5 Important Tips on FBT and Your Business
Providing benefits to employees can be beneficial for your business, providing benefits can provide, employee retention, job satisfaction and give you a competitive advantage.
If a benefit is provided chances are the business will have to pay Fringe Benefits Tax (FBT). FBT is a tax that applies to non-cash benefits provided by an employer to employees or their associates.
What should you know about FBT?
Identify Fringe Benefits
Understand which benefits provided to your employees or associates may be considered as fringe benefits. Common examples include company cars, low-interest loans, or health club memberships.
If, for example, your business provides a company car to a senior insurance agent for both business and personal use. The value of the personal use portion of the car is subject to FBT.
FBT Rates and Thresholds
Stay up to date with FBT rates and thresholds set by the tax authorities to determine the tax payable on different fringe benefits. This will help you to understand the actual cost of a benefit provided to your employees.
If, for example, the FBT rate applied is 47%, and the value of a fringe benefit is $10,000, the FBT payable will be $4,700. This means the actual cost is $14,700.
Exemptions and Concessions
Be aware of any exemptions or concessions available for certain fringe benefits, such as portable electronic devices used primarily for work purposes or minor benefits with a value of $300 or less, which are provided on an infrequent and irregular basis.
For example, if your business provides employees with mobile phones primarily for work purposes, these devices are exempt from FBT.
Employee Contributions and Communication
Encourage employees to make contributions towards the cost of fringe benefits, as it may reduce the FBT liability for your business.
If you provide fringe benefits to your employees, make sure they are aware of the FBT implications. Transparent communication can prevent misunderstandings and help employees appreciate the value of the benefits provided and any additional cost to them.
For example, fringe benefits are used in calculating the Medicare levy surcharge and may in turn increase an employee’s overall personal tax liability.
Maintain accurate records of fringe benefits provided and employee contributions to ensure compliance with FBT regulations. This includes the nature of the benefit, the value, the recipient’s details, and the date it was provided. Good record-keeping will help you during the FBT assessment process and ensure that you claim the correct deductions.
For example, keeps detailed records of company car usage and employee contributions to calculate the FBT liability correctly.
It is essential to note that FBT regulations can be very complicated, so it’s crucial to consult with a tax professional familiar with the specific rules in your jurisdiction.
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