Are you providing any personal benefits to employees?

With 31 March fast approaching, it is that time again for businesses to review whether they have provided any fringe benefits to their current or former employees in the past 12 months (1 April 2022 to 31 March 2023).

A fringe benefit is a non-cash benefit provided to an employee, in addition to their wage or salary, or in return for foregoing paying some of an employee’s salary under a salary sacrifice arrangement.

Where personal benefits have been provided to employees or their associates, it is the employer which becomes liable for the tax (FBT).

Common Types of Fringe Benefits

• Cars - Motor Vehicles owned by the business and made available to employees for their private use and enjoyment, generally due to being garaged at the employee’s premises.
• Expense Payments - Payments of private / non-deductible expenses on behalf of employees, which may include residential rent expenses, personally held insurances (other than income protection), costs associated with employees’ privately owned vehicles, gym memberships, and school fees.
• Meal & Recreational Entertainment – Examples include Christmas parties, Melbourne cup, EOFY parties, offsite lunches, after-work drinks, tickets to events or corporate boxes and work retreats.
• Employee Loans – Advances of money provided to employees without arm’s length commercial repayment and interest terms.
• Some other benefits include but are not limited to;
  • Living away-from-home allowances
  • Car parking provided to employees

Part or all of certain Fringe Benefits may be eligible to be reduced via an Employee Cash Contribution, which may be made via;

• a direct bank transfer by the employee into the business bank account; or
• an after-tax salary and wage deduction.

These arrangements would require a signed agreement, conveying the terms of the arrangement, to be in place.

Electric Cars and FBT

A key change for the 2023 FBT year is with electric cars. Businesses will not have to pay FBT if it provides private use of an electric car that meets ALL the following conditions:

• the car is a zero or low-emissions vehicle
• the first time the car is both held and used is on or after 1 July 2022
• the car is used by a current employee or their associates (such as family members)
• the purchase value of the electric car is below the LCT threshold for fuel-efficient vehicles.

Unfortunately, this exemption does not apply to any electric cars acquired before 1 July 2022.

Other Key Exemptions

There are a few common exemptions that might apply to benefits provided to your employees.

These include:

• Minor benefits – Benefits costing less than $300 per person and provided on an infrequent basis
• Otherwise deductible rule – Expenses that would be tax-deductible to the employee if they incurred it directly, such as income protection premiums or professional memberships
• Exempt vehicles – Vehicles that are not principally designed to carry passengers provided the private use is minor and infrequent, such as vans and utes

Requirement to lodge an FBT Return

If the benefits provided by a business to employees result in an FBT liability, then lodging an FBT return is a legal requirement.

However, where an FBT liability is reduced to nil due to the application of exemptions or by an employee contribution, it may still be worth doing a Fringe Benefits Tax Return, as lodgement of an FBT return, will generally restrict the review/amendment period to 3-6 years.

Conclusion

If you are a business owner and believe that any of the above benefits have been provided to your employees, then you should consider whether that benefit results in an FBT liability.

If you would like to understand more about whether your business may have any FBT consequences, please contact LINK Advisors, and we can assist your business with exploring your FBT position, including any exemptions and reductions which may apply.