Who pays FBT?
The employer is responsible for paying FBT, and it is based on the taxable value of the fringe benefits provided to employees and their associates.
If the employer provides only salary and wages, no FBT will be applicable.
When is the FBT year?
Businesses that provide fringe benefits to employees must lodge an annual Fringe Benefits Tax Return. Following lodgment, they may also be required to make quarterly FBT instalments as part of their Business Activity Statement (BAS) reporting.
The FBT year runs from 1 April of the previous year to 31 March of the current year, with lodgments and payments for the 2023 year having a due date of 21 May, or 25 June if lodging through a tax agent.
What is the FBT calculation?
Calculating FBT requires determining the gross value of the employee benefits provided, and then applying the appropriate gross-up rate, depending on whether the benefit is subject to GST or not.
The 'gross-up value' effectively reflects the gross salary your employees would have to earn, at the highest marginal tax rate (including Medicare levy), to buy the benefits themselves.
After calculating the grossed-up value, any employee contributions are subtracted, and the resulting taxable value is then multiplied by the FBT rate of 47% (for the 2022-23 FBT year).
It's important to note that some fringe benefits may be exempt from FBT or eligible for concessional treatment.
FBT exemptions and concessions
There are several exemptions and concessions available for certain types of fringe benefits. These include:
- Minor benefits: Benefits that are less than $300 in value and provided on an infrequent or irregular basis may be exempt from FBT.
- Work-related items: Items that are primarily used for work purposes, such as laptops or tools, may be exempt from FBT.
- Car parking: Car parking provided on the business premises may be exempt from FBT if certain conditions are met. Read about car parking fringe benefits.
- Certain Entertainment benefits: Read about entertainment, fbt and tax deductibility.
- Certain Electric vehicles: Read about fbt savings for electric cars.
- Certain not-for-profit organizations, such as Public Benevolent Institutions (PBIs) and charities, may be eligible for FBT exemptions for some benefits provided to their employees.
Car Fringe Benefits
One of the most common fringe benefits we see is providing a car to an employee for their private use. The taxable value of a car fringe benefit is based on a number of factors, including the cost of the car, the date it was acquired, and the business use percentage of the vehicle.
There are several methods that can be used to calculate the taxable value of a car fringe benefit, including the statutory formula method and the operating cost method. Employers should be aware of the rules and requirements surrounding car fringe benefits to ensure compliance with FBT obligations. You can find details about Car Parking Fringe Benefits here.
FBT is a complex tax that requires careful attention from employers to ensure compliance. By understanding the basics of FBT and taking advantage of exemptions and concessions where possible, you can reduce the amount of FBT that you are required to pay.
For assistance with your FBT obligations or to have your questions answered about any tax obligations, feel free to talk with us. Our team at BLG Business Advisers are Wollongong Accountants who service right around Australia and are here to help you.