Providing benefits can be a great way to recognise and reward your employees’ work, but they do bring Fringe Benefits Tax (FBT) complications.
The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary for end of financial year.
A fringe benefit is a non-cash incentive paid to an employee on top of their salary.
For example, an employer may offer a salary package that includes a business car on top of the base remuneration to attract applicants.
It’s important to note that a business mobile phone, business laptop, business iPads etc. are usually exempt from FBT.
The advantage of a fringe benefit arrangement is two-fold: it provides employers with a way to incentivise employees without increasing wages; and employees can exclude fringe benefits from their taxable income.
Who must pay FBT?
You need to pay Fringe Benefits Tax (FBT) if you provide certain fringe benefits to an employee in respect of employment.
An employee may receive fringe benefits in the form of:
- a car
- car parking
- low interest loans
- payment of private expenses.
It’s entirely legal and a common form of reimbursement used by businesses for their employees.
FBT does not apply to sole traders/partner in a partnership, they are benefits you provide to your employees and not yourself.
How do I register for FBT?
You need to register for FBT and lodge an FBT return if you have a liability during an FBT year which is 1 April to 31 March.
What is the FBT rate?
Before looking into calculating your FBT, make sure you’re aware of the current rates.
You can do this by heading over to the ATO website here.
When do I need to report on FBT?
The fringe benefits are reportable if the total taxable value of the fringe benefits you provided in the FBT year (1 April to 31 March) exceeds $2,000.
The due dates for lodgement of 2017 FBT returns for all tax agents are:
- 25 June if the return is lodged electronically
- 21 May if the return is lodged by paper.
What are the changes to Fringe Benefit Tax (FBT)?
There have been recent changes to how fringe benefits are reported on payment summaries.
If 57A of the Fringe Benefits Tax Assessment Act 1986 applies, you need to report the benefits that fall under that section on payment summaries, and show other reportable fringe benefits provided to the employees separately.
Who can I ask for help?
Fringe benefits tax is complex and you should always consult your advisor on these matters.
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