TAKE THE RISK & EFFORT OUT OF FRINGE BENEFITS TAX

You’re doing the best for your employees by discussing salary packaged arrangements. But don’t forget about your Fringe Benefits Tax liability for car parking, meal entertainment, covering costs when they’re living away from home and so many other FBT categories. Don’t worry, we can help with all of that!

FRINGE BENEFITS TAX LIABILITY: THE TAX YOU CAN’T FORGET ABOUT

One of the challenges of paying the correct FBT year on year is the fact that these FBT rates apply to so many aspects of your business. And then there are certain FBT exemption rules that you may not even know of. It’s hard to keep track!

Firstly, don’t think you can simply skip this responsibility. Fringe Benefits Tax is a tax with stringent guideline and if you take the chance of simply submitting a nil Fringe Benefit Tax return, you’re bound to get audited.

Secondly, you may think the three-year amendment rule protects you. But that only applies to business owners who did lodge an FBT return at some stage. So, if you don’t have a proper system in place soon, you risk getting into a dispute with the Australian taxation office.

All of this stress is unnecessary, because the Superior Business + Tax team wants to help you get it sorted.

FRINGE BENEFITS TAX LIABILITY DEFINED

With each team member at your company, as part of the process of employment of the employee, you would discuss a salary package. For a salary sacrifice, employers can cover certain expenses on the worker’s behalf. In reality, the employee still receives payment, but not as part of his or her salary. This is called fringe benefits.

Common fringe benefits include:

• Car fringe benefits when an employee is allowed to use a company car

• Covering expenses, such as school or membership fees

• Loans between the company and the employee

• Entertainment benefits, such as concert tickets

• This salary packaging results in tax benefits for the employee, but the employer is liable for tax payments on certain of these benefits.

When does Fringe Benefits Tax Liability Not Apply?

The guidelines for the taxable value of the fringe benefit you need to mention on your business tax return, are quite extensive. Below is a list of excluded fringe benefits. You usually don’t have to include them in your total taxable amount because they carry 0% FBT liability. Just note that in some cases this may change and you will be taxed when a threshold amount is exceeded:

• Basic salary or wages

• Food and drink expenses

• Allowances for housing in remote areas or when an employee lives away from home

• Expenses when an employee relocates

• Benefits of $300 or less that employees don’t incur often

• Clothing and tools required for work

• Work accessories including briefcases, mobile phones and some other electronic devices

• Purchasing shares, but in certain contexts only

• Volunteers or contractor benefits

• Gifting or payments upon an employee’s contract termination

The Challenges Businesses Face During Tax Season

It can be challenging to navigate the guidelines and do accurate calculations, since many factors are at play:

You may think you’re exempt from paying FBT, but upon a closer look of payment summaries you’ll see your benefits to a certain employee exceeds 2,000 dollars. This can immediately require you to report those fringe benefits.

For each year you must make an accurate calculation, using FBT rates, for relevant amounts for the period 1 July to 30 June.Laws apply to all current employees but also those from the past and future employees.

To calculate the fringe benefit tax amount relating to car FBT, you can use either a statutory formula or the operating cost method. Without the necessary insight, it can be challenging to identify the most beneficial option for your business.

There are numerous guidelines describing how laws apply to health care expenses and expenses relating to a family member of an employee.
In addition, from time to time there are amendments, such as the lifting of exempt benefits on laptops that took place in 2008 and a meal & entertainment adjustment in 2016.

These facts showcase just some of the reasons why businesses now opt for a tax expert to manage fringe benefit tax on their behalf. Can we do the same for you?

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