The 2024 Fringe Benefits year will end on 31 March 2025, if you provide benefits to your employees such as motor vehicles, expense claims, entertainment costs and accommodation costs, you may be liable for Fringe Benefits Tax.
What are Fringe Benefits?
Fringe benefits are additions to compensation that companies and trusts give their employees. These benefits can be in the form of property, services, cash, or cash equivalents provided in addition to the employee’s stated pay. Common examples include company cars, paid time off, gym memberships, and health insurance. Fringe benefits help companies recruit, motivate, and retain high-quality employees.
Fringe Benefits Tax: Key Points to Remember for Lodgements
As we approach the Fringe Benefits Tax (FBT) lodgement period, it’s crucial to ensure that all necessary records are accurate and up-to-date. FBT is a tax that employers pay on certain benefits they provide to their employees or their employees’ associates. These benefits can include anything from company cars to entertainment expenses. Here are some important things to remember in the lead-up to lodgements:
Accurate Record Keeping
Maintaining accurate records is essential for FBT compliance. This includes keeping detailed records of all fringe benefits provided, the method used to calculate the taxable value of these benefits, and any employee contributions. Accurate record-keeping helps in substantiating the benefits provided and ensures that the correct amount of FBT is paid.
Vehicle Logbooks
If you provide vehicles to employees, maintaining a vehicle logbook is crucial. A logbook helps in determining the percentage of private use versus business use of the vehicle, which is necessary for calculating the taxable value of the car fringe benefit. The logbook should be kept for a continuous 12-week period and should be updated every five years or whenever there is a significant change in the vehicle’s usage.
Understanding FBT Legislation
FBT is governed by the Fringe Benefits Tax Assessment Act 1986 (Cth) and the Fringe Benefits Tax Act 1986 (Cth). It’s important to understand the key differences between income tax and FBT, such as the rate of tax and the fact that FBT is levied on the employer, not the employee. The FBT year runs from 1 April to 31 March, and the rate of tax is the top personal marginal tax rate plus the Medicare levy.
Employee Contributions
Employee contributions towards the cost of fringe benefits can reduce the taxable value of the benefit. These contributions must be made from after-tax income and should be properly documented. This can help in reducing the overall FBT liability for the employer.
By keeping these key points in mind and ensuring that all records are accurate and up-to-date, you can ensure a smooth and compliant FBT lodgement process. If you are unsure if you are liable for Fringe Benefits Tax or are required to lodge a return, please reach out to one of our friendly team.
