Understanding fringe benefits
In most companies, employers offer their employees FBT, which is an important way to show that they care about their workers.
It’s a vital employee compensation as it offers them an additional perk on top of their salaries.
Normally, these benefits given by employers to their employees are not deducted from their salaries.
From company cars to club membership and beyond, FBT takes different forms, and it may depend on what an employer has instore for their staff.
Getting a better understanding of all these benefits is essential for both employers and employees. Let’s dive right into it below:
Fringe benefits examples
Basically, fringe benefits are non-cash perks that often come as part of an employee’s salary arrangements to enhance remuneration.
Common fringe benefits employees in Australia may get are:
- Company car benefits for personal use.
- Expense payments such as memberships, medical insurance, and more.
- Interest-free loans.
- Housing plan allowance.
Benefits of understanding fringe benefits
- It helps employers understand fringe benefits and taxation for tax compliance purposes.
- It helps employees know what constitutes a reportable fringe benefit, as this information can guide their financial plans.
- For employers, it help decrease employee turnover, amongst other costs associated with recruitment and training new members.
- Fringe benefits amongst employees can lead to job satisfaction as there is that feeling that comes with them being appreciated at work.
Taxation of fringe benefits in Australia
The ATO is the body that administers the FBT ACT and ensures that it’s followed to the latter.
According to the Australian Taxation Office (ATO), fringe benefits are not part of regular income tax.
Employers willing to give their employees these benefits must self-assess their FBT liabilities.
First, they’ll be required to lodge the FBT return and pay what they owe.
Through the use of an ATO FBT calculator they will be able to calculate the taxable value of the fringe benefit.
Types of fringe benefits
Beyond every employee’s salary/wage, is a fringe benefit allocation to put a smile on their faces and motivates them.
With us are some of the benefits employees may receive as follows:
1. Expense payment fringe benefits
Sometimes, fringe expense payments occur within organizations. This happens when an employee uses their own money to buy or pay for a utility bill.
The process involves the employer paying or reimbursing the employee for the expense they took care of.
2. Car fringe benefits
Has your employer provided you with a car for personal use? This is considered a fringe benefit. The taxable value of the vehicle is calculated based on its usage.
3. Housing fringe benefits
Employers may provide their employees with housing, which may sometimes be subject to FBT, depending on the location and circumstances.
4. Salary packaging fringe benefits
Sometimes, employees may use salary packaging, whereby their pre-taxed income is used to pay for benefits. However, the benefits they may receive from this may still attract FBT.
5. Fringe benefit exemptions
Only a few benefits are exempt from FBT, and these include;
- Work-related items such as phones and laptops are used mainly for business purposes.
- Benefits that employees who are from a remote base get.
- Minor benefits with a value below $300.
Conclusion
When it comes to employee remuneration and satisfaction, fringe benefits play an important role. However, they come with tax implementations that should be made known to all.
If you’re not sure about FBT, contact us for free tax consultation advice. Let our team help you beat the complexity of FBT for an optimized financial outcome.
