On 31 March 2017, the Fringe Benefits Tax (FBT) year ends. The ATO will review whether employers should pay FBT, as well as ensure you are paying the correct amount.

What you needs to know about fringe benefits

On 31 March 2017, the Fringe Benefits Tax (FBT) year ends. The ATO will review whether employers should pay FBT, as well as ensure you are paying the correct amount. 


To help you meet your fringe benefits obligations,we’ve put together a list of essentials every employer needs to know about FBT:  
  • Should I be registered for FBT?
  • What information do I need to give my accountant?
  • Are there any changes to the FBT rates come 1 April 2017?
  • What is exempt from FBT?
  • How can I reduce my FBT liability?
  • Do I need to review our salary sacrifice agreements?
These questions are all answered for you below, in addition to some log book management tips and new rules that have been introduced to salary sacrificed meal entertainment benefits.  
1   FBT Rate changes On 1 April 2017, the FBT rates will decreaseto: FBT Rate                      47% Type 1 Gross Up Rate   2.0802 Type 2 Gross Up Rate   1.8868  
2 Should you be registered for FBT? Generally, if you provide employees, including directors,with cars, car parking, entertainment (food and drink), employee discounts, reimburse private expenses etc., then you are likely offering a fringe benefit and we will need to register your business for FBT. It’s important that you start gathering all of the details for these provided benefits as soon as possible using our annual FBT Questionnaire so we can calculate any potential FBT liability and lodge your FBT return on time – due 25 June 2017 with payment to be made by 28 May 2017.  
3 What items are exempt from FBT? If you’re providing items like mobile phones, laptops, tablets, portable printers, protective clothing, tools of trade, or minor and infrequent benefits that are less than $300 in value, you are unlikely to qualify for FBT.   You can fill out our short FBT Questionnaire to be 100% sure!  
4 An easier way to manage your vehicle log books For employers with 20 or more ‘tools of trade’ cars – a car required for the job, such as a sales rep travelling extensively for the business – the ATO has a new process for validating the business use percentage of the car.   It’s called the ‘simplified method’, and if you meet the access conditions, you can apply an average business use percentage to all ‘tools of trade’ cars in your fleet for first log book year and over the next 4 years. Conditions to be met include:
  • Valid log books kept for at least 75% of the cars in the log book year.
  • The employer chose the make and model of the car, not the employee.
  • Each fleet car has less value than the ‘luxury car’ limit when purchased, generally $64,132 in 2016/2017.
  • The cars aren’t provided under a salary packaging arrangement/employee remuneration package.
  • Your employees can’t choose to receive additional remuneration in lieu of using the cars.
 
5 Is it time to review your salary packages? With the FBT rate changes again on 1 April 2017, it’s a good time to review all existing agreements so that you and your employees know what the package will look like once the rate drops to 47%.   The lower rate will, in general, make salary packaging less expensive to provide and an opportunity to look for potential savings. For example, for employees earning above $180,000 there is a one-off opportunity between 1 April 2017 and 30 June 2017 to reduce their taxable income with the FBT rate drop covering the 2% debt levy imposed.   Be careful though not to drop the individual’s income below the debt levy threshold, and make sure:
  • The benefits provided under the salary sacrifice agreement replace amounts that would have been payable as salary.
  • The employee agrees in writing to forego income before it is earned in return for benefits of a similar value.
  • The sacrificed amount comes out of the employee’s wages and not reimbursed into their bank account.
 
6 New rules for meal entertainment benefits that are salary sacrificed Where an employee agrees to receive meal entertainment benefits instead of future salary, i.e. as part of a salary sacrifice arrangement, concessions have been removed as of the 2017 FBT year. There are 3 key changes to note:
  • These benefits are to be included in the employee’s individual fringe benefits amount being reported on the payment summary when it exceeds the $2,000 reporting exclusion threshold.
  • You can no longer use the 50-50 split or 12-week register methods to value these benefits.
  • A new separate $5,000 cap for ‘salary sacrificed’ meal entertainment benefit now exists for employees of charities and not-for-profits. If these benefits exceed the cap the excess will be counted toward their current $31,177 exemption or $17,667 rebate cap.
 
7 Ways you can reduce your FBT liability Here are some ways you can reduce your FBT liability:
  • Replace your fringe benefits with cash salary.
  • Provide benefits that your employees would be entitled to claim as an income tax deduction if they had to pay for the benefits themselves.
  • Consider providing benefits that are exempt from FBT.
  • Use employee contributions, such as an employee paying for some of the operating costs of car fringe benefit,i.e. fuel that you don't reimburse them for business purposes. Though you should note that employee contributions may be deemed assessable income to you and subject to GST.
 How we can help you! The FBT year ends on 31 March 2017, so be sure to complete and return the FBT Questionnaire as soon as possible! Deadlines are coming up fast, so don’t miss out on all the benefits you are entitled. We look forward to helping you meet your FBT obligations and are available anytime to answer questions you may have around reducing your FBT liability or creating effective salary sacrifice arrangements.   
General advice disclaimer General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.