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Top 5 Fringe Benefits for Employees and Employers

Article By Adam Hurwood | | Accounting & Tax
With the Fringe Benefits Tax (FBT) year end of 31 March 2014 upon us, it is time to assess the annual FBT obligations of your business.

The Australian Taxation Office has increased its compliance and audit activity in this area and as such it is crucial for your business, and as an employer providing fringe benefits, to understand the different types of benefits subject to FBT to ensure your business meet its obligations.

The fringe benefits detailed below are the top 5 fringe benefits businesses and employers provide to employees and their associates that are typically subject to FBT.

Christmas Party

The annual Christmas party is an important event on your business calendar (at least to your employees).

Christmas festivities provided not on the business premises up to the value of $300 for each employee is generally exempt from FBT. So throwing a party where the cost per head is less than $300 should escape FBT consequences.

The downside is where FBT applies so does a tax deduction, and vice versa. Therefore if the event comes in under $300 per head, no FBT will apply and also the cost of the event won’t be tax deductible (no Christmas present there).

It is common in some industries to provide employees with a car as part of their salary package or where the car is needed to perform their role (i.e. sales representatives).

The provision of a car can result in a benefit that is subject to FBT, where the car is available for an employee’s private use. Availability is the key point here, as an employee doesn’t necessarily need to use the car in order for a benefit to arise. If the car is made available by the employee taking the car home, or even having the keys outside of work, the car is deemed to be available for private use.

Car Parking

It is not unusual for a business to provide free car parking for their employees. In some instances the provision of car parking can be a taxable benefit. The following outlines circumstances where providing car parking could be subject to FBT:

  • If within a one kilometre radius of the parking premises there is a commercial parking station that charges a fee.
  • If the car is parked for a total of more than four hours between 7am and 7pm and is used by the employee in relation to travelling to/from home and work.
  • If the car is parked at or near your employee’s primary place of employment.

Employee Loans

Sometimes employees can be given advances on their salary or given loans that will be repaid via deductions from their pay. These advances or loans are considered benefits and as such could be subject to FBT if no interest or a lower interest rate than the FBT benchmark is applied to these loans.

Private Expenses Paid for on Behalf of Employees

Where a business pays or reimburses an employee for an expense of a private nature, FBT is likely to apply. As a general rule, a private expense is an expense that an employee would not be eligible to claim a tax deduction.

As there have been numerous changes in guidelines and rulings to different categories of FBT, we recommend a review of your financial records to identify benefits that have been provided to employees, owners and their associates and where necessary, we will prepare the documentation and/or lodgements required to meet your FBT compliance obligations.

If you wish to discuss the impact of the above mentioned fringe benefits, or any other types of benefits that could potentially be subject to FBT, please contact your Altitude Accountant.