Its Fringe Benefit Tax (FBT) Time Again
Fringe Benefit Tax is only imposed on employers. When an employer (or employer’s associate), provides an employee (or an employee’s associate), a benefit in respect of employment of the employee, it may be subject to FBT. It also applies if the employer provides a benefit to a third party under an arrangement with the employee.
For most businesses the majority of benefits that fall under FBT can be summarised as ;
FBT is payable on the private usage of a car provided to an employee. These include cars which are owned or leased by the employer and also novated leases etc. There are two methods to calculate the FBT for cars.
How can I reduce my FBT liability?
You may wish to consider the following to reduce your liability :
Replace fringe benefits with cash salary - if you replace your employee's fringe benefits with the cash equivalent in the form of salary or wages, the employees will pay income tax on the salary or wages and you do not incur the fringe benefit tax liability.
Using employee contributions - in most cases, you can reduce your FBT liability by obtaining a contribution from employees towards the cost of providing their fringe benefits.
What is an employee contribution ?
It is a payment by an employee towards the cost of a fringe benefit. Generally, the payment is a cash payment made to the employer or person who provided the benefit. However, an employee can also make an employee contribution by contributing towards a car fringe benefit by paying for some of the operating costs, such as fuel, if these are not reimbursed by the employer. Contribution of services as an employee is not considered an employee contribution for FBT purposes.
An employee contribution normally will be assessable income in the hands of the employer.
How do employee contributions affect the value of fringe benefits?
The taxable value of a fringe benefit can be reduced by the amount of employee contributions towards the cost of particular fringe benefits.An employee contribution towards the cost of a particular fringe benefit can only be used to reduce the taxable value of that fringe benefit. It cannot be used to reduce the taxable value of any other fringe benefit.
Please note that the employee contribution has to be made from after-tax salary. Sacrificing an amount of salary does not constitute an employee contribution.
If you have any concerns about FBT before March 31st, please contact us.
For most businesses the majority of benefits that fall under FBT can be summarised as ;
- Motor Vehicles
- Loans
- Expense Payments
- Housing
- Living Away from Home Allowances
- Property
- Board & Meals
- Meal Entertainment
- Car parking
FBT is payable on the private usage of a car provided to an employee. These include cars which are owned or leased by the employer and also novated leases etc. There are two methods to calculate the FBT for cars.
- Log book - based on actual usage from a properly maintained log book over a 12 week period completed in the last 5 years or,
- Statutory method - based on the total number of kilometres travelled under the premise that the more kilometres travelled the more likely the car is used for business.
How can I reduce my FBT liability?
You may wish to consider the following to reduce your liability :
Replace fringe benefits with cash salary - if you replace your employee's fringe benefits with the cash equivalent in the form of salary or wages, the employees will pay income tax on the salary or wages and you do not incur the fringe benefit tax liability.
Using employee contributions - in most cases, you can reduce your FBT liability by obtaining a contribution from employees towards the cost of providing their fringe benefits.
What is an employee contribution ?
It is a payment by an employee towards the cost of a fringe benefit. Generally, the payment is a cash payment made to the employer or person who provided the benefit. However, an employee can also make an employee contribution by contributing towards a car fringe benefit by paying for some of the operating costs, such as fuel, if these are not reimbursed by the employer. Contribution of services as an employee is not considered an employee contribution for FBT purposes.
An employee contribution normally will be assessable income in the hands of the employer.
How do employee contributions affect the value of fringe benefits?
The taxable value of a fringe benefit can be reduced by the amount of employee contributions towards the cost of particular fringe benefits.An employee contribution towards the cost of a particular fringe benefit can only be used to reduce the taxable value of that fringe benefit. It cannot be used to reduce the taxable value of any other fringe benefit.
Please note that the employee contribution has to be made from after-tax salary. Sacrificing an amount of salary does not constitute an employee contribution.
If you have any concerns about FBT before March 31st, please contact us.