Can I claim Fringe Benefits Tax (FBT)?
As a business owner, here’s what you need to know about Fringe Benefits Tax, its benefits and your taxation obligations
Fringe Benefits Tax is a tax payable by you on any benefits you have paid to employees in place of salary or wages. Fringe Benefits can be a useful way of attracting and retaining quality staff as they are perceived as a non-cash incentive or as a salary packaging option.
Fringe benefits include any rights, privileges or services provided to current, former or future employees or directors of a business. Common benefits include; utilisation of work vehicles for private purposes; low or no interest loans, school fees, health insurance, gym memberships and entertainment such as food, drink or recreation.
FBT was created when the government realised that employers were being creative when paying benefits instead of salary. The most common fringe benefit is for vehicles where the employer picks up the cost of the car and provides the car for their employees’ use.
Advantages for small businesses of paying Benefits
As a business owner – you will likely have your own expenses that can be paid for by the business rather than out of your salary or drawings. The amount of tax on a FB payment is the same as personal tax i.e. 47%, rather than company tax of 27.5%. However, as a business, you can claim the GST component and receive the tax deduction for the expense. There may or may not be tax advantages to you in offering fringe benefits to your employees. If you are offering them or considering offering them, talk to us to see whether it will be beneficial to you or not.
What is not classed as a Fringe Benefit?
Superannuation, salary, wages, termination payments and shares acquired under employee approved schemes are not subject to FBT. Additionally, work-related items such as tools of the trade, mobile phones, computer software, some car parking, protective clothing and minor expenses under $300.
What do I need to do if I am providing Fringe benefits to employees?
Firstly, you need to check if you are registered for FBT. We can do that for you. Secondly, you need to keep all records related to the benefits and then report it. The FBT year runs from 1 April to 31 March and you will need to submit this information to your accountant for it to be lodged. Lastly, you will need to pay your FBT liability to the ATO.
The calculations for establishing the FBT amounts can be quite complicated, depending on the type of benefit and whether it includes GST or not. At Modoras we make the process simple and calculate this for you. To arrange a discussion to talk about your Fringe Benefits Tax options and obligations, call on 1300 888 803 or email us today: firstname.lastname@example.org
Over to you.
Are you a Modoras Client? Get the latest Fringe Benefits Tax Questionnaire here.
This article is published by Modoras Pty Ltd ABN 86068034908 AFS and Credit License No. 233209. This article contains general information only and is not intended to represent specific personal advice (Accounting, taxation, financial or credit). While every effort is made to ensure that the information is accurate, users must be aware that some information may not be accurate or is no longer current. No individual personal circumstances have been taken into consideration for the preparation of this material. It is recommended that you obtain your own personal professional advice before making any financial or business decision.