Fringe Benefit Tax otherwise known as FBT is a tax that was introduced to ensure benefits provided by employers to employees or associates of employees through their employment are taxed, and to ensure that employers cannot provide non-taxable benefits to their employees as a substitute for a taxable salary or wages.
There are four main groups of taxable fringe benefits:
- Motor vehicles available for private use
- Free, subsidised or discounted goods and services
- Low-interest loans
- Employer contributions to sickness, accident or death benefit funds, superannuation schemes and specified insurance policies.
Further to the above an unclassified benefit can also arise on gifts and prizes and subsidised or discounted goods and services provided to an employee. These are exempt from FBT when the taxable value of the benefit provided to each employee is $300 or less per quarter per employee and the total taxable value of all unclassified benefits provided by the employer over the past four quarters is $22,500 or less.
Any cash benefits are treated as normal salary and wages that are taxed through PAYE and therefore aren’t subject to FBT.
When it comes to motor vehicles 3 common exemptions can apply in which an FBT liability won’t arise. These are:
- Work-related vehicles – a vehicle other than a car (not designed mainly to carry passengers but to carry goods or take tools to work each day) that is prominently and permanently sign written. Notification to employees in writing must be made that the vehicle isn’t available for private use except for travel between home and work or travel incidental to business travel. There can also be a partial exemption where the employer can allow some private use on certain days such as weekends. This means the vehicle is not a work-related vehicle on those days and FBT will apply.
- Emergency call outs – a visit required to be made by the employee, in the course of employment for providing essential services. The services must be performed between 6pm and 6am Monday to Friday or anytime over the weekend.
- Qualifying business travel – absence from home for at least a continuous 24 hour period where the employee is regularly required to be away from home in performance of duties and requires the vehicle to be with them
If you are supplying these benefits or unsure of your requirements please contact your advisor at McIntyre Dick.