As a small business owner, you’re juggling multiple responsibilities, from managing operations to keeping an eye on finances. However, one thing you shouldn’t let fall to the wayside when it comes to your finances is Fringe Benefits Tax (FBT). 

With the FBT year coming to an end on March 31st, understanding and managing your FBT obligations is crucial to avoiding penalties and ensuring compliance with tax regulations. To help you keep on top of your business’ finances and your FBT obligations ahead of the lodgement deadline (on May 21st, 2024), let’s delve into the essentials of what you need to know.

What is Fringe Benefits Tax?

In simple terms, FBT is a tax applied to non-wage benefits provided by employers to their employees or associates, such as family members. These perks, which extend beyond regular salaries or wages, encompass various benefits like company cars, health insurance, entertainment expenses, and more. FBT stands apart from income tax and is calculated based on the taxable value of these fringe benefits.  Whilst the benefits are received by the employees, the tax is owed by the employer. 

Common Fringe Benefits

The most common types of fringe benefits include:

  • Company Cars: Providing company cars to employees, including directors, may attract FBT, especially if the vehicle sees personal use. 

HK Tip: Maintaining meticulous records, like a logbook, and talking to your accountant about private payment options can help mitigate FBT liabilities.

  • Gifts: While client gifts generally don’t incur FBT, gifts to employees or yourself can. 

HK Tip: Not all gifts will trigger FBT, so be aware of exclusions.

  • Entertainment and Networking Expenses: Whether it’s a round of golf, tickets to the AFL or a corporate dinner, entertainment expenses can trigger FBT obligations.

HK Tip: Even client-related costs may fall under FBT regulations, so be sure to flag them with your accountant.

  • Living-Away-From-Home Allowance (LAFHA): If you provide additional funds for staff who work remotely, such as out on a construction site or a project in a different city, this can be subject to FBT. However, if structured correctly, there are ways you can avoid this. 

HK Tip: While the idea of avoiding or minimising tax is tempting, it’s essential to discuss the appropriate strategies with your accountant to ensure you are compliant and not putting yourself at risk.

  • Additional Services/Goods: Offering perks like gym memberships or health insurance to employees? These benefits are also subject to FBT.

How to Reduce Fringe Benefits Tax?

From leveraging exemptions and concessions to implementing smart structuring of benefits, there are various avenues to reduce your Fringe Benefits Tax. 

Here are some FBT exemptions to keep in mind:

  • Minor Benefits: Gifts costing less than $300 per person provided infrequently.
  • Otherwise Deductible Costs: Expenses commonly eligible for employee deductions, such as those incurred for work-related training courses, hold the potential for exemption from FBT. 
  • Portable Electronic Devices: Devices primarily used for work, like laptops or mobile phones, may qualify for FBT exemptions.
  • Exempt Vehicles: Vehicles not primarily designed for passenger use, with minor private usage, may be exempt from FBT. This can include vans, utes or trucks, generally with carrying capacity of more than one tonne. Some electric vehicles are also now exempt.

Time to Take Action

Understanding the impact of FBT on your business is essential. Don’t ignore it or assume it doesn’t apply to you, and don’t leave your planning to the last minute (as tempting as it might be!). By proactively addressing your FBT obligations and seeking guidance from your accountant, you can implement strategies throughout the year to manage your FBT liability, avoid pitfalls and ensure you’re compliant.

Not sure where to start? Our expert team is here to answer your FBT questions. Contact us today!