Head in the sand about FBT? It’s not as scary as it sounds!

Are you one of the many employers that mistakenly assume they are not providing fringe benefits? Do you block your ears when you hear those three little letters?

Fringe benefits tax is more far-reaching than most people realise, but it doesn’t have to be scary!

The FBT year runs from 1 April to 31 March. So with the 2018 FBT year-end fast approaching, now is the time to act!

In this article, we invite you to learn about common fringe benefits provided by small businesses, the exemptions that are available and what happens once you identify you are providing a benefit; so you can feel confident about your business’ FBT compliance.

What is a fringe benefit?

A fringe benefit is any benefit other than salary or wages that is:

provided by an employer, an associate of the employer, or a third party by arrangement of the employer;
to an employee (includes directors), or an associate of an employee;
in direct connection with (because of) the employee’s employment.

Types of fringe benefits

Type of Benefit	Description	Common Examples
Car	An employer makes a car they own or lease available for the private use of an employee. Note: The car does not actually have to be used for private purposes to be subject to FBT. It just has to be available for private use. If a car is garaged at or near an employee’s home, it is taken to be available for their private use.	A company car is used by an employee to drive around for sales calls. The employee parks the car at their home in the evening. A company runs its business from its director’s home, and the company car is parked at the home.
Expense payment	Payment of private expenses of the employee.	Private portion of car running costs paid by employer (where employee owns the vehicle) Private health insurance Visa application costs (where the employee was already employed in Australia) Gym memberships Mobile phone bills
Property	Property (including any goods, real property or rights to property) provided to employees free or at a discount.	Giving stock to an employee for free Selling stock to an employee at a discount Giving an employee a laptop or mobile phone.
Meal Entertainment	Entertainment by way of food, drink or recreation.	Christmas & EOFY parties Team lunches Friday night drinks
Car parking	Car parking provided by the employer for the employee, at or near the employee’s place of work. (Note: Additional conditions apply)	A business leases car spaces in the building’s basement parking as part of its office lease. The car spaces are provided for the employees to park in. The business owns a small block of land down the road from their business premises where their employees park.
Loan	Loaning money to an employee at an interest rate below the ATO’s benchmark interest rate (5.25% for the 2018 FBT year).	An employer loans $1,000 to an employee for 6 months at an interest rate of 2% to assist them through a tough financial time.
Debt waiver	An employer waives the obligation of an employee to pay or repay an amount owed to them.	An employer sells goods to an employee and later tells them they are not required to pay the invoiced amount.
Living Away From Home Allowance (LAFHA)	Allowance paid to an employee to cover additional expenses incurred because they are temporarily required to live away from their normal place of residence to perform their employment duties.	An employee ordinarily lives and works in Sydney. You send them to Melbourne for six months to work on a special project. You pay them a set allowance per week to cover the cost of living away from home.
Housing	Accommodation provided to an employee rent-free or at a reduced rent amount, where that accommodation is their usual place of residence.	An employer runs a hostel. An employee lives at the hostel in one of the rooms and it is their usual place of residence. The employee may or may not contribute an amount towards their accommodation.
Board	An employee is provided with accommodation and is entitled to at least two meals per day.	On a remote construction site, oil rig or ship. Live-in housekeeper. Resident teachers in a boarding school.
Residual	Any benefit not covered by one of the specific types of fringe benefits.	An employee uses property (eg. video camera, projector, boat or yacht) owned by the employer (or a business-owner or director) for personal use. Provision of a service (eg. a solicitor gives legal advice to an employee) Private use of an exempt type of ‘car’ (eg. a van) used frequently for private use other than home to work. Private use of a motor vehicle that is not a ‘car’ for FBT purposes (eg. a one tonne utility).

Exclusions, Exemptions and Reductions

Numerous exclusions, exemptions and reductions are detailed in the FBT legislation. Some apply to specific types of fringe benefits and others apply across the board. Some of the ones most commonly used by small businesses are briefly outlined below.

Type of Benefit	Exclusion, Exemption or Reduction	Details
Car fringe benefits	Excluded vehicles	The definition of a “car” excludes vehicles designed to: carry a load of 1 tonne or more; and/or carry 9 or more passengers.
	Exempt vehicles	The following vehicles (designed to carry a load of less than 1 tonne and less than 9 passengers) are exempt: A taxi, panel van or utility truck; or Any road vehicle that is not for the principal purpose of carrying passengers; Provided there was no private use other than: work‑related travel; or minor, infrequent and irregular private use.
	Reporting exemption for pooled cars	Where a car is shared by multiple employees during the year, the employer must still pay FBT on this car, but does not have to report the fringe benefit on the relevant employees’ PAYG Payment Summaries.
Property fringe benefits	Work-related items exemption	Where the following items are used primarily for use in the employee’s employment, provision of these items to employees are exempt from FBT: Portable electronic devices such as mobile phones, laptops, tablets, portable printers and GPS navigation receivers; Computer software; Protective clothing; Briefcases; and Tools of trade. The exemption is limited to one item per FBT year for items that have a substantially identical function; except for portable electronic devices provided by small businesses (multiple allowed).
Meal Entertainment	Common exclusions & exemptions	Food and drink provided to employees on a working day on the business’ premises. Food and drink provided to an employee while the employee is traveling overnight is not meal entertainment.
Car parking	Exclusion	No fringe benefit arises where there is no commercial parking station in a 1km radius of the premises on which the car is parked that charges a fee for all-day parking that is higher than the ATO’s car parking threshold ($8.66 for 2018 FBT year).
Car parking	Small business car parking exemption	Car parking benefits are exempt if all of the following conditions are satisfied: The parking is not provided in a commercial car park; The employer is not a government body, a listed public company, or a subsidiary of a listed public company; and For the last income year before the relevant FBT year, the employer’s gross total income was less than $10 million, or they were a small business.
Living Away From Home Allowance (LAFHA)	Reduction for exempt amount	The portion of the LAFHA up to the ATO’s published exempt amounts is exempt if certain conditions are met (conditions are around maintaining a home in Australia, employee declarations, time limits and fly-in-fly-out arrangements).
Miscellaneous	Minor benefits exemption	Benefits (other than in-house fringe benefits) may be exempt if they are: Less than $300 including GST per employee; and Irregular and infrequent.
	Otherwise deductible rule	To the extent the cost or outgoing would be deductible to the employee if they had incurred it themselves, the taxable value of the fringe benefit is reduced proportionately.
	Taxi travel exemption	Taxi travel by an employee is an exempt benefit if the travel is: A single trip beginning or ending at the employee’s place of work; or Necessary travel due to injury or sickness to the employee.

What happens next?

The most critical part for an employer is determining whether or not you are providing any fringe benefits.

Once you have identified that you are (or might be) providing one or more fringe benefits, we strongly recommend contacting us! We can then assist you in identifying any relevant exclusions or exemptions and calculating your FBT liability.

Other things to consider around FBT

FBT increases the cost of providing non-salary benefits to your employees. Keep this in mind before providing benefits or implementing salary sacrifice arrangements. If providing a material benefit, we can assist by estimating the total cost to you as an employer so you aren’t hit with unexpected costs.

As with every area of tax, documentation is critical. A part from normal record-keeping, FBT rules often require declarations to be made by employers and/or employees. Contact us to find out what documentation is required.

Employers are required to report fringe benefits on employees’ PAYG Payment Summaries. When we attend to FBT obligations for clients, we provide these details to the employer.