Fringe Benefits Year Ending Soon
With the end of the Fringe Benefits Tax (FBT) year fast approaching it will be useful to review the benefits that have been offered to your employees or your employees associate during the year 1 April 2017 to 31 March 2018.
The most common benefits provided to employees include the following:
- Car fringe benefits
- Car parking fringe benefits
- Loan fringe benefits
FBT is a tax at 47% of the grossed up benefit provided. It is definitely worth understanding how it works to save yourself some money. Many businesses are caught, as they don’t understand how FBT works.
Car Fringe Benefits
Fringe Benefits tax can apply when a business provides a car to an employee which is available for private use. A car is considered available for private use if it is stored at or near an employee’s residence or the employer allows the employee to use it for private purposes.
There are two reporting options available to determine the best method to use, the first called the operating method and this will calculate the private use of the vehicle based on the private use percentage determined in a log book and applying this against the running costs of the vehicle.
A log book should be completed over a 12 week period to confirm the business usage of any new vehicle purchased, if the vehicle usage has changed significantly or if the log book was completed more than 5 years ago. The lower the private use, the lower the taxable value of the fringe benefit.
The other option to consider is the statutory method whereby the cost of the car is multiplied by the statutory rate of 20% to determine the taxable value of the fringe benefit.
Car parking fringe benefits
This fringe benefit arises if an employer provides car parking to an employee and all of the following conditions are met:
- The car is parked at premises that are owned or leased by the employer.
- The car is parked for a total of more than 4 hours between 7.00am and 7.00pm on any day.
- The car is owned or leased by an employee or provided by you as the employer.
- The parking provided to the employee is considered as part of their employment with you.
- The car is parked at or near the employee’s primary place of employment
- The car is used by the employee to travel to and from work at least once on any day
- There is a commercial parking station that charges a fee for all-day parking within a one-kilometre radius of the employers’ premises and where the car is parked, and the fee charged is more than the car parking threshold (for the year ending the 31 March 2018, the threshold is $8.66) and more than what is being charged to the employee.
Note that there are exemptions on carparking FBT for small business (turnover less than $10 million), certain non-profits, or the provision of disability carparking. Check our article on this topic here https://pjtaccountants.com.au/car-parking-fbt-rules/ or talk to PJT if you’re uncertain on this ruling.
Where an employer provides entertainment by way of food and drink, recreation, accommodation or travel in connection with the entertainment.
For example, entertainment may include the following:
- Christmas party meals, drinks and entertainment for the staff and family.
- Tickets to sporting or cultural events.
- Providing lunch for employees (including directors)
Many people believe that if you have a lunch meeting with a client – it is a tax deduction. This is not always the case. Often it is caught by the FBT rules. Entertainment is often a tricky area when it comes to FBT, so it is important to understand the rules.
Loan and debt waiver fringe benefits
A loan fringe benefit occurs when a loan is provided to an employee and no interest or minimal interest (less than the benchmark interest rate of 5.25% for the year ending 31 March 2018) is charged on the loan.
A debt waiver fringe benefit arises when the employer will waive or forgive the loan of an employee when for example the employment relationship is terminated.
If you have been providing any of the above to your employees please contact PJT. We can run through a series of questions with you to determine any liability and give you some advice on how to avoid getting cause by FBT.