Fringe Benefits Tax: Are you Liable?

If your business isn’t registered for Fringe Benefits Tax (FBT), it is important that you determine whether it needs to be.

Fringe Benefits Tax (FBT) is the tax employers are required to pay on benefits that they provide to employees in addition to, or in place of their salary or wages. FBT is separate from income tax and is based on the taxable value of the benefits you provide. These benefits might be provided directly by the employer or through a third party. 

So, am I liable for FBT?

If you are not sure whether your business is providing fringe benefits to employees, here are some key questions you should ask about employees, directors or associates (a relative such as a spouse or child): 

• Does the business provide entertainment - food, drink or recreation activities? For example, if you had a Christmas party then the business probably provided entertainment to employees.
• Are any vehicles owned or leased by the business available for private use?
• Are any salary package (salary sacrifice) arrangements in place?
• Has the business provided goods at a lower price than they are normally sold to the public?
• Does the business provide car parking?
• Does the business provide loans at reduced interest rates?
• Has the business forgiven any debts owed?
• Has the business paid for, or reimbursed, a private expenses?
• Does the business provide accommodation, i.e., a house or unit?
• Does the business provide any living-away-from-home allowances?

A common area of confusion is motor vehicles. Where a motor vehicle owned or leased by the business is used by an employee or director for private purposes (including travelling between home and work), there may be an FBT liability present.

Another common area of uncertainty is entertainment. Entertainment can include food, drink, recreation activities such as movie tickets, through to non-work based travel. If you provided any entertainment benefits to employees, such as an employee attending a business lunch or party, then FBT may apply. Entertainment is an area of continued focus for the ATO as the FBT treatment also interacts with the treatment of these expenses for income tax and GST purposes. 

What’s exempt from FBT?

Certain benefits are excluded from the scope of the FBT rules. The following work-related items are exempt from FBT if they are provided primarily for use in the employee’s employment: 

• Portable electronic devices (e.g., laptop, iPad, printers, GPS, etc.,) that are provided primarily for use in the employee’s employment (larger businesses are limited to the purchase or reimbursement of one substantially identical portable electronic device for each employee per FBT year);
• An item of computer software;
• Protective clothing required for the employee’s job;
• A calculator;
• A ‘tool of trade’.

What you need to do

If you suspect you may have incurred an FBT liability and need to register, please get in touch with your trusted adviser, so we can guide you through the next steps and discuss your obligations once you are registered. If you have answered no to the key questions above, then there is no further action needed.

If we can assist you with any information or queries you might have about FBT or determining if your business is liable for FBT please contact our office on (07) 5655 0106 or email info@sentrika.com.au