Understand the basics of fringe benefits tax (FBT), find out how it applies, and as an employer, what you need to know about FBT and what possible deductions you can claim.
What is Fringe Benefits Tax (FBT)?
Employers pay fringe benefits tax on certain benefits offered to their employees or their employees’ families or other associates. FBT is not the same as income tax. Generally, it is calculated on the taxable value of the fringe benefits. As an employer, you must check your FBT liability for the FBT year. If you have an FBT liability, you need to file an FBT return and pay the FBT you owe.
Types of Fringe Benefits
The following are some types of fringe benefits:
- provision of company cars
- payment of private expenses
- entertainment benefits
- low-interest loans
The following are not considered fringe benefits:
- contributions of an employer to complying super funds
- wages and salary
- benefits provided to contractors and volunteers
- payments considered to be dividends under Division 7A
- rights or shares provided under employee share acquisition schemes
- employment termination payments
Purpose of FBT
The primary purpose of FBT is to make sure that employees who get non-cash benefits from their employers are liable to a similar tax treatment as those who get income in the form of wages or salary.
Employers need to calculate and pay the FBT to the ATO. They are required to assess the fringe benefits value accurately that is provided to the employees and apply the right FBT rate that is currently set at the highest individual tax rate.
FBT Concessions and Exemptions
FBT is applied to all employers, certain FBT exemptions and concessions are available. These concessions may vary depending on the employer’s category or industry. For instance, may have particular exemptions or reduced rates available to employers.
Reporting and Record-Keeping
Employers need to maintain records of fringe benefits given and adhere to reporting requirements as highlighted by the ATO. It includes filing FBT returns and offering accurate information about the benefits given. FBT can be a complex process to understand and it would be beneficial to get professional advice to ensure compliance and correct reporting. Tax accountants with experience in FBT can help employers through the process and help them understand their obligation. It is important to understand fringe benefits tax for employers in Australia by following guidelines given by the ATO. Employers can ensure compliance assess their fringe benefits tax (FBT) liability and meet their tax obligations. Don’t forget to seek help from a professional and keep yourself updated with new changes in FBT regulations.
How Much FBT Do You Pay?
You ‘gross up’ the taxable value of the benefits you’ve supplied to determine how much FBT to pay. This is the amount of gross revenue that your employees would need to make in order to afford the perks at the highest marginal tax rate (including the Medicare levy). This “grossed-up” value of the fringe benefits is 47% of the FBT that you pay.
Can You Claim GST Credits and Deductions?
As an employer, you are allowed to claim:
- GST credits and income tax deductions for the value of offering fringe benefits
- if you claim GST credits, you will be allowed to claim the GST-exclusive amount as an income tax deduction
- if you can’t claim GST credits, you’ll be able to claim the whole amount as an income tax deduction
- an income tax deduction for the fringe benefits tax you need to pay.
What do You Need to do?
As an employer, you need to:
- check the type of fringe benefits you offer.
- Check FBT concessions and methods you can reduce FBT.
- Some benefits are not included in FBT
- you can minimise your FBT liability using alternatives to fringe benefits or offering benefits that qualify for a concession.
- If you are a not-for-profit employer, you may qualify for an exemption for not-for-profit organisations.
- Work out the taxable value of the fringe benefits you offer.
- Calculate your FBT liability.
- Maintain records.
- File an FBT return and pay the fringe benefits tax you owe.
- Record every employee’s fringe benefits in their end-of-year payment information, if needed.
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