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Welcome back everyone. In the sixth and final part of my blog series, I want to discuss something that affects all of our financial journeys: Superannuation. Perhaps you’re concerned about your retirement savings? Or maybe uncertain about how to make the most .....
FBT - 5 min read
These are payments to employees in a form other than salary and wages. These payments are usually private in nature and generally not deductible for tax purposes. Some examples are entertainment expenses, gym membership, and car use for private travel.
The government taxes employers who provide these types of benefits to employees in the form of fringe benefits tax.
As an employer, how do I reduce Fringe benefits tax?
Minor benefits exemption
If each benefit is less than $300 (inclusive of GST) then these types of benefits may qualify for the minor benefits exemption, provided they are minor and infrequent.
Car Fringe Benefit
Employers that generally provide a company car to employees to use at work at are generally taxed on the private use of the car for FBT. Employers by default, must assess these benefits under the statutory method for fringe benefit tax.
However, employers are eligible to use the operating method, which provides a better outcome for employers, when the car is predominately used for business purposes by the employees. This method requires the maintenance of a proper logbook to substantiate the business use %.
Employee contributions
Capturing employee contributions which are expense they have paid personally. Employee contributions can help reduce the taxable value of fringe benefits which you have provided in your capacity as the employer. For example, if you are letting the employee use the car for private purposes (i.e., travel to and from home) and the employees pays for the petrol personally, this can reduce the fringe benefit tax that you are required to pay.
Entertainment
Employers are taxed on employee related entertainment expenses. Common examples are staff lunches at the local restaurant. This is usually treated as meal entertainment and taxable for FBT.
However where there are clients in attendance at the lunch meeting, then keeping tracking of who is in attendance can help reduce fringe benefits tax as the client portion are exempt from FBT whilst the employee portion is taxable.
Where proper records have not been maintained then employers can apply the 50:50 method which generally taxes half the value of all meal entertainment expenses.
I want to lend money to my employees. Are there any FBT implications?
Loan Fringe Benefit
Where money is loaned to employees, this will generally attract FBT on two fronts. The first is where the business charges interest free or at a rate lower than the ATO benchmark rate. The second is where the principal debt obligation is waived by the business.
If the employer decides to lend money to employees, they should get employees to complete a declaration which confirms what the money will be used for and the business use percentage which can help reduce FBT.
However lending money to employees poses various risks to employers and you should discuss with your Altus adviser regarding safeguards which you can implement to protect yourself in the event of an ATO FBT audit on these types of arrangements.
When is FBT tax return lodgement and payment due?
The FBT return is due in late June every year if employers are lodging their returns electronically. If lodgement is via paper, then the deadline for lodgement and payment is brought forward by a month.
We have lodged the FBT return. Is there anything else I need to worry about?
Where an employee has received fringe benefits with a taxable value of greater than $2,000 generally, the employer must include a reportable fringe benefits amount on the employee’s PAYG Payment Summary or now known as the income statement for Single Touch Payroll.
Fringe benefits are also taxable under payroll tax and should be included in an employer’s payroll tax return.
What is this new electric vehicle FBT exemption the government is introducing, and how can this help me reduce paying FBT?
The government has introduced an FBT exemption for electric cars to encourage the take up of these types of vehicles which means employers will no longer be required to pay FBT on the employee private use component for these types of cars.
The employer must meet the following criteria:
Whilst these criteria may seem simple on the surface, employers should be wary of pitfalls and should speak to their Altus adviser before deciding to purchase an electric vehicle.
If electric vehicle benefits are now exempt from FBT, does that mean there is no requirement to report those benefits onto employee payment summaries and income statements?
Unfortunately, no. The government brought in legislation recently to mandate employers to continue to report exempt electric vehicle benefits provided to employees onto the relevant employee income statements and PAYG payment summaries. There are significant fines for failing to do so.
I have a question about FBT, and not sure what I should do.
Contact your Altus Adviser.
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Altus Wealth Pty Limited ABN 55 649 956 212 is an Authorised Representative of Altus Financial Services Pty Ltd ABN 24 637 026 825 an Australian Financial Services Licensee (AFSL no. 520266). Altus Financial Services Pty Ltd is not responsible for the advice, products and services provided by Altus Accounting. Julie Azzi is a credit representative (CR No. 366834) of BLSSA Pty Ltd ABN 69 117 651 760 (Australian Credit Licence 391237).
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