Recent Changes to FBT – What do they Mean for You and Your Business?

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Fringe Benefits Tax (FBT) is due at the end of March, but there have been some changes made to how it’s calculated this financial year. Here we take a look at what these changes are, and how they could affect you and your business.

Who pays FBT?
Your employer pays FBT on your behalf, if you receive fringe benefits as part of your employment. Fringe benefits are only judged to be reportable if they are not included in your salary payments and amount to over $2,000 for the financial year. Your reportable fringe benefits have to be shown on your annual payment summary.

Fringe benefits of your job can include:

  • Company car
  • Health insurance premiums
  • School fees or childcare costs for your children
  • Contributions towards your rent or home loan from your employer
  • Entertainment expenses such as food and drink

You do not pay income tax or Medicare levy on your reportable fringe benefits amount. However, it is taken into account in income testing for certain benefits.

How is FBT now calculated?
FBT used to be calculated based on 51 percent of your reportable fringe benefits amount. This year the system has changed so it is now based on 100 percent of that amount. This means you may have to update your income estimate. Your employer will be able to tell you your expected amount of reportable fringe benefits for this financial year.

Who will be affected by this change?
If you or any of your children receive benefits such as family assistance payments, the amount you receive might be less as all of your reportable fringe benefits are now taken into account. The benefits that are affected are:

  • Family Tax Benefit
  • Child Care Benefit
  • Parental Leave Pay
  • Stillborn Baby Payment
  • Dad and Partner Pay
  • Assistance for Isolated Children
  • Youth Allowance
  • ABSTUDY Living Allowance

The changes will also affect your repayment levels if you have a Higher Education Loan Program or Student Financial Supplement Scheme debt. They will also have an impact on the amount of child support you are required to pay.

Your personal superannuation contributions may also be affected. You may no longer be able to claim a deduction for contributions you have made, or eligible for the government co-contribution. You may also be affected if you have previously been entitled to a tax offset for making contributions to your spouse’s super, or for invalid carers or seniors and pensioners.

Who will not be affected?
Some not for profit organisations are exempt from the changes. These include:

  • Public benevolent institutions
  • Health promotion charities
  • Some hospitals and public ambulance services

You may also be able to make an arrangement with your employer to receive additional salary instead of your reportable fringe benefits.

FBT on company cars
If you receive a car as a fringe benefit of your employment, this may also affect your FBT. Previously your employer had to keep records of how many miles were for business and how many for personal use, on each car. The system has changed this year, so if your company has 20 or more cars, your employer can report them as “Tools of Trade” cars.

This applies where a car is essential to someone being able to do their job, such as a sales representative. The new system will make your employer’s life easier as they can choose to estimate the average ratio of business to personal miles driven by employees rather than having to record an exact figure for each car. However, if they decide to do this, you will not have the option of receiving extra salary instead of the car usage.

Further information
If you’re worried about how the changes will affect you, it’s worth talking to your employer about your FBT. You can also find more information on the government website which goes into detail about exactly which payments and benefits are affected by the changes to FBT.

References

https://www.humanservices.gov.au/customer/news/do-you-get-reportable-fringe-benefits

https://www.humanservices.gov.au/customer/enablers/adjusted-taxable-income

https://www.ato.gov.au/General/Fringe-benefits-tax-(fbt)/In-detail/Employees/Reportable-fringe-benefits—facts-for-employees/

https://www.ato.gov.au/Rates/FBT/

https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/In-detail/Employees/Salary-sacrifice-arrangements-for-employees/

https://en.wikipedia.org/wiki/Fringe_benefits_tax_(Australia)

http://www.mvanderson.com.au/news/company_news/what-employers-need-to-know-about-fbt-2017

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