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.