This week I thought I’d remind you that we are in a new tax year - for fringe benefits. Unlike the financial year, the Fringe Benefits Tax (FBT) year runs from April 1 to March 31.
The Australian Tax Office (ATO) says a fringe benefit is provided in respect of employment, but in a different form to salary or wages. In other words it is a right, privilege, payment or service of some form given to an employee. It could be a cheap loan, a gym membership, or tickets to concerts.
As an employer, you could pay FBT irrespective of your business structure and regardless of whether you actually provide the benefit, or someone else does. FBT is a separate tax which you may need to pay even if you don’t need to pay other taxes such as income tax.
There has been a significant change to one method of calculating FBT on car fringe benefits. The four-tiered statutory rate system is being replaced with a flat statutory rate of 20 per cent regardless of the kilometres travelled. The new rate applies to new vehicle contracts entered into after 7.30pm (AEST) on 10 May 2011, but is being phased in over four years. This means that some employees will not benefit from a reduction in the statutory rate until they change their car.
If your business uses cars for lots of work-related travel, the log book method may be more beneficial than the statutory rate. While the logbook method is likely to reduce your FBT liability it does require extra compliance 9ie detailed logbook over a 12 week period). It would be worthwhile revisiting your car policies, and let your staff know about any changes. Make sure you are accounting for FBT properly and contact your software supplier to ensure the new rates have been updated.
FBT can be a complex area so you should obtain specific advice from your accountant or the ATO.
Greg Taylor is Chief Financial Officer for the Hunter-based Greater Building Society.
This article appeared in the Newcastle Post April 25 2012.