08 Feb 2011 / by KRS Accountants / in Newsletters
Fringe Benefits Tax – nearly over for another year
It’s almost time to celebrate another end of year event – the FBT year end. The Fringe Benefits Tax (‘FBT’) year ends on 31 March running independently of both the calendar (31 December) and financial (30 June) years and receives very little attention from business owners.
FBT is a tax employers pay on benefits the employees receive such as the use of company cars or phones. It is not a straightforward tax and the number crunching can be daunting so many businesses have taken the approach of ignoring it. Unfortunately for these businesses the tax man has recently run a quick audit on small and medium sized businesses to determine their FBT compliancy resulting in a very high non compliance rate which in turn will increase the tax office revenue when these businesses have to pay the tax plus penalties. A number of sources indicate that the tax office plan to employ more staff to audit businesses that are not reporting FBT correctly.
The most common fringe benefit is the motor vehicle fringe benefit. Due to the 50% small business tax break a number of business owners now hold vehicles in their business and do not know that FBT applies to these vehicles. There are two methods to determine the FBT payable on vehicles:
a) Operating method: keeping a logbook for 12 weeks to determine the business use percentage of the vehicle and then calculating the amount of private expenditure on fuel, registrations, repairs, etc. This usually results in less FBT payable but many tax payers find the process of maintaining the log book to be tedious.
b) Statutory method: the FBT is calculated by a percentage determined by the distance the vehicle travels during the year. The assumption is that the private use of the vehicle reduces as the kilometres increase. This results in many cars travelling a fair distance in March to reduce FBT to the frustration of environmentalists.
Other popular fringe benefits include:
- Loans to employees;
- Paying for employees expenses;
- Housing benefits;
- Living away from home payments;
- Airline benefits;
- Car parking benefits;
- Property benefits;
- In house benefits;
- Staff parties including Christmas parties;
- Plus many more…
Sounds like bad news, what can you do?
Firstly find out what fringe benefits you are providing.
Secondly, ensure that all your paperwork is in order at the end of the year such as employee declarations, odometer readings, etc.
Thirdly, there may be ways to legally reduce your FBT bill by being proactive.
Do not ignore this tax; it will catch up with you if you do!
Employees of Public Benevolent Institutions or some non profit organisations can receive a FBT exemption for the first $30,000 or $17,000 of grossed up taxable fringe benefits which expires on the 31 March. If you are able to access this generous concession then it would be prudent to maximise your fringe benefits before the year ends as you cannot roll over any unused portion.
Fringe Benefits Tax is not simple; please feel free to contact us if you have any queries.