Fringe Benefits Tax is essentially a tax on employers in respect of mostly non-cash benefits provided to employees in addition to, or in place of a cash salary.
For FBT, employees included company directors, office holders, common law employees & recipients of compensation payments.
Clients, Customers, Shareholders & Suppliers are excluded from FBT.
Generally where the expenditure is subject to FBT, it becomes deductible to the employer under s8-1 of ITAA97. Both the tax deduction for the expense AND the fringe benefits tax paid will be deductible.
Where the expenditure is not subject to FBT, no tax deduction or GST can be claimed (eg. expenses provided to clients)
There are a number of options available to employers which can help minimise their FBT obligations as well as provide other useful income tax deductions as set out below.
CAR BENEFITS
The most common fringe benefit provided is in relation to car benefits.
For a long time, the perception was if you buy a commercial vehicle you are automatically excluded from paying FBT.
Due to changes in the legislation, these vehicles can qualify as being exempt if the private use of the vehicle is limited to:
- travel between home and work
- work related travel that is incidental to travel in the course of duties of employment, and
- other private travel that is 'minor, infrequent & irregular'
If you own a vehicle in your business or the ATO does deem the private travel to be minor, regular or frequent we strongly recommend you contact us now regarding your situation.
The best way to lower your fringe benefits tax obligations will be to maintain a log book which is valid for up to 5 years.
ENTERTAINMENT
Basically any entertainment by way of food, drink or recreation, or accommodation or travel to do with providing the above entertainment will be subject to fringe benefits tax, regardless of whether:
- business discussions or transactions occur
- it is provided for promotion or advertising
- it is provided in connection with a seminar
- provided in connection with your office duties or employment
In order to determine if entertainment is in fact provided by your business, we recommend you go through the following checklist:
- Why is the food and drink provided (refreshment does not have the characteristic of entertainment)
- What food and drink is provided (light meals and afternoon tea, cake is not entertainment, 3 course meals will be)
- When is the food and drink provided (after work drinks will have a strong likelihood of being classed as entertainment)
- Where is the food and drink provided (on premises is less likely to be entertainment, however awards nights, restaurants and corporate boxes are likely to be entertainment)
EXEMPT BENEFITS
Employers can receive a huge tax benefit by providing FBT Exempt benefits.
Not only will employers receive an income tax deduction & a reduction in GST, but they avoid paying the 49% FBT on the benefit if they're primarily used for work related purposes and limited to 1 item per FBT year. Some examples under s58 of the FBTAA include:
- Portable Electronic Devices (Laptops, Tablets, Phones)
- Computer Software
- Protective Clothing
- Briefcases
- Tools of Trade
- Minor Benefits under $300
- Airport Lounge Benefits (eg. Qantas Club)
- Newspapers & Periodicals used for business purposes
- Relocation Costs
- Provision of long service leave awards in recognition of 15 years service up to $1,000. (eg. a $1,000 home loan payment can now become deductible for the employer)