What is a Fringe Benefits tax and how is it applied.

Fringe Benefits Tax

Fringe benefits tax (FBT) is a tax employers pay on certain benefits they provide to their employees, including their employees’ family or other associates. The benefit may be in addition to, or part of, their salary or wages package.

FBT is a large and often complicated area, however we have outlined the following two most frequently asked questions.

How does Fringe Benefits Tax (FBT) apply to motor vehicles?

A motor vehicle fringe benefit arises when a vehicle is made available to an employee for their private use. The taxable value of this benefit is then calculated using either the statutory or operating cost method to determine the fringe benefits tax payable on the vehicle.

There are particular exemptions for certain types of vehicles, namely commercial vehicles, and emergency services vehicles that may apply.

What constitutes private usage is a complex area where availability takes precedent over actual usage.

For more information regarding the tax treatment of your motor vehicle benefit please contact a member of our team at CHN Herold Ross to discuss your specific circumstances.

How does Fringe Benefits Tax (FBT) apply to entertainment?

Entertaining may seem a terrific way to pick up new clients and grow your business, however there are important taxation considerations to be aware of.

The provision of entertainment in the form of a meal constitutes a meal entertainment fringe benefit, the taxable value of which will determine how much FBT you must pay. There are generally no “black and white” rules when it comes to what constitutes meal entertainment, however there are certain guidelines. For example, a three course dinner including alcohol would likely be entertainment, while some sandwiches provided in the staff lunchroom is considerably less likely to be entertainment.

Golf days, sightseeing tours and other team bonding events, along with gifts to staff and clients may also give rise to a FBT liability.

Further to this there are a myriad of exemptions that may apply to certain items or events. As outlined, fringe benefits tax is quite a complex area, and we would highly recommend obtaining professional advice.

To discuss your businesses risk of fringe benefits tax on entertainment expenditure please contact a member of our team at CHN Herold Ross to discuss your specific circumstances.

A brief overview of FBT provided by the ATO is shown below.

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