Fringe Benefits Tax is the tax employers pay on benefits which they can provide to their employees and their families. It can be part of or in addition to the wage packages of the employee.
The benefits a director of a company or trust receives may be subject to FBT, which is separate from income tax and is computed based on the taxable value of the benefits. Note that the FBT year runs from 1 April to 31 March.
Are you required to pay Fringe Benefits Tax or FBT?
If you provide benefits to your employee or associates or if the benefits are for a third party under an arrangement or associate of an employee, you may need to pay FBT. You are providing fringe benefits if you:
- Allow your employee to use a company car for private purposes
- Give your employee a discounted loan
- Provide entertainment through restaurant meals, free movie or concert tickets
- Pay for your employee’s gym membership
- Or reimburse expenses like school fees, etc.
- Note that charities may also be considered as fringe benefits
Every year, employers need to assess their FBT liability and lodge an FBT return before the due date.
TAX TIP: Payments or reimbursement of expenses which would otherwise be tax deductible to an employee is not subject to FBT. If an employee salary packages such expenses they could save tax as the employer can claim back the GST and the employee packages the expense net of GST.
What can you do?
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