What is FBT
Small business owners like you must be aware of FBT because it can have a significant impact on your tax liabilities. You are required to register for FBT if you provide fringe benefits to your employees and must maintain accurate records of all fringe benefits provided and pay the appropriate amount of tax on these benefits.
Taxable value and FBT rate
The FBT rate is currently 47% and is applied to the taxable value of the fringe benefit provided. This rate may be subject to change so you must always check for updates.
Difference between FBT and income tax
Income tax rates are progressive, meaning that the more an individual earns, the higher the tax rate they will pay on their income, while the FBT rate is fixed at 47%.
Who pays FBT?
As a small business owner, it’s important to understand who pays FBT. FBT is paid by you, the employer, and it’s a separate tax from income tax, which is paid by your employees. FBT is calculated based on the value of the fringe benefits that you provide to your employees.
If you provide your employee with a company car for personal use, that car is considered a fringe benefit and you may be required to pay FBT on its value. It’s important to be aware of your FBT obligations as an employer, so that you can stay compliant and avoid any penalties or fines.
Example of FBT Liability Calculation for Small Business Owners with Family Tax Benefits
This means including any reportable fringe benefit amounts in your employee’s payment summary, as well as any taxable income deductions that you’ve claimed. It’s important to keep accurate records of the fringe benefits you’ve provided, including school fees paid on behalf of your employees, to ensure that you are meeting your FBT obligations. By doing so, you’ll avoid any penalties for not paying the correct amount of FBT and can also take advantage of any FBT concessions that may be available to you.
Types of Fringe Benefits
- FBT on cars or other vehicles for personal use, parking and tolls
- Entertainment-related fringe benefits
- Expense payment fringe benefits
- Loan and debt waiver fringe benefits
- Accommodation and location related fringe benefits
- Property fringe benefits
- Residual fringe benefits
Examples of common benefits subject to FBT
Benefits of offering fringe benefits
Attracting and Retaining Employees
Enhancing Employee Satisfaction and Morale
Compliance with Legal Requirements
An Example of How to Provide Perks to Your Employees While Staying Compliant with Tax Laws
Sarah can also take advantage of tax benefits, such as a private health insurance rebate or income tax deductions, which can help offset the cost of providing these benefits to her employees.
She needs to report the total taxable value of fringe benefits provided to her employees as part of their Reportable Fringe Benefits Amount (RFBA) in their financial year income statement. Sarah also needs to calculate the FBT liability on the taxable value of the benefits provided and ensure that the tax is paid on time to avoid any penalties or fines.
By providing these fringe benefits, Sarah is also complying with certain legal requirements, such as the provision of private health insurance, paid leaves, or child support payments, which are essential for maintaining a healthy and productive workplace.
Fringe Benefits Tax (FBT) obligations and compliance
FBT can be a significant cost for small business owners but with right understanding and planning, unexpected costs can be avoided.
Reportable Fringe Benefits Amount (RFBA)
Calculating the Fringe Benefits tax
- Determine the taxable value of the fringe benefits provided by adding up the value of each fringe benefit provided to employees.
- Calculate the grossed-up taxable value of fringe benefits. This involves adding the taxable value of the benefits to the amount of Goods and Services Tax (GST) that would be payable if the benefit was sold at market value.
- Apply any exemptions or concessions that may apply to the fringe benefits provided. There are some types of fringe benefits that are exempt from FBT, such as certain work-related items or minor and infrequent benefits. Additionally, some concessions may apply to certain types of benefits.
- Calculate the FBT liability by applying the current FBT rate to the grossed-up taxable value. The FBT rate is currently set at the highest individual income tax rate, which is 47%.
- Take into account any employee contributions towards the cost of fringe benefits, which can reduce the FBT liability.
- Review the calculated FBT liability with your tax accountant to ensure that all calculations are correct and that all exemptions and concessions have been applied correctly.
- Ensure that the FBT liability is paid on time to avoid any penalties or fines
Reporting and paying Fringe Benefits Tax (FBT) to the ATO
The form should be lodged with the ATO by the due date, generally 21 May, or 25 June if lodged electronically. Employers also need to pay the FBT liability by the due date and keep records of relevant information for a minimum of five years.
Deadlines for lodgement and payment
Penalties for non-compliance
FBT concessions and exemptions for small businesses
Employers may also be exempt from FBT for minor and infrequent benefits that are provided to employees, such as Christmas gifts or birthday presents. To be eligible for this exemption, the total value of the benefits provided to an employee must be less than $300 for the FBT year and the benefits must be infrequent or irregular.
New businesses that have been in operation for less than 12 months and have an aggregated turnover of less than $10 million may be eligible for a range of concessions, including an exemption from FBT on certain work-related items and a reduced FBT rate of 17% for other benefits.
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