Time To Review Your Fringe Benefits
The FBT year runs from 1st April to 31st March. Rumour has it that when this tax was introduced it was so regressive that it had to be an April Fools joke. Unfortunately after some 24 years it is still with us. Thank you Mr. Keating.
A fringe benefit is when you receive a benefit from your employer and have not paid tax on that benefit. The ATO believes it to be unfair that you get something they do not, so they tax you, at the top marginal rate. Most times the employer pays this tax but if you are self employed, you must pay. There are dozens of fringe benefits, including expense payment benefits, airline transport fringe benefits, living away from home allowance fringe benefit, entertainment fringe benefit, property fringe benefit, housing benefit and so the list goes on. Employees in the Health industry or employees of charitable organisations have it easy where fringe benefits are concerned as special rules apply to them and they get exemptions from paying the FBT up to a certain amount.
The most common fringe benefit is the use of a company motor vehicle and this is what applies to most self employed people whose business is conducted through a family company.
This tax is too complex to cover in the 500 words that will appear here but as the tax applies from 1st April there are certain things that must be done so as to meet legislative requirements.
With motor vehicles, the tax can be applied in several ways, it can be on distance travelled, ignoring the business/ private use of the vehicle, it can be on a percentage basis, identifying how much business use the vehicle gets as opposed to private use or it can be based on a simple 12.5% calculation of the cost base of the vehicle.
With any of these methods of calculation, the distance the car has travelled during the year must be identified. To do this an odometer reading should be taken. This information should be forwarded to your employer and the appropriate declaration signed. If you are self employed, and use a car (sedan) in your business you should forward the number to your accountant. The FBT act defines whether the motor vehicle is a car or not. If your motor vehicle is not a car then you may not be liable for FBT. The ATO web site identifies motor vehicles that are not cars and provided they are designed to carry a load of one tone or more, more than 8 passengers or if having a load capacity of less than one tone they are not designed for the principal purpose of carrying passengers, then they are exempt from FBT.
The important point here is if your company has sedans on its books, it must prepare a Fringe Benefits Tax return. So what you need to do is go outside, get the odometer reading, send it to your accountant and ask him/her, what is the next step. If the response is a dumb look, then you need to change accountants.