Do you provide non-cash benefits to your employees (ie a car; restaurant vouchers, entertainment by way of food, drink etc)?
Do you provide these benefits regularly? Are they over $300 per benefit per employee?
If you answered yes, you may have a Fringe Benefit Tax (FBT) obligation.
Fringe benefits tax is paid by employers on certain benefits they provide to their employees or their employees’ associates (typically family members) in respect of their employee’s employment.
FBT is separate from income tax and is based on the taxable value of the fringe benefits provided.
Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay.
For example, an employee may receive fringe benefits in the form of:
- a car – if used for private travel provides a FBT benefit
- car parking
- low interest loans
- certain types of entertainment
- payment of private expenses ie school fees
It’s entirely legal and a common form of reimbursement used by businesses for their employees.
Two main types of Fringe Benefit are Entertainment and Car Benefits
Entertainment Fringe Benefit
The provision of entertainment means the provision of:
- entertainment by way of food, drink or recreation
- accommodation or travel in connection with, such entertainment.
Entertainment includes, for example:
- meals and drinks, cocktail parties and staff social functions
- sporting or theatrical events, sightseeing tours and holidays
- entertaining employees and non-employees (for example, clients) over a weekend at a tourist resort or providing them with a holiday.
Recreation includes amusement, sport and similar leisure pursuits (for example, a game of golf, theatre or movie tickets, a joy flight or a harbour cruise).
Providing entertainment may give rise to various types of fringe benefits. For example:
- the cost of theatre tickets purchased by an employee and reimbursed by the employer may be an expense payment fringe benefit
- providing food and drink may be a property fringe benefit
- providing accommodation or transport in connection with entertainment may be a residual fringe benefit
- entertainment provided by an employer who is exempt from income tax (for example, a registered charity) may be a tax-exempt body entertainment benefit.
Car Fringe Benefit
If you make a car you own or lease available for the private use of your employee, you may provide a car fringe benefit.
For fringe benefits tax (FBT) purposes, a car is any of the following:
- a sedan or station wagon
- any other goods-carrying vehicle with a carrying capacity of less than one tonne, for example a panel van or utility (including four-wheel drive vehicles)
- any other passenger-carrying vehicle designed to carry fewer than nine passengers.
A car is taken to be available for the private use of an employee on any day that they or their associates:
- use it for private purposes
- are allowed to use it for private purposes.
If a car is garaged at or near your employee’s home, even if only for security reasons, it is taken to be available for their private use regardless of whether or not they have permission to use the car privately. Similarly, where the place of employment and residence are the same, the car is taken to be available for the private use of the employee.
Generally, travel to and from work is private use of a vehicle.
The FBT Reportable FBT threshold for the 2017 FBT year is $2000.
Fringe Benefits provided to employees is also to be declared on the employee’s group certificate at 30 June each year.
The FBT year is from 1 April – 31 March – FBT returns must be lodged by 21 May.