Beware the Fringe Benefits trap

Those team rewards and benefits could cost you more than you think……

Everyone loves a freebie or some type of work perk and they are a great way to reward the team for a job well done, however it is important to remember that some perks are subject to Fringe Benefits Tax.

The ATO defines Fringe Benefits Tax (FBT) as 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. Importantly, if you are a director of a company or trust, benefits you receive may be subject to FBT.

FBT is separate to income tax and is calculated on the taxable value of the fringe benefits provided. The FBT year runs from 1 April to 31 march.

Common types of Fringe Benefits include:

  • Provision of a car that allows private use
  • Home loan payments
  • Private expenses paid by the business
  • Certain types of meals, depending on the purpose & location
  • Car parking

For example, if an employee uses a work car for personal reasons, FBT would likely be payable on the proportion of the expense that related to personal use.

Fringe benefits can be a complex area of tax that can be made easier to manage by putting systems in place to capture data throughout the year and we recommend gaining advice regarding your individual circumstances.