Fringe Benefits Tax (FBT) – What is it?

Fringe benefits are an important part of business and can be a useful way of attracting quality staff.

Fringe Benefits Tax (FBT) – What is it?

Rewarding employees beyond there usual wage or salary is a great way to show your appreciation for a job well done. 

But it is important to remember these rewards may have fringe benefits tax implications for your business.  When used by you, or your employees a company car, motor bike, property, gym membership, accommodation, concert tickets or other lifestyle assets are usually considered fringe benefits. 

So its important to keep a record of each asset and how it is used.  Accurate records will help you meet your FBT obligations and determine any related income tax deductions you are able to claim.  Innocently allowing your employee to take home the company vehicle could be considered a fringe benefit. 

Fringe Benefits Tax (FBT) is a tax payable by employers for benefits paid to an employee in place of salary or wages. This is separate to income tax and is calculated on the taxable value of the fringe benefits provided.

Why offer your employees fringe benefits?

Providing non-cash benefits allows you to be more creative to attract and retain the best workers for your business. It’s entirely legal and a common form of reimbursement used by businesses for their employees.

For example, commonly provided benefits to employees include:

  • a motor vehicle
  • provision of telephone or electronic devices
  • payment of private expenses (home loan, entertainment & health insurance)
  • car parking
  • low interest loans

Whilst fringe benefits are not subject to income tax, FBT can apply and in some instances disadvantage the employee. Not all benefit are equal, with a number of exemptions and concessions it can be worth considering your options.

The Business Experts say:  If you are unsure you are providing a fringe benefit to your employee or you need further clarification on the matter then please contact our office.

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