Fringe benefits tax (FBT) is a tax levied on certain benefits provided by employers to their employees. These benefits can include items such as cars, low-interest loans, and private health insurance. FBT is designed to ensure that employees are taxed on the value of these benefits, even if they are not taxed as part of their salary.
There are a number of reasons why employers might want to avoid FBT. First, FBT can be a significant expense for businesses. Second, FBT can add to the administrative burden for businesses, as they are required to keep track of all FBT-able benefits provided to employees. Finally, FBT can create a disincentive for businesses to provide certain benefits to employees, as the cost of the benefit may outweigh the tax benefits.
There are a number of strategies that businesses can use to avoid FBT. One strategy is to provide benefits that are not taxable under the FBT rules. For example, employers can provide employees with benefits such as gym memberships, childcare, and public transport subsidies, which are not subject to FBT. Another strategy is to reduce the value of FBT-able benefits provided to employees. For example, employers can reduce the value of company cars provided to employees by reducing the number of kilometers that the employee can drive the car for private purposes.
1. Provide non-taxable benefits
One way to avoid FBT is to provide employees with non-taxable benefits. Non-taxable benefits are benefits that are not subject to FBT, even if they are provided in addition to an employee’s salary.
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Gym memberships
Gym memberships are a popular non-taxable benefit. This is because gym memberships are considered to be a ‘health and fitness’ benefit, which is exempt from FBT.
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Childcare
Childcare is another popular non-taxable benefit. This is because childcare is considered to be a ‘family assistance’ benefit, which is also exempt from FBT.
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Public transport subsidies
Public transport subsidies are a third popular non-taxable benefit. This is because public transport subsidies are considered to be a ‘transport’ benefit, which is exempt from FBT.
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Educational assistance
Educational assistance is another non-taxable benefit. This is because educational assistance is considered to be a ‘training’ benefit, which is exempt from FBT.
By providing employees with non-taxable benefits, businesses can reduce their FBT liability and save money.
2. Reduce the value of taxable benefits
Reducing the value of taxable benefits is an effective way to avoid FBT. There are a number of ways to reduce the value of taxable benefits, including:
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Reducing the frequency of benefits
One way to reduce the value of taxable benefits is to reduce the frequency with which they are provided. For example, instead of providing employees with a company car, a business could provide employees with a car allowance that is only available for use on business days.
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Reducing the duration of benefits
Another way to reduce the value of taxable benefits is to reduce the duration for which they are provided. For example, instead of providing employees with a company car for the entire year, a business could provide employees with a company car for only six months.
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Reducing the value of benefits
A third way to reduce the value of taxable benefits is to reduce the value of the benefit itself. For example, instead of providing employees with a company car that is worth $50,000, a business could provide employees with a company car that is worth $30,000.
By reducing the value of taxable benefits, businesses can reduce their FBT liability and save money.
3. Use salary packaging
Salary packaging is a way of structuring an employee’s salary so that part of their salary is paid in the form of non-taxable benefits. This can be an effective way to avoid FBT, as the non-taxable benefits are not included in the employee’s taxable income.
There are a number of different types of non-taxable benefits that can be included in a salary package, including:
- Superannuation contributions
- Novated lease cars
- Health insurance
- Childcare
- Education expenses
By including these types of benefits in a salary package, employees can reduce their taxable income and therefore reduce their FBT liability.
Salary packaging can be a complex area, so it is important to seek professional advice before implementing a salary packaging arrangement.
4. Provide benefits through a third party
Providing benefits through a third party is a strategy that businesses can use to avoid FBT. This strategy involves contracting with a third party to provide benefits to employees, rather than providing the benefits directly. This can be an effective way to avoid FBT, as the benefits are not provided by the employer and are therefore not subject to FBT.
There are a number of different types of benefits that can be provided through a third party, including:
- Health insurance
- Childcare
- Education expenses
- Entertainment
- Travel
By providing benefits through a third party, businesses can reduce their FBT liability and save money. However, it is important to note that there are some risks associated with providing benefits through a third party. For example, the business may be liable for FBT if the third party does not comply with the FBT rules.
Overall, providing benefits through a third party can be an effective way to avoid FBT. However, it is important to carefully consider the risks involved before implementing this strategy.
5. Review FBT rules regularly
Regularly reviewing the FBT rules is essential for businesses that want to avoid FBT. The FBT rules are complex and can change frequently, so it is important to stay up-to-date on the latest changes.
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Keep up with changes in the FBT rules
The FBT rules are constantly changing, so it is important to keep up with the latest changes. This can be done by reading the ATO website, subscribing to FBT newsletters, or attending FBT seminars.
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Identify areas where FBT can be avoided
Once you are familiar with the FBT rules, you can identify areas where FBT can be avoided. This may involve changing the way that benefits are provided to employees, or it may involve providing different types of benefits altogether.
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Seek professional advice
If you are unsure about how to avoid FBT, it is important to seek professional advice. A qualified accountant or tax advisor can help you to understand the FBT rules and can help you to develop strategies to avoid FBT.
By regularly reviewing the FBT rules, businesses can stay up-to-date on the latest changes and can identify areas where FBT can be avoided. This can help businesses to save money and to avoid the risk of FBT penalties.
FAQs
Businesses can use FBT to reduce their tax liability and keep more money in their pockets. Here are answers to some of the most frequently asked questions on FBT:
Question 1: What is FBT?
Answer: Fringe Benefits Tax (FBT) is a tax imposed on certain benefits provided by an employer to its employees. These benefits can include items such as cars, low-interest loans, and private health insurance.
Question 2: Why should businesses avoid FBT?
Answer: There are a number of reasons why businesses should avoid FBT. First, FBT can be a significant expense for businesses. Second, FBT can add to the administrative burden for businesses, as they are required to keep track of all FBT-able benefits provided to employees. Finally, FBT can create a disincentive for businesses to provide certain benefits to employees, as the cost of the benefit may outweigh the tax benefits.
Question 3: How can businesses avoid FBT?
Answer: There are a number of strategies that businesses can use to avoid FBT. One strategy is to provide benefits that are not taxable under the FBT rules. Another strategy is to reduce the value of FBT-able benefits provided to employees. Businesses can also use salary packaging, provide benefits through a third party, and regularly review the FBT rules to stay up-to-date on the latest changes.
Question 4: What are some examples of non-taxable benefits?
Answer: Non-taxable benefits are benefits that are not subject to FBT, even if they are provided in addition to an employee’s salary. Examples of non-taxable benefits include gym memberships, childcare, public transport subsidies, and educational assistance.
Question 5: What are some strategies for reducing the value of taxable benefits?
Answer: There are a number of strategies that businesses can use to reduce the value of taxable benefits. These strategies include reducing the frequency of benefits, reducing the duration of benefits, and reducing the value of benefits.
Question 6: What are the risks associated with providing benefits through a third party?
Answer: There are some risks associated with providing benefits through a third party. For example, the business may be liable for FBT if the third party does not comply with the FBT rules.
Summary: By understanding the FBT rules and implementing strategies to avoid FBT, businesses can save money and reduce their tax liability.
Transition to the next article section: For more information on FBT, please refer to the following resources:
- [ATO website](https://www.ato.gov.au/Business/Fringe-benefits-tax-(FBT)/)
- [FBT guide](https://www.ato.gov.au/Business/Fringe-benefits-tax-(FBT)/In-detail/FBT-guide/)
- [FBT calculator](https://www.ato.gov.au/Business/Fringe-benefits-tax-(FBT)/Tools/FBT-calculator/)
Tips to Avoid FBT
Fringe Benefits Tax (FBT) can be a significant expense for businesses. By implementing the following tips, businesses can reduce their FBT liability and save money.
Tip 1: Provide non-taxable benefits
Non-taxable benefits are benefits that are not subject to FBT, even if they are provided in addition to an employee’s salary. Examples of non-taxable benefits include gym memberships, childcare, public transport subsidies, and educational assistance.
Tip 2: Reduce the value of taxable benefits
Reducing the value of taxable benefits is an effective way to avoid FBT. There are a number of ways to reduce the value of taxable benefits, including reducing the frequency of benefits, reducing the duration of benefits, and reducing the value of benefits.
Tip 3: Use salary packaging
Salary packaging is a way of structuring an employee’s salary so that part of their salary is paid in the form of non-taxable benefits. This can be an effective way to avoid FBT, as the non-taxable benefits are not included in the employee’s taxable income.
Tip 4: Provide benefits through a third party
Providing benefits through a third party is a strategy that businesses can use to avoid FBT. This strategy involves contracting with a third party to provide benefits to employees, rather than providing the benefits directly. This can be an effective way to avoid FBT, as the benefits are not provided by the employer and are therefore not subject to FBT.
Tip 5: Regularly review FBT rules
Regularly reviewing the FBT rules is essential for businesses that want to avoid FBT. The FBT rules are complex and can change frequently, so it is important to stay up-to-date on the latest changes.
Summary: By implementing these tips, businesses can reduce their FBT liability and save money.
Transition to the article’s conclusion: For more information on FBT, please refer to the following resources:
- [ATO website](https://www.ato.gov.au/Business/Fringe-benefits-tax-(FBT)/)
- [FBT guide](https://www.ato.gov.au/Business/Fringe-benefits-tax-(FBT)/In-detail/FBT-guide/)
- [FBT calculator](https://www.ato.gov.au/Business/Fringe-benefits-tax-(FBT)/Tools/FBT-calculator/)
Wrapping up
In summary, businesses can effectively reduce their FBT liability and optimize tax savings by adhering to the outlined strategies. Implementing these measures, such as offering non-taxable benefits, minimizing the value of taxable benefits, utilizing salary packaging, and regularly reviewing FBT regulations, can significantly impact a company’s financial position.
By staying informed about FBT rules and adapting to changes, businesses can ensure compliance while maximizing the efficiency of their employee benefits programs. This comprehensive approach not only saves money but also enhances employee satisfaction and fosters a positive work environment. By embracing these strategies, businesses can achieve a balance between providing attractive benefits and minimizing FBT implications.
