Fringe benefits tax (FBT) is a tax employers pay on certain benefits (eg. non-cash benefits) they provide to their employees – including their employees’ family or other associates.
The general concept of FBT is to ensure that any benefits over and above wages paid to employees are taxed to capture the PAYG withholding that would be paid if the benefit had been paid as a wage.
FBT is paid by the employer to the Australian Taxation Office (ATO) and therefore it is the employers’ responsibility to comply with the relevant requirements.
FBT is often overlooked by small businesses thinking that it doesn’t apply to them but this is not always the case.
Following improvements in the ATO’s IT capabilities and further access to financial and non-financial data from various external departments, they are now positioned with the tools to target employers for review.
The list of benefits that fall within the FBT regime are listed below:
- Car fringe benefits
- Car parking fringe benefits
- Meal and Entertainment fringe benefits
- Expense payment fringe benefits
- Loan fringe benefits
- Debt waiver fringe benefits
- Housing fringe benefits
- Board fringe benefits
- Living away from home allowance fringe benefits
Whilst this list may seem quite black and white and leads to businesses assuming they do not have any benefits to worry about, there is complexity behind most of these items with the devil being in the detail.
Given the complexity surrounding this regime and the ATO’s continual improvement in being able to monitor and target employers for review, it is essential that businesses rely on their accountant or financial advisor to assess their FBT status.
The FBT year differs from the traditional financial year ended 30 June. The FBT year commences on 1 April and ceases on 31 March of each year.
For the 2020 FBT year, finishing up on 31 March 2020, the due date for lodgement and payment of any FBT tax will be 21 May 2020.
There have also been several significant developments for employers when determining their FBT liability for the 2020 and beyond.
- New Ruling TR 2019/D5
This Ruling is taking affect from 1 April 2020 and it introduces a number of major changes to the application of car parking benefit rules. It is important that employers understand what the changes involve and prepare accordingly.
- New salary packaging opportunity for fully maintained associate leases
Employees who pay tax at the top marginal rate can generally obtain income savings by salary packaging a fully maintained “non luxury” car. This is mainly due to the concessional valuation rules that apply to car fringe benefits.
At Davidsons, as part of our FBT assistance we provide our business clients with an FBT questionnaire that includes easy to answer questions on various benefits to help assess their FBT obligations.
If you are an employer and would like to find out more about FBT or receive our questionnaire to help assess your obligation, please contact your Davidsons team member or email us at firstname.lastname@example.org for more information.
Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article