Considerations For The FBT Year End
With the end of the Fringe Benefits Tax (FBT) year approaching in March, it is important to be aware of a number of key considerations to help you complete your FBT return.
The current FBT rate is 49%, which will decrease to 47% for the year ended 31 March 2018. This will impact Type 1 and Type 2 gross-up rates, which are detailed in the table below.
Employee contributions are amounts contributed to the cost of the benefit by an employee from their after-tax income. This reduces the taxable value of a benefit, and thereby the amount of tax payable. Employee contributions are often used to reduce the taxable value of a car fringe benefit.
The provision of exempt benefits to employees is a good method to reward employees without having to pay FBT. Certain work related items are exempt from FBT where they are used “primarily for use in the employee’s employment.” Items such as portable electronic devices (laptops etc), a brief case, protective clothing and a tool of trade meet the conditions of this exemption, as long as only one item with substantially identical functionality is provided in any FBT year.
There are two methods you can use to calculate the taxable value of meal entertainment – the 50-50 split method and the 12-week register method. The 50-50 method calculates the taxable value as 50% of your total meal entertainment expenditure, whereas the 12-week register utilises an appropriate percentage of total expenditure, as evident from a 12-week register.
While the 50/50 method can save significant time in record keeping, it means you cannot access the minor benefits exemption (refer below), and may also mean you are paying too much FBT if your employees would not usually make up at least half of your entertainment costs.
A minor benefit is provided where the GST inclusive cost is less than $300, and is provided on an infrequent and irregular basis. Employers utilising the minor benefits exemption are not entitled to claim an input tax credit or a tax deduction for the cost of the benefit.
Should you have any questions in relation to the above considerations or FBT in general, please contact us or speak to your ESV Engagement Partner on 02 9283 1666.