If you own your own business and employ a number of people do you know what items are subject to fringe benefits tax?
As the Fringe Benefits Tax (FBT) year ends on 31 March 2010, you should be reviewing your circumstances now to determine your FBT payable.
FBT is a tax payable by an employer - not employees - on the value of certain benefits provided to an employee or a relative of the employee, because of their employment. For example, a work car provided to an employee for private use, not work use, would be a fringe benefit.
Besides providing a car, there are numerous benefits that get caught by FBT. Examples of some benefits include when you, as an employer:
- provide a cheap loan
- pay for gym or club membership
- provide entertainment such as free concert tickets
- reimburse private expenses, for example school fees
- provide rewards such as televisions or holidays. (Note - This is not a complete list of benefits)
Although the FBT rate is 46.5%, it's not as simple as applying this to the value of the benefit. FBT is payable on the "grossed-up" value of the benefit, which in effect is trying to say how much gross salary/wages an employee would have to receive in order to purchase the benefit themselves.
For example, say you provide an overseas holiday worth $10,000 to your employee as a reward for good service. The value of the holiday is grossed up to $18,692 and FBT is then applied to this amount. Therefore, on the $10,000 overseas holiday the FBT payable would be $8,692.
Advantageously, both the value of the holiday and the payment of the FBT will be a tax deduction to your business.
Of course there are a number of exemptions for benefits to which FBT does not apply, such as minor and infrequent benefits of less than $300, newspapers and periodicals provided for business use, relocation expenses etc
The specific rules for FBT can be very complex and you should contact your WHK accountant to discuss in detail your particular circumstances and if FBT applies to you.
Principal, Accounting & Business Advisory
WHK Stawell
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