On 31 March 2017, the Fringe Benefits Tax (FBT) year ends. With increased focus on data matching, the ATO will be reviewing whether employers who should be paying FBT are, and that they are paying the right amount.
To help you meet your fringe benefits obligations, we’ve put together a list of essentials every employer needs to know about FBT and review every year, such as:
- Do I have to consider FBT?
- What information do I need to give my accountant?
- What is exempt from FBT?
- How can I reduce my FBT liability?
These questions are all answered for you below, as well as some log book management tips. Remember this advice is general in nature and we encourage you to discuss your specific circumstances with our accountants who are all trained in FBT matters.
1. FBT Rate change – On 1 April 2017, the FBT rates will decrease to:
FBT Rate 47%
Type 1 Gross Up Rate 2.0802
Type 2 Gross Up Rate 1.8868
2. Do I have to consider FBT?
Generally, if you have employees, including directors and you provide them with cars, car parking, entertainment (food and drink), employee discounts, reimburse private expenses etc, then you are likely to be providing a fringe benefit and we will need to give consideration to FBT.
It’s important you start gathering all of the details of these provided benefits as soon as possible using our annual FBT Questionnaire so we can calculate any potential FBT liability and lodge your FBT return on time if required – due 25 June 2017 with payment to be made by 28 May 2017.
3. What items are exempt from FBT?
If you’re providing items like mobile phones, laptops, tablets, portable printers, protective clothing, tools of trade etc., or minor and infrequent benefits that are less than $300 in value, you are unlikely to have to worry about FBT.
You can fill out our short FBT Questionnaire to be 100% sure.
4. An easier way to manage your vehicle log books.
For employers with 20 or more ‘tools of trade’ cars – a car required for the job, like for a sales rep travelling extensively for the business – the ATO has a new process for validating the business use percentage of the car.
It’s called the ‘simplified method’, and if you meet the access conditions, you can apply an average business use percentage to all ‘tools of trade’ cars in your fleet for first log book year and the next 4 years. Conditions to be met are:
- valid log books kept for at least 75% of the cars in the log book year;
- the employer chose the make and model of the car, not the employee;
- each fleet car has less value than the ‘luxury car’ limit when purchased, generally $64,132 in 2016/2017;
- the cars aren’t provided under a salary packaging arrangement / employee remuneration package; and
- your employees can’t choose to receive additional remuneration in lieu of using the cars.
5. Ways you can reduce your FBT liability.
Here are some ways in which you can reduce your FBT liability:
- replace your fringe benefits with cash salary;
- provide benefits that your employees would be entitled to claim as an income tax deduction if they had to pay for the benefits themselves;
- look at providing benefits that are exempt from FBT; and
- use employee contributions, for example, an employee paying for some of the operating costs of car fringe benefit such as fuel that you don’t reimburse them for. Though you should note that employee contributions may be deemed assessable income to you and subject to GST.
How we can help you.
The FBT year ends on 31 March 2017, so be sure to complete and return the FBT Questionnaire as soon as possible so you don’t miss the lodgment date of 25 June 2017, and meet the payment due date of 28 May 2017.
We look forward to helping you meet your FBT obligations and are available anytime to answer any questions you have around reducing your FBT liability or creating effective salary sacrifice arrangements.
Call us today on (03) 9744 7144.