Tax tips, tax, fringe benefits tax, bookkeeper, ato, startups, small business,

What is a Fringe Benefit (FB)?

Fringe Benefits is a tax payable by you (as the employer/ small business owner) on benefits which you provide to your employees. Even though the benefit is received by your employees, it is you who bears the expense of the fringe benefits tax. This is different to employees’ salary and wages, where it is the employees who bears the cost of the tax through PAYG Withholding Tax.

Fringe Benefits do not include salary and wages or bonuses. They are generally non-cash benefits and can include the following:

  • Employee is provided a work car for use. However, the employee also uses this car for personal purposes (the personal component is subject to fringe benefits tax)
  • Holidays and entertainment
  • Payment of a non-work related expense incurred by an employee – e.g. school fees
  • and many others…

Are any non-cash benefits exempt from Fringe Benefits Tax (FBT)?

Yes, there are a number of non-cash benefits which are exempt from FBT. These are outlined by the ATO in their guide on ‘Fringe benefits tax exempt benefits

How do you Calculate Fringe Benefits Tax (FBT)?

The ATO outlines 8 steps to use when calculating your FBT liability. For more information on these steps refer here. If you are unsure of how to complete the calculations, please speak to your accountant or get in touch with the Nudge team for assistance.

Does the FBT year end 30 June?

No. The FBT has a different cycle to the Aussie small business tax cycle. The FBT year runs from 1 April to 31 March. The current FBT rate is 46.5%.

With fringe benefits tax, a benefit provided to your employees could end up costing you much more than you originally thought and could cause cash constraints if not managed! So be informed. Check with your accountant if the benefit you are providing to your staff is subject to Fringe Benefits Tax and then ask for a calculation on how much the tax impact will be so that you can factor this into your budgeting and cash flow.

This Tax Tips Tuesday is brought to you with love by Nudge Accounting. You can read other Tax Tips here.