How do I know if I need to pay FBT? What is exempt from FBT? And what to be aware of come 1 April 2016.
The FBT rate increases from 47% to 49% from 1 April 2016. Employers need to take this new rate into account with current or new salary packages with employees.
How do I know if I need to pay FBT?
Fringe Benefits Tax (FBT) is a tax payable by an employer in respect of various benefits provided to employees. If you are not sure whether your business is providing fringe benefits to its employees, here are some key questions you should ask yourself:
- Does your business make vehicles owned or leased by the business available to employees for private use?
- Does your business provide loans at reduced interest rates to employees?
- Has your business forgiven or released any debts owed by employees?
- Has your business paid for, or reimbursed, any private expenses incurred by employees?
- Does your business provide a house or unit of accommodation to employees?
- Does your business provide employees with living-away-from-home allowances?
- Does your business provide entertainment by way of food, drink or recreation to employees?
- Do any employees have a salary package (salary sacrifice) arrangement in place?
- Has your business provided employees with goods at a lower price than they are normally sold to the public?
Shortly, we’ll be sending out our annual FBT Questionnaire to all our business clients to help you further in identifying if you have a FBT liability.
What is exempt from FBT?
Certain benefits are excluded from the scope of the FBT rules. The following work related items are exempt from FBT if they are provided primarily for use in the employee’s employment:
- Portable electronic devices that are provided primarily for use in the employee’s employment – further information below
- An item of computer software;
- Protective clothing required for the employee’s job;
- A briefcase;
- A calculator;
- A tool of trade.
Two laptops are better than for small business
If you are small business with a turnover under $2M, your business can offer employees more than one work-related portable electronic device, such as mobile phone, laptop and tablet and not have to pay FBT on it even if the device is the same or similar to others already provided in that same FBT year. All other businesses are limited to one device that is identical or similar to another for each employee per FBT year.
Is Salary Sacrificing worth it?
Now is a good time to review any salary sacrifice agreements to ensure they will still achieve their intended goals and not creating an administrative burden for little to no benefit with the FBT rate continuing at 49% for another year. For employees earning above $180k however, the difference in timing between the FBT year and the income year creates a unique planning opportunity between 1 April 2017 when the FBT rate reduces back to 47% and 30 June 2017 when the 2% debt tax is removed.
Travelling or living away from home – what’s the difference?
The ATO will be looking closely at Australian taxpayers claiming living away from home (LAFH) allowances to make sure they are not accessing FBT concessions incorrectly. So what is the difference between travelling or living away from home?
If someone is living in say Sydney but are heading to Melbourne on ad hoc trips every other week, they are probably just travelling and would only be entitled to travel deductions, not FBT concessions that apply to LAFHA’s. If that person however sets up a home temporarily in Melbourne and keeps their home in Sydney for their use (unrented), then it’s more likely they can access the living away from home allowance concessions.
Care also needs to be taken where transport is provided to fly-in-fly out workers as special rules apply and it’s important to ensure the travel is exempt from FBT.
Do you have any motor vehicles owned or leased by the business that is used by an employee for private purposes, including the travel between home and work? If you do, then we encourage you to manage the FBT in these instances carefully and closely as the ATO is conducting a data matching program that is aimed at motor vehicles to try and capture benefits that are not currently being reported through FBT.
How we can help you
If you’re not sure if your business has a FBT liability or not, that’s ok. Shortly, we’ll be sending out our annual FBT Questionnaire to all our business clients to help you further in identifying if you have a FBT liability, and provide us with all the information we need to prepare and lodge any FBT returns required.
The current FBT year ends on 31 March, so be sure to complete and return the questionnaire as soon as possible so as to not miss the lodgement date of 25 June.
General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.