Fringe benefits tax (FBT) has its own calendar. The FBT year starts on 1 April every year, and closes 31 March the following year. So, the end of this FBT year is 31 March and fast approaching!
What is FBT?
FBT is quite different from income tax, not only because different dates apply. Fringe benefits tax is only paid by employers and it’s calculated and paid on particular benefits that you provide for your staff. These benefits – some call them “perks” – can include gym membership, a parking space, a car, the payment of school fees, entertainment and accommodation expenses, and so on. But they exclude, among other things, salaries, shares provided under approved schemes and contributions to superannuation funds. The ATO provides a comprehensive list of which items are considered fringe benefits. For example, an employer-provided electric car that is a zero or low emissions vehicle and meets some other requirements is not subject to FBT. Importantly, there are a number of other exemptions and concessions that either reduce or eliminate your liability as an employer to pay FBT. There are many situations where these options apply. A common example, particularly for employers with remote workers, is the provision of a “portable electronic device” such as a laptop or mobile phone. These devices, and certain other work-related items such as protective clothing for tradies, are exempt from FBT. Of course, you need to check which conditions apply!
How do you prepare a return?
Once you’ve identified which employee benefits are subject to FBT, you need to work out the amount payable by “grossing-up” the taxable value of these benefits. The grossing-up process reflects the fact that fringe benefits are a substitute for salary and wages, which would have otherwise been taxable in the hands of the employee. This calculation ensures that the tax paid on fringe benefits is equivalent to the tax that would have been paid had the employee received the benefit value as salary. There are different gross-up rates for FBT. If you’re entitled to a goods and services tax (GST) credit, then the rate is 2.0802. If you’re not entitled to this credit, then the rate drops to 1.8868. If you’re an employer who is entitled to the credit, then you simply multiply the value of the benefit by 2.0802, then multiply that value by the FBT rate, which is 47%. You then lodge the FBT return and pay the FBT you’ve calculated that you owe. Good news The good news is that employers who pay FBT can generally claim an income tax deduction for it in the financial year in which the FBT is paid. You could also claim a GST credit (if this applies to you) as well as a tax deduction for the cost of the benefit. Seek advice Like all areas of tax, this one is full of obstacles. But with informed guidance, you can negotiate the maze to maximise your business tax outcome.
Get ready to lodge your FBT return by 21 May if you’re handling it yourself, but note that you could lodge as late as 25 June if you’re an FBT client of a registered tax agent by 21 May and they’re lodging on your behalf.
Speak to one of our accountants if you have any questions about the changes in tax for 2025.
