Fringe Benefits Tax Laverton
Fringe benefits tax (FBT) is a tax paid on certain benefits which are being provided to employees or employees’ associates by the employer. FBT is separate from income tax and is based on the taxable value of the various fringe benefits you provide. It is a benefit provided in respect of employment.
The benefits include:
- Rights
- Privileges
- Services
Some examples where a benefit may attract the fringe benefit tax:
- Allowing an employee to use a work car for private purposes
- Giving an employee a cheap loan
- Reimbursing an expense incurred by an employee, such as school fees
- Providing entertainment by way of food, drink or recreation.
Examples of what does not attract the fringe benefit tax are:
- Payments of salary or wages
- Shares purchased under approved employee share acquisition schemes
- Your employer contributions to complying super funds
- Employment termination payments (for example, a company car given or sold to your employee on termination)
- Certain benefits provided by religious institutions to their religious practitioners.
Who pays FBT?
An Employer pays the FBT, even if the benefit is provided by an associate or by a third party under an arrangement with you. It makes no difference whether you are a sole trader, partnership, trustee, corporation, unincorporated association or government body or whether you have to pay other taxes such as income tax.
Some employers providing fringe benefits may be eligible to receive concessional FBT treatment. These include:
- Public benevolent institutions
- Public and non-profit hospitals and public ambulance services
- Religious institutions
- Other non-profit entities.
Different categories of Fringe benefits:
- Car Fringe benefit
- Loan Fringe benefit
- Debt Waiver Fringe benefit
- Expense Payment Fringe benefit
- Housing Fringe benefit
- Board Fringe benefit
- Living Away From Home Allowance
- Airline Transport Fringe benefit
- Board Fringe benefit
- Car parking fringe benefit
- Property Fringe benefit-
- Residual fringe benefit etc
FBT year & FBT Return
The FBT year is the 12 months beginning 1 April and ending 31 March.
Annual FBT return with the ATO must be lodged by 21 May each year, unless an arrangement has been made with ATO for an extension of time to lodge, or it has been lodged via a tax agent who has been given another lodgement date. Any returns that ATO receive later than the first business day after 21 May, without prior arrangement, may incur an administrative penalty.
Rate of tax
The rate of FBT may vary from year to year but we will advise you of the rate each year. Currently, the FBT rate is 46.5%.Prior to the FBT year commencing 1 April 2006; the FBT rate was 48.5%.
How is the amount of tax determined?
Where taxable fringe benefits are provided to employees, there are some distinct steps involved in calculating FBT liability. With the introduction of the goods and services tax (GST), there are two separate gross-up rates used to calculate fringe benefits taxable amounts:
A higher (type 1) and
A lower (type 2) gross-up rate
The higher gross-up rate is used where the benefit providers are entitled to a GST credit for GST paid on benefits provided to an employee. These benefits are known as GST-creditable benefits. The lower gross-up rate is used where there is no entitlement to a GST credit.
General record keeping requirements
There is a general requirement that records must be kept that are adequate to enable your fringe benefits tax (FBT) liability to be assessed. Records must be written in English or, if in electronic form (for example, on computer), made readily accessible and convertible into written English. For FBT purposes, these records must be kept for five years from the date they are prepared, obtained or the transactions completed, and in a form that tax officers can access and understand in order to determine your tax liability.
For an appointment, or a confidential discussion of your needs, please contact our Tax Accountants today, or call 1300 627 829.
