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Fringe Benefit Tax (FBT) 1. What small business must know

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Fringe benefits tax (FBT) is paid on certain benefits that you the employer provide to your employees or employees’ associates instead of salary or wages.
 
The ATO has a guide for small business employers who provide fringe benefits, how to decide whether they have a fringe benefits tax (FBT) obligation and, if so, calculate how much tax they need to pay. The FBT year runs from 1 April to 31 March.
 
A fringe benefit is a benefit provided to an employee (or their associate) because that person is an employee. Benefits can be provided by an employer, an associate of the employer, or by a third party under an arrangement with the employer. An employee can be a current, future or former employee.
 
Benefits that apply – Benefits include rights, privileges or services. For example, you provide a fringe benefit when you:
  • allow an employee to use a work car for private purposes
  • give an employee a cheap loan, or
  • pay an employee’s private health insurance costs or gym membership

Non Benefits, for FBT – The following are not fringe benefits:

  • payments of salary or wages
  • shares acquired under approved employee share acquisition schemes
  • employer contributions to complying superannuation funds
  • eligible termination payments (for example, a company car given or sold to an employee on termination), or
  • certain benefits provided by religious institutions to their religious practitioners.

Who Pays FBT?

As an employer, you have to pay FBT, even if the benefit is provided by an associate or by a third party under an arrangement with you. For example, you may deal with a supplier who, in turn, provides free goods to your employees.

It makes no difference whether you are a sole trader, partnership, trust, corporation, unincorporated association or government body, or whether you have to pay other taxes such as income tax.

Do you provide fringe benefits to yourself?
If you are a director and conduct your business through a company or a trust, you may be an employee of the company or the trust. This may mean that you are actually providing fringe benefits to yourself and so need to understand your company’s or trust’s FBT obligations.

Are you providing fringe benefits?

The following checklist will help you work out if you are already providing a fringe benefit to your employees. If you answer yes to any of the following questions, you may have an FBT liability.

Do your employees take cars home and garage them overnight, even if only for security reasons?

Do you make a car or other vehicles owned or leased b the business available to employees for private use?

Do you provide loans at reduced interest rates to employees?

Have you released any employees from a debt the owned?

Have you paid for, or reimbursed, a non-business expense incurred by an employee?

Do you provide a house or unit of accommodation to your employees?

Do you provide employees with living-away-from-home allowances?

Do you provide entertainment by the way of food, drink or recreation to your employees?

Do any of your employees have a salary package arrangement in place?

Have you provided your employees with goods at a lower price than they are normally sold to the public?

For a quick guide see the ATO site http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/33353.htm&page=2&H2

For more on Benefits to employees, see our post https://accountkeepingplus.wordpress.com/2011/04/09/benfits-to-employees-in-australia-what-is-allowed/

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Author: accountkeepingplus

Administration, bookkeeping and compliance for small business, and Self-Managed Super Funds (SMSF) Training, trouble-shooting, or we can do the books and payroll for you! Self Managed Superannuation Fund Service Provider, Free support MYOB Certified Consultant, Reckon/QuickBooks Professional Partner.

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