We'll email you the contents of your shopping cart, so you can easily continue where you left off on your next visit.
Our guide breaks down what every SME needs to know about fringe benefits tax (FBT), from whether your business might need to pay it to how to lodge an FBT return.
Providing a couple of perks, or fringe benefits, is a great staff retention tool for small business owners – but it’s crucial that you understand your fringe benefits tax (FBT) obligations.
Put simply, FBT is imposed on employers providing extra benefits above wages and salaries to staff. While you’re well within your legal right to provide these types of benefits, it’s important to ensure you meet your FBT obligations with the Australian Taxation Office (ATO). Read our helpful guide to understand fringe benefits tax and if your business might need to pay it.
A fringe benefit is an extra you provide to employees that supplements their wage or salary. It might be providing team members with discounted products, a car they can use on weekends, or a discounted loan. Those types of benefits are pretty common in small businesses looking for ways to attract and retain great talent in a tight employment market.
The ATO explains that a fringe benefit could include:
Employers providing fringe benefits that exceed $2,000 in value during the reporting period are required to lodge an FBT return.
IMPORTANT: If your FBT liability for the last year was $3,000 or more, you will need to pay four quarterly instalments.
If you provide certain fringe benefits with a taxable value of more than $2,000 during the FBT year, you need to report the grossed-up taxable value of the fringe benefits on your employee’s payment summary for the corresponding income year.
For example, the ATO website explains, if an employee receives fringe benefits with a total taxable value of $2,000.01 for the FBT year, the reportable fringe benefits amount is $3,773.
There are two gross-up rates
It’s not just about the rates, thresholds and dates. Bear in mind these points when preparing your FBT liability:
Small businesses need to take the time to decipher the ATO’s definition of “entertainment” so you don’t get caught out. If you like to throw amazing Christmas parties or take staff away to five-star yoga retreats as a bonus, bear in mind that the ATO is watching to make sure you don’t exploit this sort of expenditure as a loophole to avoid paying tax.
For a fringe benefits tax exemption, employers need to spend under $300 per employee, which the ATO classes as ‘minor and infrequent’ expenditure. See more exemptions and concessions.
Calculating FBT doesn’t need to be complicated, there are a huge number of fringe benefits tax calculators and receipt storage tools out there. A cloud accounting program like Reckon could make the job of keeping track of FBT obligations much easier, or you can just use a simple desktop calculator to work out what you owe the taxman.
Reporting your FBT can become second nature pretty quickly for business owners. Use the ATO guide and keep up to date with changes to FBT calculations here. And, if you provide a car to an employee, this calculator will help you figure out the taxable value.
Small businesses can register with the ATO to lodge an FBT return in the following ways: