Fringe benefits are crucial for a business and can be an effective way to get attention from quality staff. If you provide fringe benefits to your employees, then ensure you understand your tax obligations. Please read this blog post to know how FBT could have an impact on your business and how it works.
What are Fringe Tax Benefits?
Fringe benefits tax (FBT) is a tax that employers pay on benefits given to their staff, their staff’s family or other associates. Fringe tax benefits are separate from income tax. FBT is calculated based on the taxable value of the fringe benefit.
As an employer, you must assess your FBT liability for the FBT year, which runs from 1 April to 31 March. If you have an FBT liability, you must file an FBT return and pay the FBT you owe.
What is a Fringe Benefit?
A fringe benefit is a payment to staff but in a different form than wages or salary. The following are different types of fringe benefits. It includes:
- allowing staff to use a work car for personal use
- car parking
- paying gym membership for an employee
- offering entertainment by way of free concert tickets
- giving a discounted loan to worker
- offering benefits under a salary sacrifice arrangement with an employee.
The following are not considered fringe benefits:
- wages and salary
- contributions from employer to complying super funds
- right or shares provided under approved employee share acquisition schemes
- employment termination payments
- payments considered to be dividends under Division 7A
- benefits given to contractors and volunteers
- exempt benefits, such as benefits given by religious institutions to their religious practitioners.
Who is Liable to Pay FBT?
The employer is liable to pay FBT and depends on the taxable value of the fringe benefits offered to staff and their associates. If the employer gives only wages and salary to staff, no FBT will be applicable.
How Much FBT You Need to Pay?
To check how much FBT you need to pay, you gross up the taxable value of the benefits you have offered. This is equal to the gross income your staff would have to earn at a high marginal tax rate to buy the benefits themselves.
When is the FBT Year?
Businesses that offer fringe benefits to employees need to lodge an annual fringe benefits tax return. The FBT year starts from 1 April of the previous year to 31 March of the current year. FBT lodgments for the 2024 year have a due date of 21 May 2024, or 25 June 2024 if filing through a small business tax accountant.
Can You Claim Deductions and GST Credits?
Being an employer, you can claim:
- an income tax deduction and GST credits for the expense of offering fringe benefits
- if you claim GST credits, you claim the GST-exclusive amount as an income tax deduction
- if you are not allowed to claim GST credits, you claim the full amount as an income tax deduction
- an income tax deduction for the fringe benefits tax you need to pay.
What You Must Do?
As an employer, you must:
- Address the types of fringe benefits you offer.
- Check FBT concessions and different methods you can use to reduce FBT.
- There are some FBT exemptions
- You can reduce your FBT liability by using alternatives to fringe benefits
- If you are a not-for-profit employer, you may be liable for an exemption
- Check out FBT’s taxable value offer
- Calculate your FBT liability
- Maintain records, including employee declarations where required
- File FBT return and pay the FBT you owe
- Report each staff member’s fringe benefits in their end-of-year payment information if needed.
Is Salary Sacrifice a Fringe Benefit?
Salary-sacrificed super contributions within an effective salary sacrifice arrangement are regarded as employer contributions. They do not constitute fringe benefits if your employer pays them to a complying super fund.
Conclusion
This blog post shares information on fringe benefits tax, who must pay FBT, and certain things included in FBT. As an employer, you must have basic knowledge regarding fringe tax benefits. If you are confused about how to lodge FBT, you can ask Reliable Melbourne Accountants.
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Bookkeeping for Small Business