Fringe benefits tax (FBT) is a tax employers pay on benefits they provide to their employees outside of payroll – this includes all employees of a business including directors and business owners, along with their family or other associates.
The general concept of FBT is to ensure that any benefits (cash and non-cash) provided to employees that are not captured through payroll, are considered as part of an employee’s income and taxed accordingly. Although with FBT, the tax is paid by the employer.
What Benefits are subject to the FBT regime?
Some examples of these benefits include:
- private use of company car
- gift cards
- travel points
- expense payment
- product allowances and discounts
- entertainment in the form of Christmas parties and functions
- other forms of compensation that are not part of a salary or wage.
What dates do I need to know?
The FBT year is different to the normal financial year and instead runs from 1 April to 31 March, with a lodgement deadline of 22 May or 26 June if your FBT return is lodged by a Tax Agent.
If your business does any of the following:
- provides cars
- novated leases
- car parking
- reimburses expenses that are both private and work related
- provides entertainment (food and drink)
- provides product for personal use (clothing or staff cards etc)
it is highly likely that you are providing a fringe benefit.
There are a number of exemptions and concessions available to reduce your FBT liability, such as the ‘minor benefits’ exemption and employee contributions and often they can reduce the liability completely.
Given the complexity surrounding this regime and the ATO’s continual improvement in data matching, it is essential that businesses rely on their accountant or financial advisor to assess their FBT status.
What’s new in FBT?
The latest change to FBT is the electric car benefit exemption. The Federal Government have brought in an FBT exemption to encourage the take up of new electric vehicles. If you are providing an electric car to employees by way of use or novated lease and there is a private use component, there is no longer any FBT associated with this benefit. This is a game changer for FBT and Car fringe benefits, making it more attractive to employees and employers.
Again, the devil is in the detail and there are some rules that need to be followed to ensure the benefit provided is exempt from FBT.
- The vehicle is an electric or hybrid vehicle.
- The vehicle needs to be first held and used (ever) on or after 1 July 2022
- The vehicle cost (when new) must be below the luxury car tax threshold ($84,916 for 2023FY).
- FBT returns still need to be completed for this benefit and the Reportable Fringe benefit amount included in the employees Income statement.
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 email@example.com for more information.
This article was written by Senior Accountant, Jenny Elliott.
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.