Is your organisation providing your employees with additional perks?
Paying for your employee’s gym membership, providing a car for personal use or simply providing entertainment by way of food, drink or recreation, may incur a cost to your business by way of the Fringe Benefit Tax (FBT).
The FBT is separate to income tax. It is the tax you pay for benefits that you supply to your employee’s outside of their normal wage or salary. FBT is calculated on the taxable value of the benefits you provide to your employee and can range to include a number of areas including car, entertainment, living away from home allowance and other areas that you may be offering a benefit to your employee or your employees’ associates, typically a family member.
Providing these perks to your employees is a great way to keep up the morale in your organisation. It is important to keep proper records of the benefits you provide and the tax you may need to pay, as not doing so may be detrimental for your business.
So how do you navigate FBT?
By keeping extensive records of the money flowing through your company, you will be able to calculate how much you are paying your employees and if they are receiving any additional benefit outside of their normal wage. Once you have these records, you can then determine if you need to be paying the FBT.
Once you determine if you need to be paying FBT, you will then need to register your business with the Australian Tax Office (ATO). Providing fringe benefits to your employees can generally allow you to claim an income tax deduction and you may also be able to claim GST credits for certain items you have provided as fringe benefits.
Lodge A Return
Once you have registered for the FBT, you will need to lodge a return with the ATO. This lodging period is different from a normal financial year. The FBT year runs from the 1st of April to the 31st of March, requiring you to have lodged and paid your return by the 21st of May if your return is lodged by paper or, the 25th of June if your return is lodged electronically.
Once this has been completed, this is when you can then generally apply for an income tax deduction from your business financial year income tax return.
Other Important Facts
During a FBT year, if the benefits you provide to an employee exceeds $2,000, you must report the grossed-up taxable value of those benefits on your employee’s payment summary.
FBT may not apply if the benefit you are providing to your employee, would have otherwise been able to be claimed as an income tax deduction. You can also reduce your FBT liability if your employee contributes to the cost of the benefit provided. Additionally, if you provide your employee with a cash bonus, this will not be paid as part of the FBT and your employee will pay income tax on the amount given to them.
Do you need help with FBT?
Due to the nature of the Fringe Benefits Tax, it can be hard to determine what is classified as a non-cash fringe benefit. If you find yourself struggling with the distinction and rules surrounding FBT, W M Wright & Co are here to help.
We will be able to help you determine what should and should not be a part of your FBT calculations. Contact us today before your fringe benefit tax deadline on (02) 4721 7444.