An Introduction To Fringe Benefits Tax: 3 FAQs

Taxes are often a nightmare for many start-up entrepreneurs. Unfortunately, there are no two ways about it if you intend to remain in business legally..

The Fringe Benefits Tax (FBT) is a category of taxes that you'll be required to pay on fringe benefits you provide to your employees. It's important to understand this category of taxes as you work on your business activity statement. Below is a brief introduction in question and answer format.

What Are Some Examples Of Fringe Benefits?

Fringe benefits provided to an employee may include, but they're not limited to, the following:

  • Allowances that are paid to employees who are forced to live away from home in order to attend to work-related duties. These allowances are meant to cover the additional expenses that the employee incurs during their time away from home.
  • Providing the employee with a car that's owned or leased by the business for private use. Note that a car is considered to be available for private use if it's stationed at or near the employee's residence, regardless of whether the employee is allowed to use the car for private missions. In situations where the employee's residence doubles up as their place of work, such a car is also considered to be available for private use.
  • Providing a partial or full waiver for debts that an employee is meant to repay. Note that debts which you write off as genuine bad debts are not considered fringe benefits.

Are There Fringe Benefits Exempt From The FBT?

Certain benefits are exempted from the fringe benefits tax. Examples of these benefits include but are not limited to the following:

  • Benefits provided for work-related items such as portable printers, laptops and protective clothing. Provision of work-related items is only exempt from FBT if your employees rely directly on these items to execute their duties.
  • Expenses related to private taxi travel may also be exempt from FBT. To qualify for this exemption, your employees must use the taxi for a trip that begins or ends at their place of work.

How Can You Reduce The Amount Payable As FBT?

Apart from providing benefits that are exempt from the FBT, you can choose to offer your employees a dollar amount in place of the fringe benefits provided.

You can also choose to provide benefits for which an employee is entitled to claim tax credits if he or she was to pay for such benefits. For more information on how to reduce your fringe benefits tax liability, get in touch with a reputable BAS agent.