Get a basic understanding and few tips how to waive this extra tax
This is a benefit provided in respect of employment which is not salary or wage.
These types of benefits, also known as 'fringe benefits', can include extra advantages provided such as private health insurance, discounts on home loans or entertainment or a car including a novated lease.
In this case, Pay As You Go (PAYG) is not withheld on employee payslips but fringe benefit is taxable for the employer.
- Car fringe benefit: for company car special rules apply for the taxable value (now 20%)
- Loan fringe benefit : arise when an employer gives a cash advance for more than 6 months
- Expenses payment fringe benefit
- Meal entertainment : arise when the business meal is shared with clients or associates
- Car parking fringe benefit : arise when a parking is available for employees
- Property fringe benefit : e.g. giving the employee a toll kit to keep
Who is liable to pay this tax?
FBT is paid by the employer only and this irrespective of whether you are a sole trader, partnership, trustee, corporation, unincorporated association, government or government authority.
The FBT year runs from 1 April to 31 March.
How much is it and how is it calculated? There is two types FBT formulas:
If the taxable value is eligible to claim back the GST by the employer, the benefit is grossed-up by 2.0647. Otherwise, the gross-up factor is 1.8692.
In both cases, the FBT rate is 45.6 % of the grossed up taxable value.
To summarise, the extra tax to be paid by the employer will be:
- around 96 % of the original benefit value given when the GST is claimable.
- around 86 % of the original benefit value given when the GST is not claimable.
Example: A private health insurance is paid to an employee for $1,000 AUD
Because no GST is claimable, the taxable value will be $1,000*1.8692 = $1,869.20
The FBT will be $1,869*46.5 % = $869.18 AUD which stands for 86 % of the private health insurance original cost.
Exemptions – Useful to know:
- Minor Benefits for small benefits that have a taxable value of less than $300 and are infrequently provided.
- Work related exemption for eligible work-related items, such as a laptop computer or work tools that are used primarily in an employee’s employment.
- Small Business car parking exemption when the employer's total gross income (before any deductions) for the last financial year before the relevant FBT year was less than $10 million.
- Meal entertainment benefits: elect to the 50 % split method, the taxable value will be 50% of the employer’s total meal entertainment expenditure.
- Exemption for running costs associated with a car fringe benefit (fuel, repairs)
Contact your registered Tax Agent before the 21st of May 2014 to get an extension lodgement until the 25/06/2014 – the payment due date remains the 28/05/2014