Fringe Benefits Tax + Advice
An important part of business + a useful way to attract quality staff!
Fringe Benefits Tax – Taxation Advice
Fringe Benefits Tax has been around since 1986. Whilst originally conceived to target cars, travel and restaurant meals for executives, business owners should be aware of the obligations and opportunities that FBT poses.
As a business owner, you could be liable for Fringe Benefits Tax by providing benefits to your employees, or even to yourself. Rewarding your team for their contribution is one thing, but when that constitutes a fringe benefit, there’s some vital information that you need to know about your tax obligations.
What is Fringe Benefits Tax?
A fringe benefit is a ‘payment’ to an employee, but in a different form than salary or wages. It is a non-cash benefit provided to an employee’s family or other associates. Fringe Benefits Tax can apply even if the benefit is provided by a third party. Suppose you’re a director of a company and pay yourself as an employee – if that is the case, then any benefits you incur, in addition to your salary, will be considered fringe benefits. Examples of fringe benefits include:- Allowing an employee to use a work car for private purposes
- Giving an employee a discounted loan
- Paying an employee’s gym membership
- Providing entertainment by way of free tickets to concerts, football games etc.
- Reimbursing an expense incurred by an employee, such as school fees
- Giving benefits under a salary sacrifice arrangement with an employee
HOW DOESÂ FRINGE BENEFITS TAXÂ WORK?
Fringe Benefits Tax is separate from income tax and is calculated on the taxable value of the fringe benefit. It is a requirement of the employer to self-assess their fringe benefits tax liability for the FBT year (1st April – 31st March) and lodge a Fringe Benefits Tax Return. Employers can generally claim an income tax deduction for the cost of providing fringe benefits and the FBT they pay. Employers can also generally claim GST credits for items provided as fringe benefits.Fringe Benefits Tax is calculated on the taxable value of the fringe benefit.
The employer pays the fringe benefits tax, not the employee.
To work out the fringe benefits tax liability, you gross up the taxable value of the benefit that has been provided. This reflects the gross salary that employees would have to earn at the highest marginal tax rate to buy the benefit after paying tax.
There are two gross up rates, one where the employer is entitled to claim back the GST and the other where there is no entitlement to a GST claim.
Employers are able to claim an income tax deduction for both the cost of the fringe benefit to the employee as well as the fringe benefits tax paid.
Access Our Free Guide On Fringe Benefits Tax
To find out the benefits of fringe benefits tax and how our team can help you and provide expert advice when it comes to claiming these deductions, download our free guide.
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