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Fringe benefits tax (FBT) is a tax employers pay on certain benefits they provide to their employees – including their employees’ family or other associates. If you are a director of a company or trust, benefits you receive may be subject to FBT.

Some of the more common Fringe Benefits provided to Employees are:

• Car Fringe Benefits for example Private usage of a Work car,
• Provision of Entertainment by way of food, drink or recreation such as a Restaurant meal, a harbor cruise, a Golf day or sporting event.
• Car Parking fringe benefit
• Providing your employee with property either free or at a discount
• Housing Fringe Benefits

The benefit may be in addition to, or part of, their salary or wages package.

There are circumstances where some Fringe benefits provided to Employees are exempt fringe benefits and also some organisations receive concessional FBT treatment for certain benefits provided to employees.

FBT is separate to income tax and is calculated on the taxable value of the fringe benefits provided. The taxable value of a fringe benefit is established from a series of valuation rules. There are different categories of fringe benefit and each has its own specific rules for calculating the taxable value.

When working out your FBT liability you must gross-up the taxable value of benefits you provide, to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax. There are two separate gross-up rates used to calculate fringe benefits taxable amounts depending on the entitlement to a GST credit for any GST paid on the goods or services acquired to provide the benefits.

If the value of certain fringe benefits provided exceeds $2,000 in an FBT year (1 April to 31 March), you must also report the grossed-up taxable value of those benefits on your employee’s payment summary for the corresponding income year (1 July to 30 June). These are called reportable fringe benefits.

You need to allocate the reportable fringe benefits to the relevant employee and include any fringe benefits provided to associates of the employee. The amount reported on the payment summary will not be included in an employee’s assessable income or affect the amount of standard Medicare levy payable. The total will, however, be included in a number of income tests relating to certain government benefits and obligations.

Because of the complexity in the Fringe Benefit Tax legislation, it is important you consult with Frederiks Accountants to discuss your specific situation.

In general the following applies if provided to Customers, Suppliers and associates.

• Meal Entertainment – This is where food & drink is consumed at a restaurant as in a business lunch or with other entertainment including travel and accommodation. Entertainment provided to clients, customers and suppliers is not tax deductible and GST is not claimable.
• Food as sustenance – Food provided on business premises for consumption during a work meeting with your customer or supplier is not deemed to be entertainment and thus it is fully tax deductible and the GST is claimable.
• Entertainment – Recreational in nature as in a corporate box (5% of the cost could be allowable as deductible advertising), or hire of golf course etc. The cost for clients etc is not tax deductible and GST is not claimable.
• Gifts – Gifts such as hampers, beer, wine, spirits, food, flowers, perfume, pens, typical promo and marketing gifts (coolers, bags, BBQ sets) and gift vouchers (generally) are deductible and the GST is claimable. These items are generally coded to ‘Advertising and promotion’ or ‘Donations and gifts’.
• Gifts – tickets to theatre, movies, sporting events etc – Tickets to football games, movies, theatre/live performances, theme / amusement parks, circuses and airlines are non tax deductible and the GST isn’t claimable.

It is important that one of your first steps is to talk to your Accountant.

There are many things to consider that we can help with.

• What entity do I use? The four most common types are sole trader, partnership, Company and Trust. When considering which structure to use, it is important to choose the one that best suits your business needs, bearing in mind that there are advantages and disadvantages for each structure.
• Should I register for GST? If your business Turnover is proposed to exceed the threshold, currently $75000 (nil if a taxi or ride sourcing business), you must register for GST.  However, there may still be benefits to registering if turnover is under this threshold.
• How do I keep my records? There are many software packages available and again it is important to choose one that suits your purpose. You may also consider using a Bookkeeping service for part or all of your bookkeeping needs.

Keeping accurate and timely records is vitally important to the success of the business and  ensuring you avoid penalties and fines. We can help with regular reviews of your business and cashflow.

• What can I claim if I work from home? Running costs such as electricity, internet etc can be claimed and there may be other Home Office costs claimable.  It is important that you discuss these with us in case there are Capital Gains tax consequences when you sell your home.

We are happy to discuss these and the many other initial and ongoing requirements with you to ensure your Business runs smoothly from the start.

If you subdivide a block of land that contains your Principle Place of Residence, each resulting block is registered with a separate title. For capital gains tax (CGT) purposes, the original land parcel is divided into two or more separate assets.

Subdividing land is not a CGT event if you retain ownership of the subdivided blocks, as you don’t make a capital gain or loss at the time of the subdivision. However, you may make a capital gain or loss when you sell the subdivided blocks. The date you acquired the subdivided blocks is the date you acquired the original parcel of land. The cost base of the original land is divided between the subdivided blocks on a reasonable basis. A valuer or Real Estate Agent can provide a valuation as the block containing your residence would usually have a higher Base cost

If you continue living in your house on one of the subdivided blocks, it will retain its exemption from Capital Gains tax when you sell as long as you have not claimed a second Principle Place of Residence. If you build on the second block and move into the new House, after selling the original, this can then become your Principle Place of Residence. However, apportionment of time may be required depending on how long you owned both blocks.

As there are varying situations and different scenarios to consider, please contact us to discuss your specific situation prior to commencing any subdivision or similar.

Expenses for which you may be entitled to an immediate deduction in the income year you incur the expense include

• advertising for tenants
• assets under $300
• bank charges
• body corporate fees and charges
• cleaning
• council rates
• electricity and gas
• gardening and lawn mowing
• insurance
• interest on loans (but not the Principle repayments)
• land tax
• prepayments of interest, rates etc if covering a period less than 12 months
• property agent fees
• repairs and maintenance that relate directly to wear and tear or other damage that occurred as a result of your renting out the property
• repairs generally involve a replacement or renewal of a worn out or broken part, for example, replacing worn or damaged curtains, blinds or carpets between tenants. Maintenance generally involves keeping the property in a tenantable condition, for example repainting faded or damaged interior walls.
• water charges

Borrowing costs such as the following are generally claimed over 5 years unless the loan is paid out earlier

• loan establishment fees
• lenders mortgage insurance
• valuation fees if required for loan approval

Plant and Equipment over $300 that you install such as the following are depreciated over a number of years. 

• stove
• hot water service
• dishwasher etc

If your Property purchase contract was entered into prior to 7.30pm on 9th May 2017, you may be able to claim depreciation deductions on plant and equipment that was installed in the property prior to purchase.

Assets that are not plant and are fixed to, or otherwise part of, a building or structural improvement, will generally be limited to claiming a capital works deduction. i.e.

• Construction costs of building
• Replacement of an entire structure or unit of property (such as a complete fence or building, a roof or bathroom or kitchen cupboards
• Swimming pool

If you purchase a residential property that has been constructed or renovated/extended since 15th September 1987 a Depreciation specialist may be able to provide a schedule calculating the Capital works deductions that can be applied. However, remember that the Cost Base of the property will be reduced for Capital gains tax calculations for any Capital Works deductions claimed whilst the property was rented.

The following are not initially claimable but will be added to the base cost when calculating Capital Gains tax when you sell the property

• initial repairs, for example, in remedying defects, damage or deterioration that existed at the date you acquired the property
• Stamp Duty, Building and Pest Inspection costs for the Purchase and Conveyancing costs