FBT season is upon us! Fringe benefits tax (FBT) is a tax employers pay on certain benefits they provide to their employees, including their employees’ family or other associates. The benefit may be in addition to, or part of, their salary or wages package. If you are a director of a company or trust, benefits you receive may also be subject to FBT.
Types of fringe benefits
- Car fringe benefits
- Car parking fringe benefits
- Entertainment and fringe benefits
- Expense payment fringe benefits
- Loan fringe benefits
- Debt waiver fringe benefits
- Housing fringe benefits
- Board fringe benefits
- Living away from home allowance fringe benefits
- Property fringe benefits (including property, goods or shares)
- Residual fringe benefits (benefits not covered by the above categories)
You can reduce the amount of fringe benefits tax (FBT) you pay by:
- replacing fringe benefits with cash salary
- providing benefits that your employees would be entitled to claim as an income tax deduction if they had paid for the benefits themselves
- providing benefits that are exempt from FBT
- using employee contributions. For example, an employee receiving a car fringe benefit can pay for some of the operating costs (such as fuel) that you do not reimburse. Employee contributions may be assessable income to you and may be subject to GST.
What is not subject to FBT
The following are not fringe benefits:
- payments of salary or wages
- shares purchased under approved employee share acquisition schemes
- your employer contributions to complying super funds
- employment termination payments (for example, a company car given or sold to your employee on termination)
- payment of amounts deemed to be dividends
- exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.
FBT exemptions and concessions
Some benefits are exempt from fringe benefits tax (FBT) or receive concessional treatment (for example, living away from home allowance). Specific exemptions and concessions apply to some non-profit organisations.
Work-related items exempt from FBT
Subject to the limitations below, a number of employee benefits are exempt from fringe benefits tax (FBT), including the following work-related items:
- portable electronic device such as mobile phone, laptop, portable printer and GPS navigation receiver
- computer software
- protective clothing
- tools of trade.
The FBT exemption is limited to:
- items primarily for use in the employee’s employment, and
- one item per FBT year for items that have a substantially identical function, unless the item is a replacement item
Minor benefits exemption
Minor benefits are exempt benefits. A minor benefit is both:
- less than $300 in notional taxable value, and
- unreasonable to treat as a fringe benefit.
Taxi travel expenses exemption
Any benefit arising from taxi travel by an employee is an exempt benefit if the travel is a single trip beginning or ending at the employee’s place of work.
Any benefit arising from taxi travel by an employee is also an exempt benefit if the travel is both:
- a result of sickness of, or injury to, the employee
- the whole or a part of the journey directly between any of the following:
- the employee’s place of work
- the employee’s place of residence
- any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.
Small business car parking exemption
If you are a small business employer, car parking benefits you provide are exempt if all the following conditions are satisfied:
- the parking is not provided in a commercial car park
- you are not a government body, a listed public company, or a subsidiary of a listed public company
- either your gross total income for the last income year before the relevant fringe benefits tax (FBT) year was less than $10 million, or you were a small business entity for the last income year before the relevant FBT year.
Concessions, including specific concessions for non-profits
Concessions apply to some fringe benefits. The concession is a reduction in the taxable value of the fringe benefit that results in a reduced amount of fringe benefits tax (FBT), or even no FBT, being payable.
A reduction in the taxable value of the fringe benefit applies to:
- some benefits provided in remote areas
- some travel provided to employees posted overseas
- reimbursement of costs incurred by employees using their own car for relocation
- some other benefits.
Non-profit organisation concessions
Specific concessions apply to some non-profit organisations, including:
- eligible charities, such as
- charitable institutions
- public benevolent institutions
- health promotion charities
- religious institutions
- public and non-profit hospitals and public ambulance services.
Living away from home allowance fringe benefits
A living-away-from-home allowance (LAFHA) fringe benefit may arise if you pay an allowance to your employee to cover additional expenses incurred, because they are temporarily required to live away from their normal place of residence to perform their employment duties.
Access to tax concessions for LAFHA fringe benefits will generally be limited to where:
- your employee maintains a home in Australia at which they usually reside
- your employee provides you with a declaration about living away from home
- the fringe benefit relates to the first 12-month period at a particular work location
The FBT year runs from 1 April to 31 March. Speak to us today to seek individual advice to minimise or eliminate your FBT liability. Payment will not be required until the 28th May the following year.