Friday, 10 May 2019
Fringe benefits are offered by an organisation to the employees to keep them satisfied and entice the best minds in the industry. These can include a company car, car parking benefit, entertainment-related benefits, loan fringe benefit, housing fringe benefit, property fringe benefits, payment of private expenses, etc. It involves extending lifestyle related reimbursement to the employees or their associates for leisure.
It is a legal way to pay your employees in Melbourne. However, when an organisation provides such non-cash benefits to its workers, then the employer becomes legally responsible to pay the fringe benefits tax (FBT). If you are not aware of this taxation, then you must consult your bookkeeper in Melbourne to get acquainted with your tax obligations.
Employers must get themselves registered for FBT and submit the annual FBT return during an FBT year which extends from 1 April to 31 March of any given year. You can register for taxes on the same form online which is used for registering a business in Melbourne. It must be noted that this tax is separate from income tax and gets calculated on the taxable amount of the fringe benefits offered by the employer.
The last date of payment of FBT is 21 May if it is being lodged by paper and 25 June if you are filing the return online. However, the lodging arrangements may differ if your bookkeeper or tax agent is involved in the process.
The fringe benefits can either be offered in addition to the salary or as a part of the wages. They are reportable if the taxable amount of the benefits, which were offered during the FBT year, exceeds the threshold of $2000. The Australian Government Department of Human Services has recommended changes for using Reportable Fringe Benefits Amount (RFBA) on employee payment summaries in Melbourne.
Furthermore, calculating the taxable value of the varied benefits can become a cakewalk if you adhere to the golden bookkeeping tip of using an FBT calculator. You must keep in mind that the FBT is applicable even when the benefit is offered by a third party through an arrangement with the employer.
As per the Australian Taxation Office, an employee can be an existing, future or ex-staff member, company’s director, or a beneficiary of the trust who works in the business. There is a multitude of fringe benefits that can be offered to an employee or his family or other associates in Melbourne. Some of the examples are paying the gym membership expenses of the employee, giving free tickets for an event or concert, reimbursing school fees of the employee’s children, etc.
However, there are many things which cannot be termed as fringe benefits such as salary and wages, benefits given to volunteers, contributions made by the employer towards complying super funds, payment made at the time of termination, payments made as dividends under Division 7A, benefits provided by religious institutions to their religious practitioners, etc. Your bookkeeper will keep track of the items that can be termed benefits and utilise them to calculate the tax.
Moreover, employers in Melbourne can claim an income tax deduction for the expenses borne while providing fringe benefits to employees and for the FBT they have to pay. They can also claim GST credits for the luxuries offered as fringe benefits to the employees.
Some non-profit organisations in Melbourne can claim FBT concessions if they provide their employees with fringe benefits. However, the non-profit must be registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charity and must be endorsed by them.
The employer must himself or with the help of a bookkeeping company in Melbourne assess the FBT that needs to be paid as the ATO doesn’t notify about the same. The FBT rates keep changing so you must check the rate before getting started. Currently, it is 47% for the years ending 31 March 2018 to 31 March 2020.
For the calculation, you will have to find the grossed-up taxable value of the benefits that you extend to your staff members. It will highlight the gross salary that the employees have to earn at the highest marginal tax rate (including Medicare levy) to purchase the benefits after paying the tax.
The grossed-up taxable rates are divided into two types for the calculation of the taxable amounts – higher gross-up rate and lower gross-up rate. The higher gross-up rate is utilised by the bookkeeper when the employer is entitled to a GST credit for GST paid on the fringe benefits given to a staff member. Such benefits are called GST-creditable benefits. On the other hand, the lower gross-up rate is used by the bookkeeper when there are no GST credits to be claimed.
Therefore the tax amount can be calculated by multiplying the fringe benefit taxable amount with the FBT rate. Your bookkeeper will help you to maintain the FBT records which must include records of transactions made during the past five years. These written records allow you to assess the FBT liability.
There are a few ways to reduce the FBT liability and your bookkeeper can guide you through the process. You can start off by offering benefits which are income tax deductible and follow it up by using employee contributions towards the cost of a fringe benefit.
This contribution made by the employee is mostly made in the form of a cash payment. It helps to reduce the taxable value of a fringe benefit. Additionally, if the Melbourne-based employer pays his employees a cash bonus in the place of a fringe benefit, then he doesn’t have to pay FBT as the employee will pay income tax for it.
Your bookkeeper will help you stay acquainted with the latest version of the Fringe Benefits Tax Assessment Act 1986 and provide support in reporting fringe benefits on your employer’s payment summaries.
If you are in doubt related to the FBT liability or concessions, it is better to take your bookkeeper in confidence rather than making a mistake. They can help you in the assessment by showing you the best ways of calculation and aid in making informed decisions.
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