Action Points
All employers that provide non-cash benefits to employees (including in many cases, the owners) are likely liable to pay Fringe Benefits Tax on those benefits. The FBT year runs from April to March, with FBT tax returns due in May.
WHAT ARE FRINGE BENEFITS?
Fringe benefits are best described as non-cash benefits. If your employer provides you with the use of an asset, or access to a membership, or something at a discounted price – that is a non-cash benefit and potentially Fringe Benefits Tax (“FBT”) applies
LIABILITY FOR FBT
FBT is levied on the employer, not the employee. However… if your employer is going to pay additional tax on a benefit they are providing you, there is a chance that they will require you to pay for that tax.
If we think of a an employment arrangement where your employer provides you with a gross salary of $80,000 and gives you the option of salary sacrificing. The gross salary of $80,000 is a fixed amount. They employer knows they will be out of pocket exactly $80,000 – which we will refer to as the cost of employing you.
If you opt to salary sacrifice for a car (for example), and the annual cost is $20,000 – your employer may be liable for FBT of say $4,000 per year. If your employer pays you $60,000 gross, provides you with a $20,000 car, the cost of employing you is now $84,000 due to the $4,000 FBT.
For this reason, your employer will require you to salary sacrifice $24,000 to obtain that $20,000 car. Ultimately, while the FBT is levied on the employer, the employee will end up paing for it in most cases.
Where your employment arrangement is $x plus a car, your employer will have already factored the FBT into their offer and will not “hit you with a bill” for FBT down the track
FRINGE BENEFITS TAX RETURNS
Where an employer is providing fringe benefits to employees and is liable for FBT – this has to be submitted on a special FBT tax return to the ATO.
The FBT year is not July to June, it is April to March. The reason for this is because employers are required to include on group certificates the amount of fringe benefits a person has received – and it would be unreasonable to expect employers to work this out in the first two weeks of July (given the due date for giving group certificates to employees is July 14).
So, come April / May, employers are required to do their FBT tax return. If you either know that you do, or are unsure if you are liable for FBT and therefore need to do an FBT tax return – you should chat to your accountant ASAP.
MORE INFORMATION
FBT is a complex topic, but to help out we have a few resources available:
