If you’re a business owner and you offer extra perks to your employees on top of their regular pay, then this blog is for you. These extra perks are called fringe benefits, and they can help your employees save on taxes. However, you also need to deal with something called Fringe Benefits Tax (FBT). In this blog, we’ll explain what FBT is, what kinds of benefits it applies to, and how it affects your business finances.
What Are Fringe Benefits?
Fringe benefits are special things that businesses give to their employees or their family members. These can include things like company cars, fun activities, paying for certain expenses, and more. What makes fringe benefits cool for employees is that they’re usually paid for by the business before taxes, which means employees might pay less in taxes while getting cool stuff from their jobs.
Understanding Fringe Benefits Tax (FBT)
FBT is like a special tax that businesses must pay based on the value of the fringe benefits they give to employees. The reason they must pay this tax is that fringe benefits are a different way of paying employees instead of just giving them regular money. The tax is calculated based on how much those benefits are worth, like how much extra money an employee would need to earn to buy those benefits after paying taxes. But here’s the good part: businesses can usually get some of this tax money back as a deduction.
Types of Fringe Benefits:
Businesses can give all sorts of fringe benefits to their employees. Here are some examples:
- Company Vehicles: Sometimes, businesses give employees cars to use for work and personal stuff.
- Vehicle Lease Arrangements: Instead of giving a car, some businesses let employees lease cars at a good price.
- Car Parking: Businesses might provide parking spots for employees.
- Entertainment: This includes fun things like club memberships, tickets to cool events, and more.
- Expense Payments: Sometimes, businesses cover expenses like credit cards, health insurance, or even courses to help employees learn new things for work.
But not all benefits have to pay FBT. If a benefit is something that employees could usually claim as a tax deduction, then FBT usually doesn’t apply. For example, if a business pays for employees to go to work-related training, there’s usually no FBT to worry about.
The FBT year goes from April 1 to March 31, and businesses have to tell the government how much FBT they paid for each employee by July 14. This information then shows up on employees’ yearly tax papers. Keeping good records is important to figure out if FBT applies and how much to tell the government about it.
Get Help from Experts:
If you’re not sure how FBT works for your business, it’s a good idea to talk to people who know a lot about it. They can help you with FBT rules, how much tax to pay, and even help you set up your books to keep track of everything.
Fringe benefits are a great way to make your employees happy, but FBT can be a bit tricky. By learning about FBT, understanding the different types of benefits, and keeping good records, you can manage your business better. You can give your employees great perks while also following the tax rules. If you have questions about FBT, don’t hesitate to ask experts who know all about it. They can help you make the right choices for your business.