Knowing how to calculate fringe benefits tax can save you time and money

3 key tips for small business owners dealing with fringe benefits tax

Providing your employees with perks can be a great way to show how much you value them. It's important to realise, however, that these perks, also known as fringe benefits, come with their own set of rules when it comes to tax time. Fringe Benefits Tax (FBT) can be confusing, so here are a few tips for small business owners attempting to deal with it.

1. Know when to lodge your FBT return, and how much you owe

It's important to realise that FBT is separate from income tax. It, therefore, has a different financial year which runs from April 1st to March 31st, and you must lodge your FBT return by 21st May each year.

The government doesn't normally tell employers how much FBT you have to pay, so it's up to you to work it out. FBT is based on the taxable value of each of the fringe benefits you provide to every employee, multiplied by the FBT rate, which varies. 

Certain perks offered to employees may be eligible for fringe benefits taxWhen offering perks to your employees, know which may be eligible for fringe benefits tax.

2. Know what constitutes a fringe benefit

In order to calculate FBT correctly, you need to know what does and doesn't class as a taxable fringe benefit. And there are some surprises. For example, laptops and phones used primarily for work purposes don't class as fringe benefits. However, food and drink, and even gifts may be deemed as entertainment – which can be taxed as a fringe benefit. Research fully whether the benefits you're providing are classed as fringe benefits to make sure you don't pay more than you have to.

You also need to consider who receives these perks. FBT doesn't only apply to benefits provided to employees, but also their families and friends.

3. Keep records

Keeping reliable records of the benefits you provide to your staff won't just reduce stress when it comes to lodging your FBT return, it's actually the law.

For employers providing fringe benefits, you must keep records of:

  • Declarations
  • Worksheets
  • Calculations
  • Elections
  • Supporting details

These records must be kept for five years, according to guidance from the Australian Tax Office.

For more information on how Wilson Porter can help you asses your FBT liability, and produce strategies to minimise your liabilities, get in touch with our team today.