Introduction
As the end of the fringe benefits tax year approaches (31 March) , Australian employers should begin preparing for the Fringe Benefits Tax (FBT) return. The FBT return will be due by sometime at the end of April or May depending on whether you engage with a registered tax agent (or tax accountant) in Perth or Australia. And undertaking fringe benefits tax planning service is important to stay ahead of your tax law obligations and to reduce your tax liability.
FBT is a tax employers pay on certain benefits they provide to their employees or their employees’ associates. To ensure you are well-equipped to minimise your FBT liability and effectively manage your tax planning, we have compiled a list of hints and strategies to consider before the deadline.
1. Understand your FBT obligations
It’s crucial to be aware of the benefits you provide to your employees that are subject to FBT. Some common examples include:
• Company cars used for private purposes
• Low-interest loans provided to employees
• Entertainment expenses (such as social events or dining)
• Payment of an employee’s private expenses
By identifying and accurately valuing these benefits, you can ensure proper FBT reporting and potentially identify areas to reduce your FBT liability.
2. Take advantage of FBT exemptions and concessions
Certain benefits are exempt from FBT or have reduced taxable values, which can significantly reduce your FBT liability. Some examples include:
• Minor benefits (those with a value less than $300 and provided infrequently)
• Work-related items (such as laptops, mobile phones, or protective clothing)
• Employee car parking, if certain conditions are met
• Relocation expenses for employees moving to work at a new location
Evaluate the benefits you provide to ensure you are taking advantage of any available exemptions or concessions.
3. Utilise salary packaging arrangements
Salary packaging, or salary sacrifice, allows employees to receive a portion of their pre-tax salary as a non-cash benefit, potentially reducing their taxable income and your FBT liability. If you consider fringe benefits tax as a salary packaging tool to recruit great team members you can give your business a competitive advantage. Common salary packaging arrangements include:
• Additional superannuation contributions
• Novated car leases
• Payment of employee expenses (such as rent, mortgage, or school fees)
Review your employees’ remuneration packages and consider offering salary packaging options that align with their preferences and your business objectives.
The salary packaging arrangements can also include consideration of salary packaging to non-reportable fringe benefits to reduce other taxes like payroll tax or Div 293 tax.
4. Time your benefits strategically
Timing is essential when it comes to managing your FBT obligations. For example, providing benefits that qualify as minor benefits or exempt work-related items in the current FBT year can help reduce your FBT liability. Additionally, deferring non-urgent benefits to the next FBT year can help spread the tax burden.
5. Review your entertainment expenses
Entertainment expenses are often subject to FBT, so it’s essential to review your entertainment policies and record-keeping practices. Be sure to distinguish between entertainment (which is generally subject to FBT) and sustenance (which is generally exempt). If you provide meal entertainment, consider electing to use the 50/50 split method or the 12-week register method to simplify record-keeping and potentially reduce your FBT liability.
6. Engage professional assistance
Navigating the complexities of FBT can be challenging, and the consequences of non-compliance can be costly. Engaging a tax professional to assist with your FBT planning and reporting can provide valuable insights and ensure your business is well-prepared for the end of the financial year.
Conclusion
Effective FBT planning services can help Australian employers minimise their tax liability and maintain compliance with ATO requirements. By understanding your FBT obligations, taking advantage of exemptions and concessions, and implementing strategic tax planning measures, you can optimise your financial position before the 31 March 2023 deadline.
At Westcourt we take our role as Perth tax accountants seriously. We have one sole focus – helping founder led families who own commercially run businesses. And that sole focus coupled with our proven tax leadership translates into real world value when we assist clients – so why not give us a call?
