Fringe Benefits Tax (FBT) applies to most non-cash benefits provided to employees in addition to their salary or wages.
For employers, understanding FBT is essential to stay compliant, avoid penalties, and manage the financial implications of providing benefits.
What Is Fringe Benefits Tax?
FBT is separate from income tax and is paid by the employer, not the employee. It covers benefits like company cars, low-interest loans, entertainment, or housing provided to employees or their associates. The tax is calculated on the grossed-up taxable value of the benefit, meaning the actual cost of providing the benefit is adjusted to reflect the gross salary an employee would need to earn to buy the same benefit after income tax.
The purpose of FBT is to ensure fairness in the tax system. Without it, non-cash benefits could allow employees to receive untaxed value, giving them a financial advantage over those receiving only cash salary.
Common FBT Scenarios
Employers often encounter FBT in situations such as:
• Company cars: Personal use of a work vehicle can attract FBT.
• Entertainment: Meals, tickets to events, or staff functions may be subject to FBT, depending on the circumstances.
• Loans: Low-interest or interest-free loans provided to employees.
• Housing or property: Accommodation provided to employees as part of their employment package.
Why Employers Should Care
FBT can have significant cost implications if not managed properly. In addition to the tax itself, failing to comply with FBT reporting requirements can result in penalties or interest charges. Planning and record-keeping are crucial to ensure benefits are recorded accurately and reported correctly in your annual FBT return.
Practical Tips for Employers
- Keep accurate records: Document all benefits provided, their value, and the dates.
- Understand exemptions and concessions: Some benefits, such as minor benefits under $300 or certain work-related items, may be exempt.
- Communicate with employees: Ensure employees understand which benefits are taxable and how they affect remuneration.
- Review your policies regularly: Update benefit policies to reflect changes in business operations or FBT legislation.
- Use software or a professional adviser: Automated systems or accountants can help calculate FBT and lodge returns accurately.
A Simple FBT Checklist for Employers
• Identify all benefits provided to employees (cash and non-cash).
• Determine the taxable value of each benefit.
• Check for any exemptions, concessions, or rebates that apply.
• Keep detailed records of dates, amounts, and recipients.
• Calculate FBT liability using the current FBT rate.
• Lodge the FBT return by the due date (usually 21 May for the FBT year ending 31 March).
• Adjust employee remuneration packages if needed to manage FBT costs.
• Review policies and benefits annually to ensure ongoing compliance.
By understanding which benefits are taxable, maintaining accurate records, and following a simple checklist, employers can confidently manage FBT obligations while providing value to employees. Proactive planning not only prevents costly errors but also supports clear communication and transparency between employers and staff.
Contact Leenane Templeton today to support your FBT obligations.
Disclaimer
The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.