Reducing Fringe Benefits Tax

Fringe Benefit Tax is only imposed on employers. When an employer provides an employee or an employee’s associate, a benefit in respect to that worker's activities.

For most businesses the majority of benefits that fall under FBT can be summarised as:

    * Motor Vehicles
    * Loans
    * Expense Payments
    * Housing
    * Living Away from Home Allowances
    * Airline Transport
    * Board Meals
    * Meal Entertainment
    * Car parking

Looking at motor vehicles, FBT is payable on the private usage of a car by an employee, including company owned, novated leases etc. There are two alternative methods to calculate the FBT for cars:

    * Log book - based on actual usage from a properly maintained log book over a 12 week period completed in the last 5 years or,

    * Statutory method - based on the total number of kilometres travelled under the premise that the more kilometres travelled the more likely the car is used for business.

Please remember to have your log books up to date at the 31st March.

How can I reduce my FBT liability?

You may wish to consider the following to reduce your liability :

    * Replace fringe benefits with cash salary - if you replace your employees' fringe benefits with the cash equivalent in the form of salary or wages, the employees will pay income tax on the salary or wages and you do not incur the fringe benefit tax liability.

    * Using employee contributions - in most cases, you can reduce your FBT liability by obtaining a contribution from employees towards the cost of providing their fringe benefits.

What is an employee contribution?

It is a payment by an employee towards the cost of a fringe benefit. Generally, the payment is a cash payment made to the employer or person who provided the benefit. However, an employee can also make an employee contribution by contributing towards a car fringe benefit by paying for some of the operating costs, such as fuel, if these are not reimbursed by the employer. Contribution of services as an employee is not considered an employee contribution for FBT purposes.

An employee contribution normally will be assessable income in the hands of the employer.

How do employee contributions affect the value of fringe benefits?

The taxable value of a fringe benefit can be reduced by the amount of employee contributions towards the cost of particular fringe benefits.

Please note that the employee contribution has to be made from after-tax salary. Sacrificing an amount of salary does not constitute an employee contribution.

Disclaimer:

No investment advice provided to you.
This web site is not designed for the purpose of providing personal financial or investment advice. Information provided does not take into account your particular investment objectives, financial situation or investment needs.

You should assess whether the information on this web site is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision on the basis of the information on this web site. You can either make this assessment yourself or seek the assistance of any adviser.