March 2014 Newsletter 

In this edition:

Welcome

Preparing your business for the new anti-bullying laws

FBT - time to get ready for 2014

How to survive a tax audit

Support our team in the Weekend to End Women's Cancer walk

But what is FBT, and who is required to pay it? What information is required to prepare an FBT return, and what can be done to reduce the tax payable?

What is FBT?

Fringe Benefits Tax (FBT) is a tax levied on employers on certain cash and non-cash benefits provided to their employees or associates of their employees.

Essentially, all non-salary and wage remuneration can potentially attract FBT, although the most common fringe benefits include company cars (whether on a novated lease or owned outright), entertainment, food and drink, interest-free loans, school fees and any other expense paid by an employer on behalf of an employee.

However, there are a number of exemptions available (usually based on work-related expenditure) and so each benefit provided needs to be individually considered to determine the FBT liability.

Who is required to pay FBT?
FBT is a tax on employers and so is paid by them, rather than by the employee receiving the benefit.

While employees do not pay FBT directly, if they have received benefits with a grossed up value of more than $2,000 in the FBT year they will have an amount reported on their PAYG Payment Summary which records the value of the benefits received.

This amount then needs to be included in the employee's tax return. While the employee does not have to pay tax on the amount itself, it will be used to calculate their Adjusted Taxable Income (ATI) which helps determine their entitlement to various government benefits.

What information is required to prepare an FBT return?
The FBT year spans 1 April to 31 March, and the tax is applied to benefits provided during that time, rather than during the financial year.

The record keeping requirements are different for each class of fringe benefit provided, and to make it easier for our clients, GCC has drafted FBT information templates and employee declaration forms which layout the FBT reporting requirements in an easy to follow format. These "FBT Record Keeping Packs" are provided to all clients on our FBT list before the end of March.

If you have not lodged an FBT return in the past but believe you may have provided fringe benefits to employees, you should call and discuss the issues with your GCC advisor to see whether you also required an FBT Pack.

As a general guide however, the calculation of fringe benefits on cars provided for employees' use will require the following (although this list is meant as a guide only and is not exhaustive):

• Odometer readings at 31 March (and on the date of acquisition for new vehicles);
• A logbook, kept over at least 12 consecutive weeks to establish a business-use percentage, for each employee who had use of a car;
• Details of any costs incurred in relation to the running of each car during the period 1 April – 31 March;
• Details of who drove each car and for what period (if a car was provided to more than one employee) and
• Details of any period a car was not available for private use (including while being repaired or garaged at the employer's premises).

What can be done to reduce the amount of FBT payable?

Generally speaking, the best way to reduce FBT is to ensure you keep complete and thorough records, including log books and employee declarations where applicable.

The taxable value of a benefit is also reduced where it would otherwise have been deductible to the employee, or where the employee has made a contribution to the cost of the benefit.

Further, several fringe benefits are also exempt from FBT, including some laptop computers, mobile phones and tablets, and some other "minor and infrequent" benefits, including entertainment and food and drink. Where these sorts of benefits are provided, you should keep receipts and discuss the expense with your advisor.

As an example of the importance of record keeping, the most common form of fringe benefit provided is a work car.

As employers have a choice to calculate the taxable value of a car fringe benefit under one of two methods – the statutory method or the operating cost method – and choose the lesser of the two values, it is important to keep good records so both methods can be considered.

It all sounds a bit hard! Should I avoid providing fringe benefits to employees?
The truth is that FBT is a complex tax, and can be complicated in its administration and calculation.

However, providing a mixture of fringe benefits and wages to certain employees can be a very tax-effective way to maximise their remuneration. In fact, many employers should carefully consider whether they could be better using fringe benefits to help retain key staff members.

If you are interested in discussing fringe benefits, have any questions in relation to the calculation of FBT, or are unsure whether you should be registering for FBT, you should contact your GCC advisor on 02 9899 3044.