Fringe Benefits Tax (FBT) is a tax payable by employers on the value of certain benefits, known as "fringe benefits", that have been provided to their employees or to associates of their employees in respect of their employment. The purpose of FBT is to ensure the comparable tax treatment of cash and non-cash remuneration provided to employees.
Some employers are exempt from FBT, but most, without realising it, will be subject to FBT. Sometimes, FBT is required to be reported on an employees annual payment summary and more often than not, a FBT return will be required to be lodged.
Some examples of FBT items are:
- car parks - providing a car park for employees (even if the business is leasing or owns the car park)
- home internet expenses
- meal entertainment
- motor vehicle - providing a vehicle and/or paying the costs of maintaining a motor vehicle
- other entertainment - such as tickets to festivals, sports events etc
- private health insurance
Now, there is nothing stopping a business paying for these types of expenses, but you do need to keep in mind that the cost of doing so isn't just the cost of the items themselves, but are "grossed-up" to obtain a taxable value. It all comes down to whether or not the business can afford to provide such benefits to their staff and ensuring that they set enough funds aside throughout the year for the various taxation requirements.
Also, not claiming GST on items does not mean you get out of the FBT trap. In fact, sometimes, you might lose out on some tax benefits if you don't go through the process of identifying the FBT benefits and what needs to be reported (not to mention losing out on GST credits).
The FBT year is 1 April to 31 March. FBT returns are due to be lodged with the Tax Office by 21 May or through a Tax Agent (us) by 25 June.
We will be sending out data capture sheets to our clients toward the end of March to ensure we are able to collate the necessary information and prepare their returns in a timely manner.
If you are not a client and would like a review to see if you will be subject to FBT or would like us to prepare your FBT return, contact us today.
This information is general in nature and does not constitute financial or other professional advice.