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It’s FBT time again…

With the Fringe Benefits Tax (FBT) year coming to an end on 31 March 2017, it’s a good time to brush up on FBT and what it means for you and your business. The FBT net is quite broad and looks to capture many arrangements between employers and employees. It is important to understand when FBT may apply so that any resulting tax can be managed.

We have compiled a list of the most common fringe benefits, FBT exemptions and reduction options so that you can determine whether this may apply to your circumstance.

What is FBT?

The FBT year runs from 1 April to 31 March and is a tax payable by employers on certain benefits provided to employees or their associates. Fringe benefits tax is separate from income tax and is calculated on the taxable value of the fringe benefits provided. 

Examples of fringe benefits include:

  • Allowing your employee to use a work car for private purposes
  • Providing your employee with a discounted loan
  • Paying an employee’s gym membership or other personal costs
  • Providing entertainment, such as free concert tickets
  • Reimbursing an expense incurred by your employee, such as school fees
  • Providing benefits under a salary sacrifice arrangement

Common FBT categories

The most common fringe benefit categories are: 

  • Car fringe benefits arising when employers provide a car which is available for private use by the employee;
  • Entertainment fringe benefits arising from the provision of recreation, food and drinks (including associated travel costs); and
  • Expense payment fringe benefits arising when paying for an employee’s private expenses either by direct payment or by reimbursement.

Other categories of fringe benefits include car parking, loans, living away from home allowance, debt waivers, housing and board.  In addition, a residual fringe benefit may arise if an employee is provided with any benefit that is not one of the specific fringe benefit categories.

Common FBT exemptions

Some benefits are exempt from FBT, or receive concessional treatment, however specific conditions often need to be satisfied.  Some examples of FBT exemptions include:

  • Work-related items (provided items are primarily used for employment);
  • Minor benefits (generally items less than $300 notional taxable value, excluding meal entertainment); and
  • Car parking for small business (subject to a number of conditions being satisfied).

Other exemptions and concessions may apply to taxi travel expenses and living away from home allowance benefits.  Specific concessions also apply for non-profit organisations.

Reduction options

A number of fringe benefits attract concessional treatment however these benefits are usually obscure and uncommon. For employers looking to provide further incentives to employees by way of salary packing etc., there are a number of benefits that can be provided that attract little to no FBT, such as:

  • Only providing benefits that would be an income tax deduction if the employee had paid for the benefits themselves (e.g. reimburse for business use of mobile phone / home internet costs) or
  • Providing exempt fringe benefits like portable devices (laptops, iPad’s etc.);
  • If an employee is provided with a motor vehicle for use whilst at work and does not need to take the vehicle home, the vehicle should remain on the employer’s premises (including leaving the keys in the office). If a vehicle is only used for business travel and is not made available for private use by employees, there will be no FBT.

Compliance requirements

If your business is providing fringe benefits, and if the employee does not reimburse the business for the taxable value of the fringe benefit provided, the business is required to register for fringe benefits tax, and lodge an FBT return.  The lodgement and payment due date is 21 May. However, if the return is lodged by a registered tax agent, the payment due date is extended to 28 May and the lodgement due date is extended to 25 June.

What you need to do now

If your business is providing fringe benefits to employees, the following will assist you in getting ready for the end of the fringe benefits tax year:

  • Set a reminder for 31 March to record odometer readings of all motor vehicles provided to employees and subject to FBT;
  • Request details from employees of when these vehicles were not available for private use;
  • Review your files to identify any possible benefits provided to employees and their associates;
  • Review salary packages in place for any unspent amounts; and
  • Request receipts for any unreimbursed expenditure from employees.

Remember – Directors of a company or trust may also be subject to FBT if they are receiving certain benefits.  Sole traders and partners in a partnership however are not employees, and are therefore not obligated to report fringe benefits.

We can help

If you would like more information about fringe benefits tax or assistance with preparation of your FBT return, please contact us on 07 3217 2477.