In this current climate, Fringe Benefits Tax (FBT) is more complex than ever – with understanding the ins and outs of FBT tricky enough as it is.
Agilis CA is here to help you with this, and break down what FBT is, types of FBT, and the rules surrounding COVID-19 and FBT.
What is Fringe Benefits Tax?
Fringe benefits tax (FBT) is a benefit paid to an employee – but not in the form of a salary or wage.
Examples of fringe benefits include:
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- An employee using a work car for private purposes
- Giving discounted loads to employees
- Paying a gym membership for an employee
- Providing entertainment e.g., free concert tickets
- Reimbursing employee incurred expenses e.g., school fees
- Employee benefits under salary sacrifice
FBT is paid by employers and applies even if fringe benefits are provided by a third party under arrangement with an employer.
It is separate from income tax, and is instead calculated on the taxable value of the fringe benefit.
Employers are required to self-assess their FBT liability, with the FBT year running from April 1, – March, 31.
An FBT return is required to be lodged. To register for FBT to lodge your return, click here to visit the ATO website for instructions.
Usually, an employer can claim an income tax deduction for the cost of providing fringe benefits, and the FBT paid, as well as GST credits for the items provided as fringe benefits.
What Are The Types of Fringe Benefits?
The type of benefit provided and it’s FBT categorization ultimately determines how an employer calculates and reports a fringe benefit taxable value.
To view the ATO’s list of types of fringe benefits, click here.
How To Calculate Your FBT
When lodging an FBT return, an employer must self-assess the amount of FBT they are required to pay.
To view the processes of calculating how much FBT you have to pay, click here.
COVID-19 and Fringe Benefits Tax
Are you providing rapid antigen tests and other COVID-19 related benefits to employees?
Business owners providing benefits in addition to salary or wages because of COVID-19 need to check if fringe benefits tax could apply.
Although you may be providing various benefits to create a safe workplace and support employees, you may be inadvertently liable for fringe benefits tax.
Track COVID-related benefits paid for by the business
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- COVID-19 PCR and RAT testing
- Work from home equipment
- Work vehicles that are garaged at employees’ homes
- Vaccination incentives
- Travel or accommodation costs
- Protective gear
- Emergency health care
If you pay for COVID-related services for employees, you’ll need to track them in your accounting system to make it easy to determine if you have an FBT liability and if you should report any amounts on employees’ end of year income statements.
The minor benefits FBT exemption may apply for many or all of the benefits you have provided to employees – however, we will need to review your records to ensure that you’re not going to get a surprise bill from the ATO down the track!
If you are unsure whether FBT applies to your business, talk to Agilis CA
FBT is a complex area of tax law, and there are specific tests that must be satisfied to be exempt from FBT.
Contact Agilis CA today to go through the benefits you have provided to employees.
We can look at the minor benefits and otherwise deductible rules to ensure you’re not paying more tax than you need to. If you’re not already registered for fringe benefits tax, we will look at whether FBT applies and register your business if needed.
We can also notify you of any amounts that need to be reported on employees’ income statements at the end of the payroll year.
The fringe benefits tax year finishes on 31 March – the end of this month! So, now is an excellent time to get ahead and assess whether your business could be up for an FBT bill.
This blog was originally published by BOMA, but has had edits made by Agilis CA for the benefit of our readers.
