Fringe benefits are those extra payments, gifts or bonuses received from an employer that are not part of your salary or wages.

Also known as ’perks’ – its one of the ways in which companies lure prospective employees, making a job proposition that little bit more appealing. Whether you’re an employer or worker, understanding your tax obligations from a ‘fringe benefits’ perspective can help reduce your taxable income and enable you to get the most out of your annual return.

What is Fringe Benefits Tax?

When an employee is gifted something that is not part of their salary or wages, this is known as a fringe benefit. Whether it’s a holiday for a job well done, a bonus cash payment or gift vouchers, these benefits are usually subject to Fringe Benefits Tax (FBT). It’s important not to get this confused with income tax. A fringe benefit is calculated separately based on the individual value of the fringe benefit – making this a taxable component for the employer.

So, what are some of the reasons why businesses offer fringe benefits to an employee?

• It is used for attracting & keeping star quality employees during the recruitment process.
• It helps differentiate company offerings & creates a point of difference that is more appealing and attractive to prospective employees.
• A fringe benefit can also be given to family members including child, husband or wife as an extra incentive for the job.
• These costs can be claimed by employers as tax deductions at the end of the financial year.

What are common Fringe Benefits?

• Payment of school fees & childcare costs
• Lower interest loans
• Gym memberships
• Complimentary concert tickets
• Company vehicles

What is used to calculate Fringe Benefits Tax?

When working out a FBT liability, your accountant will base this on the highest tax bracket for the employee. This doesn’t change, irrespective of whether the employee is on a lower or mid range tax bracket.  It is the employer’s responsibility however, to keep a record of all benefits paid to their employees together with the value of benefits offered that reflects the employees’ gross salary at the highest marginal tax rate.

At Oliluca, we can help determine whether you are entitled to a GST credit for the GST paid throughout the year or if there is no GST entitlement applicable. If you would like to learn more about how FBT is calculated specifically for your company needs, feel free to have a chat to one of our expert accountants today. We will be more than happy to break it all down for you.

Running a business can be fraught with challenges, particularly when it comes to making the right decisions around your finances. As a leading tax accountant for SME’s, we’ll ensure your business is operating smoothly with our full range of expert accounting services in Melbourne. From accounting, taxation and advisory services, assistance with GST applications, Capital Gains Tax & Small Business CGT concessions, Tax Minimisation Strategies, Tax Planning & Advice, Financial Reporting, Budgeting & Cash Flow Projection, Business Structure Advice & ASIC registrations, we’ve got you business finances covered.

For more information, please get in touch with Oliluca today on (03) 9561 1040 to arrange a confidential chat.