FBT Year End is getting close: What corporate Fringe Benefits can you provide to your Employees?

In a competitive employment market many employers are looking for ways to differentiate themselves and show benefits to employees. Rather than focusing on salary many companies opt to offer their employees other benefits in lieu of a financial payment. These might include things such as using a work car for private use or paying for an employee’s gym membership. Because these incentives do actually represent a monetary value they are still seen as an income in the form of fringe benefits and as such the employer needs to pay tax on these items known as Fringe Benefits Tax or FBT.

The FBT year runs slightly differently to the financial year, it is based on 1 April through to the 31st March. Employers need to self-assess their FBT liability for the FBT year and lodge an FBT return.

For most benefits that an employer provides they can claim an income tax deduction for both the cost of providing the benefit and also the FBT that they pay. They can also claim GST credits for the items provided.

Related: FBT Exemption for Electric Cars: How to Take Climate Action whilst Reducing Employees’ Tax

Here are some examples of fringe benefits that employers can provide their employees:

1. Car fringe benefits – providing a car for business use that can then be used for personal use also.
2. Car parking – Paying for car parking close to the office.
3. Loan – some employers will provide an employee with a loan at a discount. They might provide a loan interest free or below the current interest rate standard.
4. Housing – An employer may provide housing for an employee as part of their employment agreement.
5. Living away from home allowance – If an employee is expected to travel and spend time away from home then an employer may choose to pay a living away from home allowance to cover additional expenses.
6. Entertainment – Employers may provide an incentive to the employee in the form of tickets to an event, or a dinner out. This also includes events such as a staff Christmas Party.
   
7. Debt waiver – if the employee owes the business money and then the employer waives that debt and no longer requires the employee to pay the money owed then they will have to pay FBT in the form of a debt waiver. For example if the employer sells goods to the employee and then later tells them they don’t have to pay the amount, they have provided a debt waiver fringe benefit.
8. Board – providing meals to an employee can incur FBT. This might occur for miners that have a dining facility onsite, a live in housekeeper or nanny or teachers that reside at a boarding school.
9. Property – when an employer provides the employee with property either free or at a discount. This can include company shares, but can also extend to property and houses, or good such as a computer, TV or items of clothing.
10.  Residual – this can occur when an employee gains access to a product or service that the employer has. For example they borrow a video camera, or are able to access advice from a lawyer. These don’t fit into any of the other areas, so are covered off by the residual FBT rule.

The area of FBT can be complicated, and because it is self-assessed you may find that you become unstuck at the time of audit. As such we highly recommend getting advice from an expert around some of the benefits that you currently offer your staff and what you may want to offer in the future (and anything else that you might not be aware of that may attract corporate fringe benefits).

Related: Why you Business needs professional Tax Preparation Services?

Have you noticed our #FridayExpertTips... here's one that relates to #Taxation
"FBT Exempt Benefits: The provision of exempt benefits to employees is a good method to reward employees without having to pay FBT. Contact us today if you want to know more."

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.