The FBT rate increases from 47% to 49% from 1 April 2016. Employers need to take this new rate into account with current or new salary packages with employees.
How do I know if I need to pay FBT?
Fringe Benefits Tax (FBT) is a tax payable by an employer in respect of various benefits provided to employees. If you are not sure whether your business is providing fringe benefits to its employees, here are some key questions you should ask yourself:
- Does your business make vehicles owned or leased by the business available to employees for private use?
- Does your business provide loans at reduced interest rates to employees?
- Has your business forgiven or released any debts owed by employees?
- Has your business paid for, or reimbursed, any private expenses incurred by employees?
- Does your business provide a house or unit of accommodation to employees?
- Does your business provide employees with living-away-from-home allowances?
- Does your business provide entertainment by way of food, drink or recreation to employees?
- Do any employees have a salary package (salary sacrifice) arrangement in place?
- Has your business provided employees with goods at a lower price than they are normally sold to the public?
Shortly, we’ll be sending out our annual FBT Questionnaire to all our business clients to help you further in identifying if you have a FBT liability.
What is exempt from FBT?
Certain benefits are excluded from the scope of the FBT rules. The following work related items are exempt from FBT if they are provided primarily for use in the employee’s employment:
- Portable electronic devices that are provided primarily for use in the employee’s employment – further information below
- An item of computer software;
- Protective clothing required for the employee’s job;
- A briefcase;
- A calculator;
- A tool of trade.
Two laptops are better than for small business
If you are small business with a turnover under $2M, your business can offer employees more than one work-related portable electronic device, such as mobile phone, laptop and tablet and not have to pay FBT on it even if the device is the same or similar to others already provided in that same FBT year. All other businesses are limited to one device that is identical or similar to another for each employee per FBT year.
Is Salary Sacrificing worth it?
Now is a good time to review any salary sacrifice agreements to ensure they will still achieve their intended goals and not creating an administrative burden for little to no benefit with the FBT rate continuing at 49% for another year. For employees earning above $180k however, the difference in timing between the FBT year and the income year creates a unique planning opportunity between 1 April 2017 when the FBT rate reduces back to 47% and 30 June 2017 when the 2% debt tax is removed.
Travelling or living away from home – what’s the difference?
The ATO will be looking closely at Australian taxpayers claiming living away from home (LAFH) allowances to make sure they are not accessing FBT concessions incorrectly. So what is the difference between travelling or living away from home?
If someone is living in say Sydney but are heading to Melbourne on ad hoc trips every other week, they are probably just travelling and would only be entitled to travel deductions, not FBT concessions that apply to LAFHA’s. If that person however sets up a home temporarily in Melbourne and keeps their home in Sydney for their use (unrented), then it’s more likely they can access the living away from home allowance concessions.
Care also needs to be taken where transport is provided to fly-in-fly out workers as special rules apply and it’s important to ensure the travel is exempt from FBT.
What is a Car Fringe Benefit? Does it apply to you?
A car fringe benefit can occur when an employer makes a car they own or lease available for the private use of an employee. If you conduct your busienss through a company or trust, you may be an employee of the company or trust.
Are any of your business cars being used privately by an employee?
When a non-cash benefit (like the use of a car) has been provided to an employee, your business may be liable to pay FBT.
You can calculate the taxable vaue of your Car Fringe Benefit using either the Statutory Formula Method or the Operating Cost Method.
But that's our job!
- which method yeilds the lowest taxable value
- reduce your FBT liability to nil; and
- ensure you keep adequate FBT records.
Warning! You need to have a valid log book to substantiate your business use. You will be required to sign a Log Book Declaration. If you don't have a log book for each car, start one ASAP.
For more information about Car Fringe Benefits download our What is a Car Fringe Benefit FactSheet.
How we can help you
If you’re not sure if your business has a FBT liability or not, that’s ok. Shortly, we’ll email you a brief FBT Questionnaire that will take you just 2 minutes to review and sned back to us. We'll then instantly let you know whether your business is liable to pay FBT. And, of course, if you are we will do everything we can to legally minimise it!
Please feel free to contact us if you have any queries or would like any further information.