What is FBT?
Fringe Benefits Tax (FBT) is a tax payable by employers who provide employees with non-cash benefits that are outside their normal salary and superannuation.
Common examples of Fringe Benefits are:
- Using business vehicles (cars) for private use;
- Providing loans;
- Covering private expenses;
- Paying for car parking;
- Providing entertainment;
- Providing goods/services from the business; and
- Living Away From Home Allowances (LAFHA).
If fringe benefits are provided to the employee, the employer must value the benefits in accordance with the legislation and pay FBT at the rate of 47%.
To reduce or eliminate the FBT liability, employers can access a number of exemptions & concessions.
It is important to be aware that FBT liabilities can also be eliminated or reduced for businesses that are eligible for exemptions and/or concessions, such as not for profit charities. In most cases FBT is not allocated to contractor or volunteer benefits.
Some fringe benefits are exempt from FBT. Particular work-related items that are exempt from FBT (subject to some limitations) are:
- Portable electronic devices eg. Mobile phones, laptops
- An item of computer software;
- Protective clothing required for the employee’s job;
- A briefcase; A calculator; A tool of trade
The work-related FBT exemptions are limited to:
- Items primarily for use in the employee's employment
- One item per FBT year that have a substantially identical function, unless the item is a replacement.
Car Fringe Benefit
This is the most common fringe benefit that employers provide to their employees. If an owned or leased business car is made available for the private use of an employee, this can be provided as a Car Fringe Benefit where you are required to pay FBT.
If this is the case you need to ensure employees with Car Fringe Benefits do the following:
- 1. Maintain valid logbooks recording their personal and business travel. If you have not done this before, ensure you start this up as soon as possible.
- 2. Record the closing odometer of their vehicle as on 31 March of each year.
What should I be doing now?
If you have provided any non-cash benefits to employees during the last twelve months, it is advisable to speak to a trusted accountant or adviser on how the FBT rules apply to your business, as well as if you are unsure of what record keeping requirements need be satisfied.
If your business offers salary packaging to employees, now is also the time to review those packages to ensure they are set up accurately for the FBT year.
For tailored advice on how to achieve the best outcomes for your business in the FBT year, please get in touch with our team at BLG Business Advisers online or call (02) 4229 2211.