What is FBT and When Does the FBT Year Run?
Fringe Benefits Tax (FBT) is a tax that employers pay on certain benefits they provide to their employees – including their employees’ family or other associates. These benefits can be things like company cars, entertainment, and gym memberships.
These FBT concessions can then flow through to employee’s offering them benefits that are concessionally taxed and cheaper than an employee paying for these benefits from their net after tax wages.
The FBT year runs from 1 April to 31 March each year, and the deadline to lodge your FBT return and pay any FBT due is 21 May (or 25 June if lodging electronically through a tax agent). With the FBT year-end fast approaching, now is the perfect time to review your FBT obligations and identify ways to reduce your liability, and potentially provide a benefit to employees that is concessionally taxed with the tax concession then flowing through to the employee.
5 Strategies to Minimise Your FBT Liability
Certain benefits are FBT-exempt, meaning they don’t attract any FBT at all. These include work-related items like laptops, mobile phones, and tools of trade, provided they are primarily used for work purposes. Leveraging these exemptions can significantly reduce your FBT bill.
2. Implement Effective Salary Packaging
Salary packaging (or salary sacrificing) allows employees to receive fringe benefits in place of salary, potentially lowering both the employer's FBT liability and the employee’s taxable income. Common examples include car leases or superannuation contributions. A well-structured salary packaging arrangement benefits both parties.
3. Keep Benefits Under the Minor Benefits Threshold
Benefits that are less than $300 in value and provided on an infrequent or irregular basis are generally exempt from FBT. This can include small gifts, meal vouchers, or team-building activities. Ensuring benefits remain under this threshold can help keep FBT costs down.
4. Review Car Fringe Benefits
Company cars often represent a significant portion of an employer’s FBT liability. To reduce this:
- Encourage employees to keep logbooks to calculate actual business vs. private use.
- Opt for electric vehicles (EVs) where possible, as certain low-emission cars may qualify for FBT exemptions.
Related: FBT Exemption for Electric Cars: How to Take Climate Action whilst Reducing Employees’ Tax
5. Maximise Employee Contributions
If employees make after-tax contributions towards the cost of a benefit – for example, paying part of the running costs of a company car – this reduces the taxable value of the benefit and therefore the FBT payable. Encouraging employee contributions can be a smart way to trim your liability.
Related: Fringe Benefits Tax (FBT) Checklist
With the FBT lodgement deadline approaching, now is the time to take a proactive approach to managing your FBT obligations. Implementing these strategies can help reduce your FBT bill and keep your business compliant with Australian Taxation Office (ATO) requirements.
More Strategies to Reduce Your FBT Liability
These are just a few key strategies to help minimise your FBT obligations, but there are many more ways to optimise your tax position. Every business has unique circumstances, and a tailored approach can make a significant difference in reducing your FBT bill.
Our team at Azure Group specialises in FBT planning and compliance. Whether you need guidance on specific exemptions, structuring salary packages, or reviewing your current FBT strategies, we’re here to help.
Need help with your FBT calculations or strategy?
Navigating Fringe Benefits Tax (FBT) obligations can be challenging. Azure Group is here to guide you through the complexities of Fringe Benefits Tax (FBT).
Our team of tax specialists are experts at identifying and valuing reportable fringe benefits. They are dedicated to keeping up to date with any changes to legislation, tax rulings, and ATO data-matching process, and can help you avoid any compliance issues when preparing and lodging your FBT return.
Visit our FBT Services page to learn more or reach out to our tax team today – let’s minimise your FBT liability together.
Have you noticed our #FridayExpertTips... here's one that relates to #Taxation
“March 31 is FBT year-end: Providing your employees with perks can be a great way to show how much you value them. It's important to understand that these perks, also known as fringe benefits, come with their own set of rules and tax treatments. Get in touch to find out more."
Related: Fringe Benefits Tax (FBT) End-Of-Year Traps
This article is intended to provide general information only, and is not to be regarded as legal or financial advice. The content is based on current facts, circumstances, and assumptions, and its accuracy may be affected by changes in laws, regulations, or market conditions. Accordingly, neither Azure Group Pty Ltd nor any member or employee of Azure Group or associated entities, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused. Readers are advised to consult with qualified professionals for advice specific to their situation before taking any action.
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