Navigating the Maze of Fringe Benefits Tax Rules
CoggerGurry • September 11, 2023
In today's rapidly evolving business landscape, attracting and retaining top talent has never been more crucial. One effective way to do so is by offering attractive fringe benefits to your employees.
However, as many Australian employers know, providing these perks can also come with tax obligations. In this newsletter, we explore the essential Fringe Benefits Tax (FBT) rules in Australia that employers should be aware of when offering fringe benefits to their staff.
Understanding Fringe Benefits Tax (FBT):
Fringe Benefits Tax, commonly known as FBT, is a tax imposed by the Australian government on the non-salary benefits provided by employers to their employees. These benefits can include company cars, health insurance, gym memberships, and even work-related entertainment. The aim of FBT is to ensure that employees are not receiving hidden forms of compensation that go untaxed.
Key FBT Rules and Considerations for Employers:
- Types of Fringe Benefits: Employers should be aware that not all benefits are considered taxable fringe benefits. Common examples include company cars, housing allowances, and low-interest loans. Understanding what constitutes a fringe benefit is the first step in compliance.
- Calculating FBT: Once you've identified the fringe benefits, you'll need to calculate the FBT liability. The most common method is the 'taxable value' method, where the taxable value of the benefit is multiplied by the FBT rate (currently 47%).
- Reporting and Lodging: Employers are required to report FBT to the Australian Taxation Office (ATO) on an annual basis, generally by the end of March following the FBT year (April 1 to March 31). Ensuring accurate reporting and timely lodgment is crucial to avoid penalties.
- Exemptions and Concessions: Some benefits may be exempt from FBT or eligible for concessions. For example, small businesses with an annual turnover below a certain threshold may be entitled to reduced FBT rates or exemptions.
- Employee Contributions: In some cases, employees may make contributions towards the cost of fringe benefits. These contributions can reduce the taxable value of the benefit and, consequently, the FBT liability for the employer.
- Record Keeping: Comprehensive record-keeping is essential. Employers should maintain documentation that supports the FBT calculations, including receipts, invoices, and employee declarations.
- Employee Declarations: Employees may be required to declare their fringe benefits on their income tax returns. Employers should communicate this requirement to their staff to ensure compliance on all fronts.
Consult with Experts:
Given the complexity of FBT rules, many employers find it beneficial to consult with tax professionals or accountants specializing in FBT. Their expertise can help you navigate the intricacies of FBT compliance, minimize your tax liability, and ensure that your employees receive the benefits they deserve.
In conclusion, offering fringe benefits can be a valuable tool for attracting and retaining top talent in your organization. However, it's vital for employers to understand and comply with the FBT rules to avoid potential pitfalls. By staying informed and seeking professional guidance, when necessary, you can create a win-win situation for both your business and your employees.
If you have any questions or require assistance with FBT compliance, please contact us.
If you’re nearing retirement and looking for ways to boost your superannuation savings, downsizer super contributions might be the perfect solution for you. These allow eligible Australians aged 55 and over to contribute proceeds from selling their home into their superannuation fund. A downsizer contribution allows an eligible individual to contribute an amount equal to all or part of the sale proceeds (up to $300,000 each) from the sale of their home into their superannuation fund. The contribution must not exceed the sale proceeds of the home. The great advantage is that downsizer contributions aren’t restricted by any other contribution caps or your total superannuation balance; there are no work tests; and there’s no upper age limit. It’s one of the rare ways you can contribute large amounts to your super even after the age of 75. Eligibility To make a downsizer contribution, you must: • be 55 years or older at the time of contribution; • have owned the home for 10 years or more (the owner can be you or your spouse); • sell your home that is in Australia and is not a caravan, houseboat or mobile home; • ensure the sale is exempt or partially exempt from CGT for you under the main residence exemption; • make the contribution within 90 days of receiving the sale proceeds (usually settlement date); • not have made a downsizer contribution previously from another home; and • provide your super fund with the Downsizer contribution into super form either before or at the time of making the contribution. Failure to submit the Downsizer contribution into super form on time may result in your fund rejecting the contribution or treating it as a standard non-concessional contribution, which could have adverse tax implications. The 90-day deadline from the date of settlement is also strict. If you need more time (Eg due to delays in purchasing a new home), you must apply to the ATO for an extension. Extensions are granted only in limited circumstances, such as settlement delays due to council approvals. If you are considering selling your home and wish to further explore a potential downsizer contribution, please do not hesitate to get in contact with our office (03)55710111
The government has announced major reforms to Australia’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) laws . This is the biggest update in nearly 20 years. These reforms aim to modernise how Australia combats financial crime and bring us into line with international standards. While not every business will be affected, some sectors will face new or expanded reporting and compliance obligations. Sectors likely to be impacted include: Accountants and bookkeepers Real estate agents Lawyers and conveyancers Dealers in precious metals and stones The activities you undertake, such as managing client funds, setting up companies or trusts, or handling large transactions, will determine if these new rules apply to you. AUSTRAC’s national awareness campaign will help businesses understand what’s changing and how to prepare, with guidance and tools rolling out over the next year. 👉 We’re here to help. If you’re unsure whether these reforms could affect your business, contact our team to discuss what it means for you. You can read more here - https://www.austrac.gov.au/national-reforms-awareness-campaign-launch
Vouchers and GST in your business If your business sells or buys vouchers, it’s essential to understand how to account for and report GST correctly. A voucher is a document or an electronic record that represents a right to receive goods or services. This includes physical gift cards, digital vouchers and even prepaid phone cards. When your business sells a voucher, you’re essentially providing the recipient with a promise to supply goods or services in the future, and it’s at this future point that the GST implications come into play. The ATO recognises two distinct types of vouchers. Face value vouchers Face value vouchers can be redeemed for a reasonable choice of goods and services – for example, a $50 supermarket gift card that works across all store locations. The voucher sale isn’t considered a GST taxable supply, so you don’t charge GST at the point when you sell the voucher. Instead, you account for GST when the voucher’s redeemed and the goods or services are supplied. For instance, if you sell that $50 gift card, you don’t charge GST on the gift card sale, but when the gift card’s redeemed to purchase goods worth $50, you charge GST on the supply of those goods. Non-face value vouchers Non-face value vouchers are restricted to specific goods or services – like a voucher specifically for a spa treatment, purchased for $100. With these, you account for GST (eg on the $100 price) at the time of sale, but only if the voucher is redeemable for taxable supplies. If the voucher is only redeemable for GST-free or input-taxed supplies, there’s no GST to account for. Note on expired vouchers Here’s something business owners often overlook: if you’ve sold face value vouchers that expire or remain unredeemed, and you write back the unused amount to your current income for accounting purposes, you need to make an “increasing adjustment” on your Business Activity Statement (BAS). This adjustment is 1/11th of the unredeemed balance. Keep accurate records To account for GST on vouchers you sell, you need to keep accurate records including dates of sale, redemption and/or expiration, and the amounts of GST payable. Importantly, specific rules and exceptions apply to certain types of vouchers. For example, if you sell vouchers that can be redeemed for a combination of goods and services, you need to apportion the GST accordingly. You may also need to issue a tax invoice to the customer when a voucher’s redeemed and \keep a copy of this invoice for your records. And finally, of course, you need to report GST on vouchers in your BAS in accordance with ATO guidelines.
