The fringe benefits tax (FBT) year ends on the 31st of March in Australia, so if you want to make sure you’re meeting all of the requirements and obligations you have, now is the time to do it. Fringe benefits can be tricky, and there is a lot of variety in what counts as a fringe benefit. If you need help ensuring that you are meeting all of your obligations under the law, now is also a good time to speak with a professional accountant to ensure that you don’t run into trouble.
What is Fringe Benefits Tax (FBT)?
A fringe benefit is an additional benefit that you provide your employees, such as meals not consumed within the working day, accommodation, travel costs, and other entertainment. These benefits incur taxes that need to be paid within the FBT year, which is April 1st to March 31st.
The tax rate for FBT currently sits at 47%, which is equivalent to the top marginal tax rate of 45%, plus a 2% medicare levy. When considering your FBT, you must also consider the grossed-up taxable value of the fringe benefits.
What are the Grossed-up types?
There are two types of benefits that you need to pay FBT on, and they need to be considered differently. The first type allows an employer to claim input tax credit on the benefit they provided. This type is referred to as ‘GST creditable benefits’.
The second type does not allow you as an employer to claim an input tax credit for the benefit you provided. These would be things such as overseas travel benefits in certain circumstances.
What is the minimum reporting threshold?
You need to provide your employees with a certain amount of benefits before you are required to pay taxes on them. Generally, the threshold sits at $2,000, but you also need to take into account the grossed-up types covered earlier.
The minimum amount for reporting grossed-up benefits is $3,773.60 this year for the second grossed-up type, which is always the one used for fringe benefit calculations in the income statement.
How do I advise the ATO of FBT?
The simplest way to report your FBT is to go through an accountant, who will be able to wade through the nuances of grossed-up types and ensure that you are not overpaying. If you choose to advise the ATO yourself, you will need accounting software that allows for the nomination of fringe benefits.
You will likely need the assistance of a professional accountant this FBT end-of-year, and the team at MSI Taylor can help! Not only are we your local Brisbane business accountant, we specialise in tax advice and structuring. Whether you need a specialist small business accountant, or you have a large multinational business, we can ensure that you don’t pay more than you need to in FBT and that you don’t get into hot water with the ATO. Give us a call today to chat with us.