Fringe Benefits Tax – a guide for small business ownersStuart Taverner
As a small business owner, you need a good understanding of which taxes apply to you right from the start. One tax that can be incredibly confusing for business owners with employees is the fringe benefits tax (FBT). For most small business preparing their own FBT return, it needs to be lodged and liability paid by May 23 every year.
Let’s have a look at what FBT is, how you can prepare for it and what upcoming changes to the tax may affect your business.
A fringe benefit is a benefit that an employee or their associate (spouse or child) receives because of their employment. This can be a current, former or future employee. A benefit can be any right, privilege, service or facility that the employee receives.
A benefit can include:
– The use of something, such as a car, house or equipment
– Ownership of something such as items of clothing
– Enjoyment of a privilege or facility, such as staying at a holiday home
– Salary packaging
– Meals/ entertainment
Fringe benefits do not include:
– Salaries and wage payments
– Approved employee share acquisition schemes
– Employer contributions to complying superannuation funds
– Eligible termination payments (e.g. Company car given or sold to employee on termination)
– Laptop computers, mobile phones, printers and software used primarily for work purposes
For a more comprehensive list of the different types of fringe benefits please visit the ATO website.
What is Fringe Benefits Tax?
Fringe Benefits Tax (FBT) is a tax on employers that provide non-cash benefits to their employees. FBT is separate from income tax. It’s based on the taxable value of the various fringe benefits that you have given to your employees. It is partly used by the ATO to stop employers avoiding paying tax on wages by providing non-cash bonuses in the place of a salary.
When do I pay Fringe Benefits Tax?
As an employer you have to assess your liability for FBT annually. If you’re preparing your own FBT return covering the FBT year (1 April to 31 March) then it should be lodged by 21 May, or the first business day after this date. Tax paid in the FBT year must then be reported on the employee payment summary (group certificate) for the financial year (1 July 30 June). If you think you’ll need an extension, you can phone the ATO on 13 28 66.
If you’re lodging via a tax agent, you’ll need to appoint them by 21 May. Tax agents will then have until June 27 to lodge your return if they lodge electronically, or May 23 if they lodge by paper.
How to avoid last minute FBT stress
In Wages Manager and Cashflow Manager Gold you are able to record fringe benefits payments. This is important as your employee’s PAYG Payment Summary needs to include fringe benefits payments. Wages Manager assists you in setting up the fringe benefits including salary sacrifice and can even calculate the superannuation on your salary sacrifice. You can also add the fringe benefit amounts to your electronic banking and produce an accurate fringe benefit balances report, which makes life much easier for you.
Important changes to Fringe Benefits Tax
COVID-related payments or incentives
If you provide your employees with incentives or rewards for getting their COVID-19 vaccination or booster dose, there may be tax and super consequences in doing so. Unfortunately it gets a little complicated and can depend on whether a cash payment, paid leave or non-cash benefit was provided to your employees.
If you provide non-cash benefits, you may have to pay FBT on these benefits unless an exemption – such as the minor benefits, work-related preventative health care or in-house benefits exemption – applies.
The ATO have a full list of how different types of COVID-19 benefits may be taxed (or not) including vaccination incentives, working from home equipment, COVID-19 Rapid Antigen Tests and more.
Exemptions and concessions
There are various exemptions and concessions that might apply to the fringe benefits (and can save you money). They often change every year, so if you pay fringe benefits to your employees it’s work checking out the entire list of FBT exemptions and concessions.
Notable exemptions and concessions include:
- retraining and reskilling exemption
- minor benefits exemption (for certain benefits less than $300)
- working from home exemptions
- small business and other car parking exemptions
- living away from home allowance exemptions
- Concessions, including concessions for not-for-profits
Can I pay Fringe Benefits Tax by instalments ?
If this isn’t your final FBT return and you had to pay FBT of $3,000 or more, you must pay quarterly FBT instalments for the next FBT year.
You will receive pre-printed activity statements before the lodgment date, including your:
- due dates for lodging and paying
- FBT instalment amount.
If you pay your FBT by instalments, you must lodge all your activity statements for the FBT year ending 31 March, including the March quarter, before lodging your FBT return. Your FBT return won’t be processed until all your activity statements are lodged.
If you prepare your own return and need to make a balancing payment, the payment is due by 21 May.
If you didn’t have an FBT liability for an FBT year, and you didn’t vary your FBT instalments to nil during that year, you need to lodge an FBT return. Lodging an FBT return will allow update the ATO and trigger a refund.