The new fringe benefits tax (FBT) year starts on 1 April 2016. There were quite a few changes to FBT announced in the last Federal Budget, nearly a year ago now, but because the FBT year is out of kilter with the income tax year, those changes are only just set to take effect.
So, if you’re a SME and you provide benefits to your employees, what do you need to know?
First, the good news.
In this day and age where staff routinely work off-site, whether that be at home, from an airport lounge or from a client’s premises, you want to make sure that they have the right electronic tools to do their job.
Previously, it’s been possible to provide your employees with one portable electronic device per year without worrying about the FBT consequences.
From 1 April 2016 that tax break gets a lot more generous. From that date, you can supply employees with more than one work-related portable electronic device without having to pay FBT.
This concession applies to small businesses only (defined as those businesses with an aggregate turnover of less than $2m).
The devices can include:
But be careful. Although you can buy the devices anytime, you can only take advantage of the new concession if you give them to your employees after 1 April 2016.
If your business pays for car expenses (other than borrowing costs or leasing costs) in respect of a car owned by an employee, the taxable benefit for FBT purposes is reduced to the extent a deduction would have been allowed to the employee if he/she had paid the costs (the ‘otherwise deductible’ rule).
Previously, there were three methods of calculating the taxable value of this fringe benefit. As of 1 April 2016, that is changing and there will only be two methods. These are:
From 1 April 2016, all meal entertainment benefits will become reportable benefits and thus will count towards an employee's "reportable fringe benefits amount" for an income year. An employee has a reportable fringe benefits amount" if their individual fringe benefits amount for the relevant FBT year (i.e. the FBT year ending on the previous 31 March) exceeds $2000. At present, meal entertainment fringe benefits are "excluded benefits" and therefore are ignored in working out an employee's reportable fringe benefits amount.
Finally, and largely of relevance to not-for profits (i.e. public and not-for-profit hospitals, public ambulance services, public benevolent institutions – except hospitals – and health promotion charities), a grossed-up cap of $5000 per year on the FBT concessions for salary-sacrificed meal entertainment benefits will be introduced.
Employees of these NFPs have long been able to salary sacrifice meal entertainment benefits with no FBT payable by the employer. It is these benefits that will now be subject to the separate grossed-up cap of $5000 per year per employee.
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