Thursday, 26 Nov 2020
You may have heard about the term fringe benefits but never paid much attention to it until the tax season arrived. As an entrepreneur in Melbourne, you are liable to the tax applicable on the fringe benefits enjoyed by your staff or their family members.
In most cases, your bookkeeper in Melbourne keeps you apprised of your tax liabilities. However, if you are new to the commercial sector and do not know much about these employee allowances, then it is imperative to get acquainted with the vital information. Here is what you need to know about reportable fringe benefits as an employer.
Fringe benefits are the additional perks offered to employees by entrepreneurs besides the salary and wages. It could be benefits like a company car or health insurance. These incentives are offered in respect of the employment, such as reimbursement for travelling to a distant location to meet a business client.
Some businesses offer fringe benefits in lieu of a part of the salary that the employee agrees to forgo. It helps the workers to reduce their taxable income,and it is beneficial for those whose income falls in the high tax bracket. All employers have to pay the Fringe Benefits Tax (FBT), and it is not dependent on the type of business you own.
The significance of paying for these privileges is that they encourage and motivate the employees to perform better. Also, a satisfied and content workforce is inspired to stay with the company for a long time, and it helps in reducing the attrition rate.
Incentives like free movie tickets, discounts at shopping stores, etc., are helpful in making the company a well-respected workplace with high ratings online from present and past employees.
Many times, entrepreneurs in Melbourne are not aware of the fact that they may be already providing their employees with fringe benefits. Your bookkeeper can help you in identifying these perks as they incur a tax liability. Here is a list of the incentives which are considered fringe benefits.
Your bookkeeper takes care of the reportable fringe benefits in Melbourne. However, you must be aware of the term and its significance. If the cost of the fringe benefits offered to an employee is higher than $2000 in a FBT year, which lasts from 1st April to 31st March, then the entrepreneur has to report the grossed-up taxable cost of the incentives.
It can be reported on the payment summary or Single Touch Payroll for the related financial year, which begins on 1stJuly and ends on 30thJune. The reportable fringe benefits are assigned to the relevant worker and include the fringe benefits offered to the associates of the worker.
The amount which is reported on the payment summary or the income statement in myGov is not made a part of the worker’s assessable income. Also, it does not impact the amount payable as standard Medicare levy in Melbourne.
On the other hand, it does become a part of the income tests for government benefits and responsibilities. In case the workers share an incentive, then the bookkeeper assigns the shares to each of them accordingly.
Since a bookkeeping company is adept at saving money by reducing the tax liabilities of the business, you must take their assistance to get it done for FBT. Here is what most bookkeepers recommend.
As an employer in Melbourne, you will not have to pay FBT if you offer tax exempted benefits to your staff members. These include mobile phones and clothing provided to workers for conducting the operations.
Also, offering share schemes or the right to buy shares are not considered fringe benefits as long as the scheme is in accordance with the income tax requirements.
If you offer extra cash as salary to your employees instead of offering fringe benefits, then you are not liable to FBT. The reason behind this is that the employees will be paying income tax on the salary, so there will be no FBT. Many bookkeepers suggest following this path to reduce taxes.
A business owner in Melbourne does not have to pay the FBT if he/she pays for an expense which the employee would have claimed as an income tax deduction.
Bookkeeping professionals usually recommend asking the employees to pay for a part of the cost of the fringe benefits to avoid FBT liability for the business. The cash payment made by the workforce to get an incentive is called employee contribution.
However, you must be aware of the fact that the services extended by the employees are not considered employee contribution for FBT. The legitimate contribution must be made from the tax deducted income of the staff member in Melbourne.
The employer is obligated to offer a variety of allowances to his workforce. However, all of these are not considered fringe benefits. Here are the exclusions.
It is commonly known that any payment made to the staff members in Melbourne as salary and wages is not subject to FBT.
The amount contributed toward the super fund of an employee and contributions made towards a retirement plan of an employee are also not subject to FBT. Your bookkeeper will help you to identify payments that are liable to taxes, such as a contribution made towards the super fund of an associate of an employee.
Any payment made at the time of the end of the service of an employee is not considered a fringe benefit. For example, the full and final amount paid to a retiring worker is not a benefit.
FBT is a significant part of an employer’s tax report. This is the reason why most entrepreneurs rely on a professional bookkeeper in Melbourne to ensure compliance with reportable fringe benefit regulations. Thus, keep the points mentioned above in mind while dealing with the reporting part during the tax season.
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