As the fringe benefits tax year sits right around the corner (31 March), it’s an important time for small to medium businesses to evaluate their records and ensure everything is in order. The FBT rate ending 31 March 2019 is at 47%.
So, what is FBT?
Fringe Benefits Tax (FBT) is a tax that applies when an employer provides a non-cash benefit to an employee other than by way of their regular salary or wage. Some common FBT items are vehicles that employees take home every day, car parking benefits to employees at the cost of the business, recreation (such as the annual work Christmas party) and IT related accessories (such as tablets, smartphones etc) that the business provides.
Some tips to limit your FBT exposure
- Check that gifts provided to employees are less than $300 in value (inc GST)
- Keep the cost of the annual Christmas party to less than $300 per head
- Provide non-entertainment gifts such as wine or chocolate to clients to ensure a tax deduction is available
- Replacing a fringe benefit with cash salary (an employer replaces an employee’s fringe benefit with the cash equivalent in the form of salary or wage)
- Choosing the right FBT calculation method on entertainment fringe benefits
- Providing exempt only benefits to employees, as such these would not attract an FBT liability (i.e. tools of trade, protective clothing, tablets, laptops, mobile phones to name a few)
As the FBT year ends 31 March, it is important for all employees who use a work motor vehicle for both private and work-related reasons to note the closing odometer reading on 31 March. As well as an odometer reading, it is also desirable that the employee also keep a 12-week logbook which will provide the number of kilometres driven by the work vehicle for business use (this is usually a logbook business percentage %).
If your employees are tech savvy, there are some great apps that can be used to record the kilometres used such as:
- ATO Vehicle Logbook
- Drivers Direct
- Travel Logs
FBT and End of Year Planning
As an employer or business owner it is their responsibility for paying FBT tax. This type of tax is applied to non-cash benefits that they have provided to their employees, typical examples of these benefits are vehicles that employees take home every day, laptops the employer provides to the employee, car parking benefits at the cost to the business to name a few.
It is important to plan well for the FBT year which ends 31 March each year (commences 1 April the prior year). Below are some obligations that should be considered from a business owner’s perspective:
- Payroll Tax – very important to make sure when valuing fringe benefits for payroll tax side of things
- Payroll – ensuring that individual fringe benefit amounts are reported correctly on payment summaries issued
- Making sure that the FBT treatment and tax are correct when dealing with entertainment benefits that may have occurred during the FBT year
- Salary Packaging – this is very important that employee’s salary packages align with the reconciliation of FBT from the business side of things
Fringe Benefits can be very overwhelming for a business owner as it is a complex area of taxation. So, it is imperative that any taxable benefits provided to employees are recognised and taxed correctly when calculating fringe benefits liabilities.
If you would like assistance in reviewing your business’s current situation, please contact us on 07 5413 9300 for a confidential chat.