Spotlight on Fringe Benefits Tax: Pay to be nice

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Top tips at tax time from 542 Partners

Are you a nice employer? Do you shower your staff with benefits when they make their targets?

Sometimes YOU need to pay to be nice.

Enter > Fringe Benefits Tax.

Fringe Benefits Tax (FBT) is a tax levied on benefits provided by an employer to their employees. It is worth noting that if you are a director and conduct your business through a company or a trust, you may be considered an employee of the company or trust for FBT purposes. In this situation you will need to account for and pay FBT on any fringe benefits you provide to yourself!

The FBT is paid by the employer and is approximately equal to the benefit provided. So, if an employer provides an employee a benefit valued at $1,000 and it is caught under the FBT, the cost to the employer will be approximately $2,000 ($1,000 for the actual benefit and then approximately $960 in FBT).

Before you go reeling in last years’ Christmas bonuses, there are exemptions. Certain items provided as benefits which aren’t caught can include; minor benefits (generally under $300 in value), portable electronic devices, protective clothing, tools of the trade, some transport and relocation expense benefits and there are also substantial FBT exemptions for not for profit employers.

The main items or benefits that we see provided to employees that are subject to FBT are motor vehicles, boats, ‘entertainment’, housing and discounted or interest-free loans.

Rapid round: 5 points you need to know about FBT

  1. Fringe Benefits Tax (FBT) is a tax paid by employers NOT employees.
  2. FBT is only payable on benefits provided by employers to employees and their associates (relatives).
  3. The FBT year is the 12 months beginning 1 April and ending 31 March.
  4. FBT is approximately equal to the value of the benefit provided.
  5. Some Fringe Benefits are required to be reported on employees’ payment summary form as a Reportable Fringe Benefit Amount.

Confused about FBT or know someone who is? Give us a call to arrange a consultation.

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