Fringe Benefits Tax (‘FBT’) is a tax payable by an employer in respect of various benefits provided to employees.
When it comes to taxes and business costs we see a lot of businesses paying too much in FBT and some simple tips could help save you thousands.
1. Keep a log book
If your employees drive a car that is owned or leased by the business and their business use is high then get each employee to keep a log book. This means you can use the ‘operating cost’ method to value the fringe benefit rather than the ‘statutory formula’, resulting in a lower taxable value where business use is high. What is a valid log book? Refer to the ATO’s Car Expenses web page for more information
2. Expensive cars with little or no business use
Sometimes it doesn’t make good business sense to purchase an expensive car through the business, especially when there is little or no work-related travel. When it comes to valuing the taxable value of the benefit using the ‘statutory formula’ method the taxable value can be quite high, as no log book has been kept or business use is negligible. Say for example you purchase a Porsche for $110,000. Using the statutory method the taxable value of this fringe benefit would be $22,000. Now say if you bought a somewhat less sexy Mazda 3 for $30,000, the taxable value of this benefit would be $6,000…a $16,000 saving each year!
3. Provide your employees with exempt benefits
Are you looking for ways to reward or incentivise your staff? Provide employees with work-related exempt benefits that are “primarily for use in the employee’s employment” such as laptops, ipad/tablet, a brief case, protective clothing or a tool of trade. Not only will your business get a tax deduction and claim the GST credits, there is no FBT on these items.
4. Replace fringe benefits with cash salary
Instead of providing fringe benefits which are taxed at the highest marginal tax rate you can instead increase the employee’s cash salary or pay a bonus, which would be taxed at the employee’s marginal tax rates.
The FBT year ends on 31 March, so if you think you may be providing fringe benefits or what to discuss anything in this blog further give us a call on 07 5451 1118 or drop us an email at firstname.lastname@example.org