe Benefits Tax
What is FBT?
Fringe Benefits Tax is generally the tax payable by an employer on a taxable benefit provided to an employee (or their associate-usually family) and can relate to current, past or future employment. The benefit could be in place or in addition to salary or wages. The tax is separate to Income Tax and the FBT year runs from the 1st April to 31st March.
Do you provide benefits to employees (or their associates) such as:
- Do your employees take cars home at night?
- Can your employees use cars owned or leased by the business for private purposes?
- Do you provide low interest loans to employees?
- Have you waived a debt from an employee?
- Have you paid or reimbursed a non-business expense for an employee?
- Do you provide housing or accommodation of any sort to your employees? This can be any kind of housing from units, cabins, caravans, boats-anything they live in
- Do your employees receive a living away from home allowance?
- Do you pay for food, drink or recreation for your employees or families?
- Do you salary package for any of your employees (or yourself)?
- Do your employees receive any kind of staff discount?
These are all examples of Fringe Benefits and the main categories are:-
Cars (any company vehicle (less than 1 tonne) with private usage ie. Garaged at employee's home, even if it is not authorized)
Expense Payments (paying for or reimbursing an employee's expenses including things like health insurance, home telephone, school fees etc.-sometimes the taxable value can be reduced for business usage)
Entertainment (provision of meal entertainment or recreation) see ATO.
Loans (low-interest loan provision-doesn't apply if same conditions are available for regular customers)
Debt waiver (eg sell goods to employee then don't worry about repayment-except genuine bad debt)
Housing (employer provides accommodation where employee usually lives includes houses, units, caravans, guesthouses, bunkhouses, hotels or motels);
Board (where employer provides accommodation and at least 2 meals/day-eg remote construction site); Airline transport (free or discounted air travel on stand-by basis normally in travel industry)
Living-away-from-home-allowance (allowance paid to employees to compensate inconvenience and expenses of being away from home-additional expenses not normal tax deductible expenses)
Car parking (where a commercial car park is within 1km radius and charges an all-day rate above the declared fee threshold normally announced by the ATO each April. The car parking benefit may be exempt if the employers total gross income was less than $10 million in the previous year and the parking is not provided in a commercial car park);
Property (providing employees with no cost or low-cost goods eg clothing, electrical equipment etc. or real property-land/buildings or shares);
Entertainment provided by a tax-exempt body; (food, drink or entertainment provided by or reimbursed by an employer who is exempt or partially exempt from income tax)
Residual benefits (where a benefit doesn't fall into the above categories it becomes a residual benefit-for example a group health insurance policy provides for employees would be a residual benefit)
What's NOT a fringe benefit?
- Salaries and wage payments
- Approved employee share acquisition schemes
- Employer contributions to complying superannuation funds
- Eligible termination payments (eg. Company car given or sold to employee on termination)
- Laptop computers and mobile phones used primarily for work purposes.
You can reduce the amount of FBT you pay by:
- Replacing fringe benefits with a cash salary
- Providing benefits that your employees would be entitled to claim as an income tax deduction if they had paid for the benefits themselves
- Providing benefits that are exempt from FBT
- Using employee contributions
FURTHER INFORMATION: See the Fringe Benefits Tax Guide on the ATO website for more information.
|IMPORTANT DISCLAIMER: This article is published as a guide to clients and for their private information. This article does not constitute advice. Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of these areas.|