With the FBT year coming to a close on 31 March, now is a good time to review your FBT requirements, whether an employer or an employee.
Part 1: Your obligations as an employer
What is Fringe Benefits Tax (FBT)?
A fringe benefit is a benefit paid to an employee or their associate in addition to salary and wages, as part of their remuneration package. The employer is responsible for paying tax on these benefits. The structure of employee remuneration can have a significant impact of the amount of tax employers pay and we are always working with clients to minimise tax payable.
For medical practices employing staff the most common fringe benefits we come across are as follows:
|Fringe Benefit:||Explanation:||Minimising your tax:|
|Entertainment||Meal entertainment for example:
– Lunch/dinners with third parties and/or employees
– Staff Christmas Party
– Awards nights
|Some provisions of food and drink are not considered meal entertainment: exemptions apply for light refreshments, meals while travelling and meals provided during a seminar or at the medical practice. The minor benefits exemption may also be applicable**.|
|Car Fringe Benefits||Car provided to an employee for private use. This includes a car provided to a director of their own medical entity.||A valid logbook completed by the employee can reduce the taxable value of the benefit or a motor vehicle allowance* can be paid instead of providing a car whereby the employee owns the car and not the business.|
|Taxi Travel||Providing non-work related taxi travel||There is an exemption for work-related travel, for example a trip from the employee’s place of work or due to sickness or injury.|
|Expense payment reimbursements||An expense that is reimbursed, already incurred by the employee||Consider paying an allowance* so the payment does not attract FBT.
There is an exemption for reimbursement of deductible expenses.
*Allowances: Payments of allowances may be subject to PAYG withholding obligations.
**Minor Benefits Exemption: Assessed using specific criteria including the taxable value of the benefit (less than $300 per person), frequency and value of similar or associated benefits. An example of an expense that can be treated as minor and exempt from FBT is the yearly staff Christmas party.
- The exemption for taxi travel has now been extended to Uber and other ride-sharing providers. This exemption refers to travel for a single trip beginning or ending at the workplace.
- For the purpose of determining a car parking fringe benefit, a commercial parking facility is now considered to be a car park run to make a profit. If your medical practice is within a 1km radius of a commercial car park (including hospitals, shopping centres and airports) FBT on car parking may apply. The small business exemption is available under the new ruling, set to apply from 1 April 2020.
2020 FBT Timeline:
28 February: Quarter 2 FBT Instalment due*
31 March: End of FBT reporting period (1 April to 31 March each year). If cars are provided to employees, get the closing odometer at this date
1 April: Review salary packaging
28 April: Quarter 3 FBT Instalment due*
21 May: Need to have appointed a tax agent to have the extended due date for lodgement and payment of FBT return
21 May: Lodgement and payment of FBT return if not through a tax agent or if lodging by paper
25 June: Lodgement and payment of FBT return (must be lodging electronically and appointed tax agent by 21 May)
28 July: Quarter 4 FBT Instalment due*
28 October: Quarter 1 FBT Instalment due*
*FBT instalments are only payable if FBT payable was greater than $3,000 in the previous year.
The Australian Taxation Office (ATO) now has access to real time information about employers and employees with the introduction of single touch payroll. If you have a business with employees, we recommend lodging an FBT return. If no FBT is payable we can prepare and lodge a nil FBT return to show your obligations have been considered and also limit the years in which the ATO can audit your entity for FBT.
Part 2: Guidelines as an employee
Salary sacrifice involves paying for selected expenses before income tax (PAYG) is taken out. As an Australian health care worker you can salary package up to $9,010 in everyday living expenses that would usually attract FBT such as groceries, rates, mortgage payments and rent. In addition to this, $2,650 in meal entertainment or venue hire can be salary sacrificed. Other benefits can also be packaged including self-education, work-related expenses and a novated car lease.
We recommend salary sacrificing items from your pre-tax income that are not deductible in your personal tax return. Deductible expenses such as subscriptions and self-education expenses can then be offset against your post-tax income. We can assist with setting up a salary sacrifice arrangement and packaging benefits to maximise your income and reduce tax payable.
It is important to note that reportable fringe benefits are recorded in your individual tax return. While it does not generate additional tax payable, this can impact on determining your private health insurance rebate, eligibility for various tax offsets, liability to pay the Medicare Levy Surcharge, Division 293 tax, child support obligations and repayments against student debt (i.e. HELP).
Understanding FBT can be complicated, let us make it easy. Contact Kristy Baxter or Angela Stavropoulos on [email protected] or 07 3023 1300 today.