In this busy world, it is quite challenging to retain talented employees, and business owners need to focus on it to keep them on board. For this reason, fringe benefits tax (FBT) may offer a solution to your business. Fringe benefits tax is considered a non-cash incentive that is paid to your workers on top of their wages or salaries. Got it? Well, if you want to offer it to your employees, then you need to understand a few things about it. When you hire an accountant for your business, then all these aspects will be covered in the accounting services your accountant offers you. In today’s blog, we’ll discuss it.
What is a Fringe Benefit?
A fringe benefit is a form of non-cash incentive given to employees on top of their basic salary, and this is a method to allure talented employees to your business. The following are some examples of fringe benefits:
- Company cars
- Provide their workers with a cheap loan
- Telephone reimbursements
- Entertainment benefits
The benefits of a fringe benefit to the organisations are various. The reasons why organisations choose fringe benefits for their employees:
- To offer an incentive to the employees without increasing their salaries
- Fringe benefits can be excluded by employees from their taxable income
- Employees don’t need to add them to their taxable income
You need to understand one thing fringe benefit is a different thing, and fringe benefits tax is a different thing.
What is Fringe Benefits Tax (FBT)?
Employers offer fringe benefits (non-cash benefits) to their employees that are not included in their salary and superannuation. You need to calculate by considering the taxable value of the benefits you select and multiplying it by the FBT rate.
You need to track your FBT records because these records are essential for tax purposes when it is the end of the financial year. If you don’t know how to calculate it, then you can look for the best accountant near you by searching ‘accountants near me’. Various reasons are responsible for why companies offer fringe benefits, such as:
- Employers can claim GST credits for things offered as fringe benefits
- Employers can claim an income tax deduction for the expense of offering fringe benefits and for the fringe benefits tax they pay
- The availability of certain tax concessions offers the money-saving opportunity
- Fringe benefits are more affordable than increasing wages or salaries of employees
FBT Concessions or Exemptions
Some FBT concessions apply to some benefits offered by not-for-profit organisations.
- Work-related portable electronic device exemption
An FBT exemption applies when an employer offers portable electronic devices related to work to their employees after 31 March 2016.
- Other work-related item exemption
Other items related to work are exempt from FBT even though there are some limitations:
- Tools of the trade
- Protective clothing
- Briefcases
- Computer software
- Minor Benefits Exemption
It includes benefits with a value of less than $300. It can be exempted from FBT if it will be unreasonable to consider it as a fringe benefit, that is, if:
- The benefit is given irregularly
- The taxable value of the minor benefit is low
- It is hard to calculate the taxable value of the minor benefit
- Taxi Travel Expenses Exemption
Employer payments of non-work-related taxi travel costs of workers may be exempt from FBT if the travel is either:
- A single trip starting or ending at the place of work of an employee
- Emerging as an outcome of injury or sickness to the employee
- Small Business Car Parking Exemption
Benefits of car parking offered by small business employers are exempt if either:
- For the last income year before the FBT year, the employer was a small business
- The total gross income of the employer for the last financial year before the FBT year was less than $10 million
What Should Small Business Owners Do?
As a business owner, if you also have been offering fringe benefits to your employees for the last 12 months, it is suggested to ask accountants, and if you don’t have an accountant, then you must hire one. You can also find the best accountant by searching ‘accountants near me’ to find an accountant near your area. An accountant will guide you on how the FBT rules apply to your company and what records you need to provide to an accountant.
Conclusion
If you are unaware of fringe benefits tax, then this blog will help you know more about it. Moreover, it is suggested to take help from an accountant to get FBT concessions or exemptions for your business. Despite this, you can also contact Accountants in Melbourne for more detail.