What is Fringe Benefits Tax (FBT)?
By Travis Bacon
February 15, 2022
What is a Fringe Benefit?
A Fringe Benefit is something provided to an employee in addition to their wage. Essentially it is a non-cash benefit as a result of their employment. Some examples of this are meal or recreational expenses, personal usage of a business car, car parking expenses, low-interest loans, gym memberships, etc.
What is Fringe Benefits Tax?
A business could pay an employee for their work in Fringe Benefits and avoid withholding and paying tax by not paying a cash wage. But, of course, the government doesn't like this, enter stage left Fringe Benefits Tax. Because the government sees a Fringe Benefit as a type of employee remuneration, they like to collect tax on that amount. Hence Fringe Benefits Tax. It is essential to understand that Fringe Benefits Tax is a separate tax from regular income tax and salary and wage taxes. In fact, to make things more confusing, the FBT year runs from 1 April to 31 March.
Are There Any Exemptions?
Just because you provide a Fringe Benefit to an employee doesn't mean that Fringe Benefits Tax will apply. There are many exemptions and reductions available for various industries and types of benefits.
A common exemption is where the Fringe Benefit provided is something that is used primarily for work purposes. Examples include a laptop, mobile phone, etc.
Another common exemption is that car parking Fringe Benefits are exempt for small businesses with a turnover of less than $50 million.
Do I Need To Lodge An FBT Return?
We suggest that if you provide any Fringe Benefits to your employees that you consider lodging a return, even if the taxable value is nill. The reason for this is that from the date of lodgement of the FBT return, the ATO has two years to review it; if you don't lodge a return, they have an opened ended amount of time to review your FBT obligations.
You can register for FBT online via the Australian Government Business Registration Service. The due date for filing your FBT returns via a tax agent like TaxDigital is 35th June.
Note that when the taxable value of FBT per employee reaches $2,000, you will need to report these amounts on their yearly payment summary via your payroll software.
How Can TaxDigital Help?
Unfortunately, FBT is highly complicated, and many businesses try their very best to avoid it - we would recommend avoiding it where possible. See, the problem is that there are regular changes to Fringe benefits and how they are to be reported. So it can be challenging to stay up to date. At TaxDigital, we assist small businesses in reviewing their employee agreements, remuneration packages, and expense accounts to identify any possible FBT liabilities. If you would like some personalised advice or assistance, feel free to reach out to us on 0407 438 849 or email@example.com.
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek personalised tax advice from us at TaxDigital. Information is current at the date of issue and may change.
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