Fringe Benefits Tax ALERT 2016

Fringe Benefits Tax ALERT 2016

Fringe Benefits Tax (FBT)

 Fringe Benefits Tax (FBT) is a tax that many business owners try to forget until the deadline is upon them, but it is one that can have far reaching implications and costs. The end of year for FBT is 31 March 2016 – with the year running 1 April to 31 March. The Government introduced FBT many years ago to ensure that employees do not receive income disguised in another form and therefore avoid paying income tax. The deadline for lodging a FBT Return is 28 April 2016.

 What expenses are subject to FBT?

As a general rule, any non-business expense payment an employer makes on behalf of an employee may be subject to FBT.

Some business expenses are subject to FBT and some are exempt.

The most common FBT expenses are those associated with the private use of a car, including car parking. To this end there is an increased focus this year on log books. But fringe benefits can also be things like the provision of a low-interest loan or payment of an employee’s child’s school fees. Various entertainment expenses are also subject to FBT.

When it comes to exempt expenses, the most common are mobile phones, laptop computers and iPads used mostly for work. While there are other exemptions, the rules are tricky so it’s worth contacting our office ASAP to determine what might apply to your business.

How do YOU know if YOUR BUSINESS needs to pay FBT?

If you are not sure whether you are providing fringe benefits to your employees, here are some key questions you should ask yourself:

  • Do you 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 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?

Your Action Plan

FBT is an area of tax law that changes regularly. Getting prepared , collecting the right records and taking the time to speak with your Accountant at PrimeAdvisory about FBT could be well worth the effort, and may save you thousands of $$$$$ in FBT!

You can start your FBT return preparations using our questionnaire located  here

Download our 2016 FBT Questionnaire

Contact us TODAY to discuss:

  1. The types of expenses that you pay in your business that may be subject to FBT
  2. The records you should be keeping to help minimise your FBT
  3. What you can do NOW to reduce your FBT

Email Andrew Mahoney at or contact us today from taking advantage of FBT rulings.

We would be delighted to assist you.

The FBT rate shake up continues

Keeping on top of your Fringe Benefits Tax (FBT) obligations this year will be a little more onerous with a temporary increase in the FBT rate from 47% to 49% implemented from 1 April 2015. The FBT rate will then stay at 49% until 31 March 2017.

The change in the FBT rate for the 2 year period has a number of implications particularly to those employers with salary sacrifice agreements in place or where fringe benefits form part of your employment agreements.

FBT gross up rates have also changed in line with the rate change. The new rates are:

FBT year FBT rate Type 1 gross up rate Type 2 gross up rate
1 April 2014 to 31 March 2015 47% 2.0802 1.8868
1 April 2015 to 31 March 2017 49% 2.1463 1.9608
1 April 2017 onwards 47% 2.0802 1.8868

Review all salary sacrifice agreements

It’s essential that you review all salary sacrifice agreements. Providing employee benefits is more expensive and potentially less attractive now and over the next few years unless that cost is passed through to employees. And, in some cases, the salary sacrifice agreement may not achieve the intended goals and simply create an administrative burden for little to no benefit.

Living away from home allowances

Reforms from 22 October 2012 severely limit access to FBT concessions for living away from home (LAFH) allowances particularly for non-residents. The reforms introduce a higher level of substantiation, limit the time the FBT concessions can apply to a LAFH to 12 months (in most cases), and dictate strict conditions such as maintaining a home in Australia for their personal use (no rentals). Special rules exist for fly-in-fly-out and drive-in-drive-out employees.

Salary sacrificing goods or services that your business provides

For many businesses, there was once a tangible financial benefit to packaging up goods or services they provide as part of the remuneration offered to employees. Retailers providing discounted clothes to employees and private schools discounting school fees for children of employees, are just two examples. On 22 October 2012, the FBT concessions that were previously available in this situation were removed.

Correct Record Keeping is ESSENTIAL

Whether or not your employee’s benefits are included or exempt from FBT, you still need to account for them. So it’s very important to collect the correct information about all employee expenses throughout the year.

The question of what information to collect will depend on how you decide to calculate the tax. For common types of expenses there is more than one calculation method available under the tax laws.

As an example – consider car expenses. One calculation method – known as “the statutory method” – is a formula based on the cost of the car and the number of business kilometres driven in the FBT year.

You could also use the “operating cost method”, which takes into account all the running costs of the car and multiplies that by your business use versus private use to calculate its value for FBT purposes.

So in this case, knowing how cars are used and how the expenses are incurred can help determine which method to use, thereby potentially reducing your FBT bill. To this end log books are receiving increased focus.

Reducing FBT on Entertainment

On many occasions, business owners have calculated entertainment FBT based on the “50/50 method”.

However, if they changed to the so called “actual method” they could reduce their FBT bill by collecting more accurate records, enabling them to more precisely determine FBT expenses and exemptions.

Big FBT Tax Planning Opportunities  

It’s not all bad news! On the other side of FBT compliance are these FBT tax saving opportunities:

  • Relocation expenses for employees
  • Bringing your spouse to conferences
  • Effective Salary Packaging
  • FBT exempt utes
  • Laptop computers and iPads

Contact our office to discuss how you like to benefit from tax savings on the above items.

Your Action Plan

FBT is an area of tax law that changes regularly. Getting prepared early, collecting the right records and taking the time to speak with your Accountant at PrimeAdvisory about FBT could be well worth the effort, and may save you thousands of $$$$$ in FBT!

You can start your FBT return preparations using our questionnaire located here

Contact us TODAY to discuss:

  1. The types of expenses that you pay in your business that may be subject to FBT
  2. The records you should be keeping to help minimise your FBT
  3. What you can do NOW to reduce your FBT

Email Andrew Mahoney at or contact us today from taking advantage of FBT rulings.

We would be delighted to assist you.

 

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