Every day we at Chan & Naylor receive numerous client enquiries as to Fringe Benefits Tax (FBT). So, we decided to have a closer look at exactly what it is and what are some of the necessities when needing to report FBT.
The 2015 FBT year is coming to a close and it is time to start preparing ahead for your FBT returns. If you own a business that employs staff and provides remuneration to your employees in a form other than a straight salary, you may be liable for fringe benefits tax (FBT). Under the FBT law, a fringe benefit typically arises when a benefits is provided by an employer to an employer or their associates.
FBT is separate to income tax. The FBT regime has its own tax year, from April 1 to March 31 and is calculated using a “grossed-up taxable value” of the relevant benefit provided and is payable at the current FBT rate of 47% for the FBT year ended March 31, 2015. Meaning that the Type 1 and Type 2 gross-up factors have now changed to 2.0802 and 1.8868, respectively.
The rates increases to 49% as a result of the Temporary Budget Repair Levy for the 2016 and 2017 FBT years and then the rate will return back to 47% again for the FBT year ending 31 March 2018. The Type 1 and Type 2 gross-up factors applicable to a 49% FBT rate are 2.1463 and 1.9608, respectively.
The increase in both the FBT rate and the gross-up factors means that employers should reconsider all current fringe benefits arrangements with their staff to limit the impact of possible additional costs and ensure that any arrangement is still as beneficial as possible, for both employee and employer. Employers should also note that the value of taxable fringe benefits once grossed-up are included in the calculation of taxable wages for payroll tax purposes.
Things to consider and some of the more common mistakes regarding FBT for the 2015 FBT year:
- Business vehicles and keeping logbooks when using the operating cost method for calculating vehicle benefits. Ensure that logbooks have been appropriately completed and are valid for the 2015 FBT year.
- Contributions an employee makes to the employer to reduce the taxable value of a fringe benefit;
- are assessable income for income tax purposes.
- are possibly taxable supplies for GST purposes.
- Ensure the appropriate declarations have been correctly completed and collected.
- Employees receiving the living away from home allowances that the appropriate documentation has been provided to you to support the costs of accommodation and food.
- Staff receiving car fringe benefits, that the car declarations contain both odometer readings, and days available/unavailable for private use. If your employees have incurred any fuel and oil expenses, then they need to provide you with this information on their declaration form to substantiate these expenses.
- Directors running their business through a company may be regarded as employees. This may mean that fringe benefits provided to directors result in the company having FBT obligations.
- Where reportable fringe benefits have been recorded on an employee’s payment summary, you must lodge an FBT return
FBT can be a complex minefield of making sure that you ‘get it right’. If you need further assistance, make an appointment with your accountant today to ensure that your FBT return is correct.
Client Manager – Chan & Naylor Accountants Brisbane
Disclaimer: This article contains general information. Before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs.