How to be ready for the changes to fringe benefits tax
If you’re an employer, preparing and paying your fringe benefits tax (FBT) is an annual exercise you’re probably familiar with.
But you might not know that this tax season there are three key changes to FBT which could impact the amount you owe and the details of your assessment, says Belinda Spence, Senior Tax Manager, MYOB.
If you’re working with your tax agent to prepare and lodge your fringe benefits tax, remember that the due date for the 31 March 2023 FBT year is 26 June.
So now’s the time to get clear on key changes and how they could impact your obligations.
What is a fringe benefit?
Essentially, a fringe benefit is like a payment or perk provided to an employee, but in a different form to salary or wages.
This might include:
- Paying an employee’s gym membership
- Free tickets to concerts
- Car parking
- Reimbursing an expense such as school fees
- Giving an employee a discounted loan
What items are exempt from FBT?
The most common FBT exemptions for businesses include:
- Minor benefits valued at less than $300 and of an infrequent nature.
- Some work-related items commonly used by employees to perform their duties, including portable electronic devices, computer software, protective clothing, or tools of trade.
- Relocation expenses: moving an employee for employment purposes.
- Benefits that would be deductible to an employee: no FBT liability arises for a benefit that the employee would have been able to claim as a deduction if they’d paid for it themselves.
So, what’s changed?
In 2023, three key changes to FBT you need to know about are:
1. Changes to car parking fringe benefits
In June 2021, the ATO widened the definition of what constitutes a commercial car parking station to include those that would have previously been considered ‘special purpose parking facilities’ – essentially the kind of parking stations whose fees encourage short-term parking only.
From 1 April 2022, employers who provide car parking fringe benefits to employees that are located within a one kilometre radius of a commercial or special purpose parking facility may be exposed to an FBT liability.
However, if your business’ turnover is less than $50 million the car parking benefit will be exempt, provided the parking does not fall within the commercial parking definition.
2. Exemption for electric vehicles
Going green with your employee car fleet makes sense when it comes to reducing your fringe benefits tax liability.
There’s now an FBT exemption for electric vehicles purchased on or after 1 July 2022, as long as the purchase price falls below the luxury car tax threshold for fuel efficient cars (currently $84,916).
Eligible vehicles are battery electric vehicles, hydrogen fuel cell electric vehicles and plug-in hybrid electric vehicles.
3. Fringe benefits and independent contractors
Working with independent contractors? If so, it’s important to determine whether they fall under the new definition of an employee, and to review the contracts you currently have in place.
This definition changed following a recent High Court decision, impacting pay-as-you-go, superannuation and FBT obligations.
What does this mean for employers?
In short, you might have a greater FBT liability in the 2023 year if you’re providing benefits to independent contractors or car parking as a benefit for employees.
The responsibility is on you, as the employer, to ensure compliance around changes to FBT and correct payment of what your business owes.
The cost a business incurs when providing a fringe benefit or exempt benefit is usually an allowable tax deduction, however it’s worth noting that some expenses can’t be deducted until the FBT is paid — in particular, entertainment expenses.
3 top tips for getting prepared:
1. Start early
If you haven’t already started, now’s the time. If you’re working with a tax agent on your fringe benefits tax lodgement, you have until 26 June to comply with your lodgement requirements.
2. Document everything
It’s really important to ensure that you have good documentation in place to support any benefits you supply to your employees.
3. Be clear on what constitutes a fringe benefit
It pays to be clear, especially when it comes to understanding what does and doesn’t fall within the realm of FBT. For example, we often see employers giving employees multiple tech devices, without understanding that some of them may be considered a fringe benefit.
If in doubt, speak to your tax agent now to get clear on your FBT obligations, and be ready to lodge in advance of the 26 June deadline.
A version of this article first appeared on Kochie’s Business Builders.
