Understanding Fringe Benefits Tax (FBT)

What are fringe benefits?

Fringe benefit is a form of payment that you receive but is different from a salary or wage. It is considered to be an extra or added benefit that is provided to the employee. It may be in the form of a company car, private healthcare, workers’ insurance, gym memberships, retirement plans or medical leaves. Providing employees with a discounted loan along with reimbursing expenses by an employee and entertainment expenses are also included in Fringe Benefits.

What are fringe benefits tax?

Fringe benefit tax is a tax paid by the employers on the benefits provided to their employees. FBT is separate and different from income tax as it is calculated on the taxable value of the fringe benefit provided and is paid in addition to the income tax. According to the Finance act 2005, FBT is set at 30% of the cost of benefits that a company has paid.

Who needs to pay FBT?

FBT applies to all current, future and/or past employee. It also includes directors of a company and any beneficiary of a trust who is working on behalf of the business. It is important to note that your clients are not your employees and therefore are not applicable for fringe benefits. If you are a sole trader or in a partnership; you are not an employee and the benefits you utilize for yourself do not come under fringe benefits.

What do you need to do?

If you are an employer and you are providing your employees with fringe benefits, you need to consider the following:

  1. Identify the types of fringe benefits you provide
  2. Check for FBT concessions and how you can reduce FBT
  3. Work out the taxable value of the fringe benefits you are providing
  4. Calculate your FBT liability
  5. Maintain records as a company policy
  6. Lodge a FBT return and pay what you owe

Hiring an accountant for your company would be the best call to analyze fringe benefits for your employees.



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