Introduction
As the end of the financial year approaches, businesses are dealing with various responsibilities, and one of them is understanding the Fringe Benefits Tax (FBT). In this detailed guide, we’ll break down the complexities of FBT for the year 2024. We’ll explore its different aspects, look at common benefits, discuss exemptions, and take a closer look at the changing rules regarding fringe benefits tax for electric vehicles.
Understanding FBT
Fringe Benefits Tax, often called FBT, is a tax that employers have to pay on certain extra perks they give to their employees. This goes beyond just the workers and includes family members and other people connected to the employees. To handle FBT properly, businesses need to understand what it covers and how it can affect them.
Common Fringe Benefits
Fringe benefits cover a wide range of things, like benefits related to cars, entertainment, living away from home, loans, parking, expenses, and housing. Each type comes with its own set of challenges and things to think about for businesses that want to follow the rules.
Exemptions and Concessions
When it comes to dealing with Fringe Benefits Tax (FBT), an important part is looking at exemptions and special allowances. If you work from home, some things like laptops, portable printers, and other work-related electronic devices don’t count for FBT. Digging a bit deeper, there’s also an exemption for small work-related items used at the workplace, like monitors or keyboards, as long as they don’t cost more than $300.
Electronic Vehicle FBT Exemption
In a new law that looks ahead, some electric cars won’t have to pay Fringe Benefits Tax (FBT) starting on July 1, 2022. For a car to qualify, it needs to be eco-friendly (zero or low emissions) and used by a current employee or their family and friends. It’s important to note that the luxury car tax shouldn’t have been paid when the car was brought into the country or sold.
ATO’s Audit Targets
The Australian Taxation Office (ATO) keeps a close watch on different things where people might not follow the rules. They pay extra attention to motor vehicle benefits, living away from home allowances, car parking values, gym memberships, and submitting FBT returns. It’s important to know what the ATO is looking at to make sure you’re doing things the right way.
Lodging FBT Returns
As the 2024 Fringe Benefits financial year wraps up on March 31, 2024, businesses need to submit their FBT returns by June 25, 2024. Meeting this deadline is really important to avoid fines and make sure things go smoothly into the next financial year.
Who is eligible for fringe benefits?
FBT (Fringe Benefits Tax) is a tax that applies to extra perks given to your employees, their families, or other connections. For FBT, an employee can be someone who:
- Works for the company and is also a beneficiary of a trust.
- Is a current, former, or past employee.
- Serves as a director of a company.
If you own a sole proprietorship or are a partner in a partnership, you’re not considered an employee for FBT purposes. In such cases, you don’t have to pay FBT for any benefits you provide for yourself. Also, benefits given to your clients, like freebies and entertainment, are not subject to FBT.
What is the amount of FBT (Fringe Benefits Tax) you are required to pay?
To calculate the FBT amount, you must aggregate the taxable value of the provided benefits. This sum represents the gross income that your employees would require to cover the benefits at the highest marginal tax rate, which includes the Medicare levy.
The fringe benefits’ value is equivalent to 47% of the total FBT payment.
What Do You Need to Do?
As an employer, here are the steps you need to take:
- List the different types of extra benefits you provide to your employees.
- Explore discounts and other methods to reduce the fringe benefits tax (FBT) you have to pay.
- Some work-related benefits are not subject to FBT.
- You can lower your FBT by either opting for alternative benefits or choosing ones that qualify for a concession.
- If you work for a non-profit organisation, you might be eligible for a rebate or exemption.
- Figure out the taxable value of the extra benefits you’re offering.
- Calculate the amount of FBT you need to pay.
- Keep thorough records, including any necessary employee declarations.
- Submit an FBT return and make the required payments.
If needed, include a report of each employee’s extra benefits in their year-end payment information.
Conclusion
In conclusion, dealing with fringe benefits tax can be tricky, but businesses need to be actively involved and fully grasp the rules. They need to figure out how much FBT they might have to pay, take advantage of any exemptions they can, and make sure to submit all the necessary paperwork on time. This way, they can handle the complex world of fringe benefits tax more effectively.
FAQ’s
1. What is Fringe Benefits Tax?
FBT, or fringe benefits tax, is a tax on the extra perks employers give to employees and their families.
2. Tell me more about exemptions for work-related electronic devices.
Sure. Things like work laptops are exempt from FBT. Also, smaller work items used in the office, like monitors or keyboards, are exempt if they cost less than $300.
3. Which electric cars don’t have to pay FBT?
Electric cars that meet certain conditions, like being eco-friendly, used by an employee or their family, and not being charged luxury car tax, can skip paying FBT.
4. What does the ATO check during audits?
The ATO keeps an eye on things like benefits related to cars, living away from home, car parking, gym memberships, and whether businesses are filing their FBT returns properly.
5. What if businesses don’t submit their FBT returns on time?
If businesses miss the June 25, 2024, deadline for FBT returns, they might face penalties. So, it’s important to get it done on time.
