Fringe benefits tax refers to the tax paid by employers on certain benefits they provide to their employees apart from monetary compensation. The ATO explains fringe benefits as a “payment” to an employee of the company, which has a different form to salary or wages.
Employers must coordinate with the ATO to file their FBT, and the calculations can be quite complex. Alternatively, you can hire accounting services that calculate the FBT for you. That said, here are some things every employer needs to know about FBT.
Do You Need to Be Registered for FBT?
Fringe benefits may include allowing employees to use a company car for private purposes, giving employees an interest-free loan, providing employees with a wellness centre or gym membership and providing entertainment through meals or free tickets to concerts or musical events.
If you provide any of the benefits mentioned above to your employees or any other that is separate from their monetary remuneration, you will need to register your business for FBT. You can register online using your Australian Business Number or by phone with the ATO. However, the best way is to hire a tax agent who can act on your behalf and handle all the complexities of FBT.
What Items Are FBT Exempt?
The ATO does allow some benefits to being exempt from FBT. Certain work-related items such as protective clothing, portable electronic devices such as mobile phones, laptops, computer software and tools of the trade are exempt from FBT.
Also, if the total taxable value of the fringe benefits comes to $300 or less and if it is unreasonable to treat it as an additional benefit, the employer can be exempt from FBT.
How To Reduce FBT Liability?
There are certain ways to reduce your FBT liability. You can substitute fringe benefits by offering employees cash allowances, provide benefits your employees would be entitled to claim as income tax deduction, or provide FBT-exempt benefits.
How to Calculate an FBT?
Here are some steps to calculating fringe benefits tax:
- Step 1: Sum up the entire value of the fringe benefits provided during the tax period
- Step 2: Identify the “Type 1” benefits and calculate their taxable value
- Step 3: Calculate the grossed-up taxable value of your Type 1 benefit
- Step 4: Identify the “Type 2” benefits and calculate their taxable value
- Step 5: Calculate the grossed-up taxable value of your “type 2” benefits
- Step 6: Add together grossed value of Type 1 and Type 2 benefits
- Step 7: Calculate the FBT by multiplying the amount in step 6 by the current rate
These calculations can be confusing, and it’s better to hire professional tax planners to help you accurately calculate the type 1 and 2 benefits and ensure that you’re not underpaying or overpaying your FBT.
Get Your FBT Needs Sorted With Ace Biz
If you’re looking for an experienced accountant who can help you deal with the complexities of FBT, check out the services provided by Ace Biz. We are highly qualified accountants who understand FBT’s technicalities and can liaise with ATO to ensure you lodge your FBT on time and accurately. We also provide comprehensive accounting and tax planning, business advisory, bookkeeping, and financial reporting services in Sydney, Newcastle and nearby areas. Get in touch with us today to learn more about our services.