Fringe Benefits Tax – The Minor Benefits Exemption

Fringe benefits tax the minor benefits exemption
9
Mar

Fringe Benefits Tax – The Minor Benefits Exemption

09.03.15

The Fringe Benefits Tax ("FBT") year concludes on 31 March 2015 and with that comes the annual compliance obligation of filing the FBT return. Broadly, any non-cash benefit provided to an employee in respect of their employment could fall within the scope of FBT and as such, being aware of the exemptions could save your business a considerable amount of money.

 

One of the most popular exemptions relied upon to reduce an employer’s FBT exposure is the Minor Benefits Exemption (“MBE”). As the name suggests, the MBE exempts from FBT any benefit provided to an employee that is “minor” in value and provided on an infrequent and irregular basis.

 

THE MBE APPLIES WHERE:

  • The benefit is not an airline transport benefit;
  • The benefit is not an in-house benefit;
  • The notional taxable value of the benefit is less than $300; and
  • The benefit is provided on an irregular and infrequent basis when compared to other similar benefits.

 

The first three criteria are relatively straight forward to assess, in that the minor benefits exemption does not apply to airplane tickets or to provision tangible property that the employer ordinarily sells to the public (in-house benefits) and that the GST inclusive cost must be less than $300. The fourth criteria however, that the benefit be provided on an infrequent and irregular basis, is subject to interpretation as there are no hard and fast rules in relation to this.

 

Infrequency and irregularity of benefits need to be determined on a benefit by benefit basis for each employee. Accordingly, the level of record keeping required may mean that time cost of keeping these records is too great. However, as the cost of FBT can almost equate to dollar for dollar on the benefit provided, the savings could be significant.

 

As an example, during an FBT year an employer held 3 events in which 20 staff attended costing $250 per head (total cost of $15,000). Assuming the MBE applied, there would be no FBT payable. If however, the employer chose not to keep the relevant records to apply the MBE and instead chose to apply the 50/50 method, total FBT payable would be $7,332.

 

Should you have any questions relating applying the MBE for your FBT return or your FBT obligations in general, please contact your ESV Engagement Partner on 02 9283 1666.

 

For the year ended 31 March 2015 the FBT return is due for lodgement on 21 May 2015 if lodged in paper form or 25 June 2015 if lodged electronically. 

 

Article by Geoff Tierney