Fringe benefits are perks on top of your salary, like health insurance or gym memberships. They can be mandatory (like health insurance in some countries) or offered by employers to attract talent. Fringe benefits tax is a levy some employers pay in certain countries for these perks, though it’s not common everywhere. So, fringe benefits make your job sweeter, and fringe benefits tax, when it applies, makes them a bit more expensive for employers.
Fringe Benefits Tax
A Fringe Benefits Tax (FBT) is a non-monetary incentive provided to employees through their employers. Common benefits include reimbursing telephone bills, covering educational fees, offering entertainment perks, and providing access to company cars. In the US, these are known as fringe benefits, whereas in Australia, they represent entitlements for employees. FBT serves as a strategic means to offer incentives without increasing wages.
Employees retain the right to decline fringe benefits, which are considered part of their taxable income. FBT is calculated based on the taxable value of the benefits provided to employees, factoring in Australia’s gross-up rate. Implementing FBT can significantly enhance your business by attracting and retaining talented employees.
What is Fringe Benefits Tax?
A Fringe Benefits Tax (FBT) is a tax imposed on employers for certain benefits provided to employees, such as medical health care. These benefits, in addition to salary, are offered by employers and are not considered part of the employee’s regular salary. FBT applies to benefits provided to current, former, and even prospective employees, as well as their families.
A fringe benefit is provided to an employee in a form other than payment or wages. For example, if an employer allows an employee to use a company car for personal purposes, this is considered a fringe benefit. Employers must register for Fringe Benefits Tax (FBT) and maintain accurate FBT records. If you’re new and haven’t yet reported FBT, you can register online using your Australian Business Number (ABN). For detailed registration procedures, it’s advisable to consult local tax authorities or qualified tax professionals for current and precise information.
Fringe Benefits Tax Types
The Australian Tax Office (ATO) operates under the Australian government’s jurisdiction to oversee superannuation, taxes, and administer social assistance programs for employees. The ATO recognizes eight specific fringe benefits:
- Loan Benefits
- Housing Benefits
- Food Benefits
- Car Parking Benefits
- Entertainment Benefits
- Property Benefits
- Healthcare Benefits
- School Fees Benefits
During the COVID-19 pandemic, many employees were provided with various devices like laptops, printers, phones, and tablets to facilitate remote work from home. These items fall under property benefits for Fringe Benefits Tax (FBT) purposes.
How Do These Taxes Work?
Understanding the various types of Fringe Benefits is essential for employees to comprehend how they work. Here are the points detailing the benefits you can receive:
Included Fringe Benefits:
- Employees can use the office car for personal purposes.
- Entertainment benefits include paid or free tickets for events.
- Gym memberships for fitness-conscious employees can be covered.
- Payment for primary and secondary school fees may be provided.
- Health care insurance or life insurance payments can be made.
Excluded from Fringe Benefits:
- Salary or wages are not considered as Fringe Benefits.
- Employer contributions to superannuation accounts are distinct from FBT.
We trust you now have a clear understanding of these benefits. For the latest updates, please continue exploring SMT.
How To Submit FBT (Fringe Benefits Tax)?
For the financial year running from 1 April to 31 March, it’s crucial to understand the process of providing fringe benefits to your employees. Here’s a step-by-step procedure:
- Register for FBT Online:
- Begin by registering for Fringe Benefits Tax (FBT) online.
- Maintain FBT Records:
- Keep accurate records of all fringe benefits provided.
- Calculate FBT:
- Calculate the FBT payable on the benefits provided.
- Lodge FBT Return:
- Submit the FBT return to the nearest Australian Taxation Office (ATO) office.
- Preference for Online Lodgement:
- Opt for online lodgement of FBT returns to streamline the process and avoid office visits.
Following these steps ensures compliance with FBT regulations and efficient management of fringe benefits for your employees.
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