FOR those wondering about how to manage Fringe Benefits Tax, or even wanting to know exactly what it is, the Australian Tax Office has recently added Fringe Benefit Tax guidelines to its website, www.ato.gov.au
The FBT material includes information on: how FBT works and who pays it; providing fringe benefits; calculating FBT; FBT for small business; salary sacrificing; exemptions; car and residual benefits; the taxable value of a meal entertainment benefit; expense payment benefits; and an FBT checklist.
The ATO has also provided the following definitions:
You use an activity statement to pay your FBT instalment, along with other tax obligations including GST, PAYG instalments and withheld amounts.
Associates include people and entities closely associated with you (or your employees), such as relatives.
An employee contribution may be assessable income in the hands of the employer. (As a general rule, the costs incurred by the employer in providing fringe benefits are income tax deductible.)
Excluded fringe benefits are certain fringe benefits you don’t have to report on employees’ payment summaries.
Exempt benefits are those benefits you provide for which you don’t have to pay FBT.
Basically, a fringe benefit is a benefit provided to an employee (or their associate, such as a family member) because that person is an employee. Benefits can be provided by an employer, an associate of the employer, or by a third party under an arrangement with the employer. An employee can be a current, future or former employee.
Fringe benefits tax
Fringe benefits tax (FBT) is a tax paid on certain benefits employers provide to their employees or their employees’ associates (typically family members) in place of salary or wages. FBT is separate from income tax and is based on the taxable value of the various fringe benefits provided.
Grossing up means increasing the taxable value of benefits you provide to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax.
Individual fringe benefits amount
This is the total value of all benefits provided to a particular employee in an FBT year.
This is the amount at which you have to start paying your FBT liability to the Tax Office in quarterly instalments using your activity statement. The threshold is currently $3,000.
A payment summary shows the total payments made and the amount of tax withheld for each worker during the financial year ending June 30.
Reportable fringe benefits
From April 1 1999, if you provide fringe benefits with a total taxable value of more than $1,000 to an employee in an FBT year (April 1 to March 31), you must report the grossed-up taxable value of the benefits on the employee’s payment summary for the corresponding income year (July 1 to June 30). These are called reportable fringe benefits.
Residual fringe benefit
Any fringe benefit that doesn’t fit into one of the other 12 categories of fringe benefits is called a residual benefit.
This is the value of fringe benefits that you use as a basis for calculating your FBT liability. There are different rules for calculating the taxable value of the different types of fringe benefits.
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