An Employer’s Introduction To FBT
Fringe Benefits Tax (FBT) is a tax levied on particular benefits employers provide to their employees or their families.
It is separate from income tax and is calculated based on the taxable value of the fringe benefit provided.
As an employer, it is crucial to understand your FBT obligations to ensure compliance with tax laws and regulations.
Who Pays FBT?
The responsibility for paying FBT lies with the employer, regardless of whether the benefit is provided directly by the employer or through a third party under an arrangement with the employer.
Calculating FBT
To determine the amount of FBT payable, employers must ‘gross up’ the taxable value of the benefits provided.
This involves calculating the gross income equivalent that employees would need to earn at the highest marginal tax rate (including the Medicare levy) to acquire the benefits themselves.
The FBT payable is calculated at 47% of the fringe benefits ‘grossed-up’ value.
Deductions & GST Credits
Employers can claim income tax deductions and GST credits for the cost of providing fringe benefits. Employers can claim the GST-exclusive amount as an income tax deduction if eligible for GST credits.
However, if GST credits cannot be claimed, the full amount of the fringe benefit is deductible for income tax purposes. Additionally, employers can claim an income tax deduction for the FBT they must pay.
Employer Responsibilities
As an employer, it is essential to fulfil several responsibilities regarding FBT:
- Identify Fringe Benefits: Determine the types of fringe benefits provided to employees.
- Check for Concessions: Explore FBT concessions and strategies to reduce FBT liability. Some benefits may be exempt from FBT, while alternatives or concessions may be available to reduce liability.
- Calculate Taxable Value: Accurately calculate the taxable value of fringe benefits provided.
- Keep Records: Maintain detailed records, including employee declarations where necessary.
- Lodge FBT Return: Lodge an FBT return and pay the FBT owed by the due date.
- Report Fringe Benefits: If required, report each employee’s fringe benefits in their end-of-year payment information.
Navigating Fringe Benefits Tax (FBT) obligations can be complex for employers, but understanding these responsibilities is essential for compliance with tax laws.
Employers can effectively meet their FBT obligations by identifying fringe benefits, exploring concessions, accurately calculating taxable values, maintaining records, and fulfilling reporting requirements.
Seeking professional advice from tax experts or consultants can also provide valuable guidance and support in managing FBT compliance. Ultimately, staying informed and proactive is key to ensuring smooth FBT administration and avoiding penalties or liabilities.
Want to learn more about your potential FBT obligations? Speak with a trusted tax professional today.
