Fringe benefits tax do’s and don’ts

A common acquisition is a company car. Directors will often purchase one for their spouse, a top performing employee or themselves. Whatever the intention, it is wise for a business owner to consider the FBT implications of purchasing a new car and ascertain if the want outweighs the need.

Under FBT rules, when a company provides a car to an employee or director for personal use, the employer must pay tax on the value of that benefit provided. The tax is calculated based on the car’s taxable value, which includes factors such as the cost of the car, its accessories, and running expenses.

The business should consider several factors before purchasing a company car to minimise the impact of FBT. Firstly, they need to assess the vehicle’s taxable value and how it aligns with its intended use. A business can explore options such as choosing cars with lower taxable values or encouraging employees to minimise personal use to reduce FBT liabilities.

The type of car purchased can influence FBT obligations, as vehicles with lower emissions or those considered environmentally friendly may attract lower tax rates. A business should conduct thorough cost-benefit analyses to determine the most tax-efficient approach to providing company cars. FBT plays a crucial role in shaping a company’s decisions regarding purchasing company cars, and it is recommended to seek professional advice from your accountant before entering into an acquisition agreement.

Providing housing or accommodation to employees, including rent-free or discounted housing, can be subject to FBT. Living Away From Home Allowance (LAFHA): Payments made to employees to compensate for additional expenses incurred while living away from their usual place of residence may be subject to FBT.

Any non-cash employee benefits, such as goods, services, or property, are generally subject to FBT. And providing entertainment to employees, including tickets to events, holidays, or leisure activities, may attract FBT. Where employees enter into salary sacrifice arrangements to receive non-cash benefits in lieu of salary or wages, FBT may apply to the value of those benefits.

Employee share schemes, gym memberships, educational expenses, employee discounts and relocation expenses can all be subject to FBT, the ATO doesn’t miss much or leave much wriggle room.

Importantly, we help you interpret the intricate rules, exemptions, and concessions, helping businesses understand their obligations accurately. By staying up-to-date with legislative changes and industry practices, we offer insights into FBT planning strategies that align with the business’s objectives while minimising tax liabilities.