The Australian Tax Office, or the ATO, has introduced the Fringe Benefits Tax (FBT) for businesses. For this year, the deadline for FBT is 31st March 2023. With the deadline being just around the corner, now’s the right time for companies to learn about Fringe Benefits Tax. Additionally, you must remember that the Australian Tax Office charges $900-$4500 on every missing payment or business tax submission. The exact amount can vary depending on your company’s size and growth, but you’d still be required to pay financial compensation for failing to file for any tax returns like the Fringe Benefits Tax.
This blog discusses everything companies need to know about the 2023 Fringe Benefits Tax.
What is the Fringe Benefits Tax?
Fringe Benefits Tax refers to the tax employers have to pay in return for any benefits they’re paying to their employees or the employees’ families, except their wages. You might be surprised to know that the FBT is separate from the usual income tax. Therefore, companies that aren’t required to pay income tax have to pay the Fringe Benefits Tax too.
What Are Fringe Benefits?
Before you start determining how to pay the Fringe Benefits Tax, it’s important to understand what kind of favors are considered fringe benefits for the employees. Here are some types and examples of benefits that are taxable under the ATO.
- Car parking for employees
- Provision of transport or vehicles to employees for private purposes
- Payment of an employee’s personal expenses like a gym membership or tickets to a movie
- Reimbursing any expense paid by the employee, like covering their child’s school fee
- Giving a loan with a lower interest rate than the market to the employee
- Letting employees sacrifice their salary in return for additional benefits like added vacation days
What Doesn’t Qualify as Fringe Benefits?
However, not every benefit you provide your employees counts as a fringe benefit. Here are some employee benefits that aren’t considered fringe benefits.
- Salary paid by the employer
- Contribution of an employer to the employee’s retirement fund or other funds
- The shares in a company provided to an employee by the employer
- Additional benefits provided to the volunteers and third-party contractors
- Any items provided by the employer that is less than $300 in value
- Provisions used for work use, like cars, laptops, and computers
Companies need to hire a registered tax agent who analyzes a company’s business, payment, and benefits model to ensure that they determine the taxable benefits correctly and only file for them. Additionally, you also need a tax agent to register your company for Fringe Benefits Tax, especially if you own a business that isn’t registered for income tax.
How to Prepare for Your Fringe Benefits Tax in 2023?
Every year, the Fringe Benefits Tax has a deadline of 31st March. Therefore, companies that want to pay their Fringe Benefits Tax need to be prepared beforehand, ensuring that they don’t make mistakes calculating the amount or miss the deadline. Here’s a guide on preparing for the Fringe Benefits Tax this year.
- Ensure that all the vehicles that the company provides the employees for work and private use or private use only have complete logbooks. On 31st March, you can take images of the odometers of all these vehicles. This method is effective in determining the operating cost of these vehicles, allowing you to save money if the car has been used less than your previous calculations. Additionally, if an employee uses a company car for both work and personal use, keep their expenses separated, as you only have to file for FBT for personal use time.
- Keep a record of all the expenses that you have paid for your employees and determine which of them are considered fringe benefits. If your company regularly pays for the employees’ meals or likes to provide entertainment benefits like tickets or discount vouchers for any brand, it’s essential to keep track of it.
Once you have all the details, you can take steps to reduce your Fringe Benefits Tax liability this year or the next year.
Get Started with Ace Biz to Hire a Registered Tax Agent in NSW
Hiring a registered tax agent is essential to file for your Fringe Benefits Tax on time and even decrease the liability to an extent. Ace Biz has highly-experienced tax planners in NSW who can analyze a company’s revenue and expenses, helping them calculate the exact tax they have to pay. Their registered tax agents provide annual taxable payment reports to companies, letting them pay the tax before the deadline, avoiding any financial penalties. Their team also has data analytics services and business advisory services in NSW.
So what are you waiting for? Contact their tax planning services and let them handle your FBT and other taxes for your company.
About the Author
The author is a registered tax agent affiliated with Ace Biz. She is an experienced tax planner and consultant, helping companies calculate and pay their exact tax on time.
