Taxation can be one of the most frustrating and time-consuming responsibilities of running a business. Plus, it can be hard to keep up with the latest tax law and associated requirements whilst you are busy building your operation.
Today, Dexterous Founder Nick Urry, explains what Fringe Benefits Tax is and whether you need to take action for your business.
What are Fringe Benefits?
A fringe benefit is a ‘payment’ made to your employee, not in the form of salary of wages. It includes payments that benefit your employee’s family or associates too. For example, if your business allows staff members to use a work car for private purposes it’s a fringe benefit. Or, if you provide tickets to a concert for your team members those are considered fringe benefits too. There are lots of examples that apply.
As these types of ‘payments’ are separate to income tax, your business is required to pay Fringe Benefits Tax (FBT) on them. FBT applies even if the benefit is provided by a third party under arrangement from you.
Should I be registered for Fringe Benefits Tax?
If your business is undertaking any ‘payments’ that aren’t salary or wages; yes! You might be liable to pay fringe benefits tax. Therefore, register your business for FBT as soon as you’ve decided you’ll provide benefits.
What is exempt from FBT?
There are some benefits that are exempt from FBT or receive concessional treatment. For example, some work-related items you supply to your employees that are primarily used for their employment (like a computer or mobile) can be exempt from FBT. Or, if your staff member travels by taxi or a ride-sharing service to or from work it can be exempt too. There are a range of exemptions or concessions that your business might be in a position to take advantage of.
Can I reduce my FBT liability?
Yes. You can reduce your FBT liability by arranging your employee to pay cash towards the benefit. This payment can be to you or the person providing the benefit.
However, if you provide your employee with a cash bonus instead of a benefit you won’t have to pay FBT (though there may be additional PAYG Withholding and Superannuation obligations). Your employee will also be required to pay income tax on the amount.
How do I calculate FBT?
FBT is calculated on the taxable value of the fringe benefit, the specific calculation will vary depending on what type of benefit is provided.
Your business must self-assess your FBT liability for the FBT year (1 April to 31 March) and lodge an FBT return.
2021 FBT returns are due for lodgement on 21 May 2021, with any FBT payable also due on that date. However, if lodging your FBT return via a Tax Agent (like Dexterous Group), the due date for lodgement and payment is extended to 25 June 2021.