Avoiding or significantly reducing your Fringe Benefits Tax (FBT) liability primarily involves strategically structuring the benefits provided to employees and leveraging available exemptions and concessions. It's about ensuring that a benefit either doesn't meet the definition of a fringe benefit or falls under a specific exclusion.
Key Strategies to Reduce Your FBT Liability
To minimize or even eliminate FBT, employers can focus on providing benefits that are specifically exempt, fall below a certain threshold, or are structured in a way that avoids triggering the tax. Here are common approaches:
- Provide Exempt Benefits: Certain types of benefits are specifically exempt from FBT, meaning no tax is payable on them.
- Utilise Concessions and Reductions: The tax system offers various concessions that can reduce the taxable value of a benefit or the FBT payable.
- Reimburse Employees Directly: In some cases, directly reimbursing employees for legitimate, substantiated work-related expenses rather than providing a benefit can avoid FBT.
- Cash Salary Sacrifice: Encourage employees to salary sacrifice into FBT-exempt items or superannuation, as superannuation contributions are generally not subject to FBT.
Specific Exemptions and Concessions
Understanding and applying specific exemptions is crucial. These are situations where a benefit, even if it might otherwise be considered a fringe benefit, is explicitly excluded from FBT.
1. Work-Related Items Exemption
Certain portable electronic devices, tools of trade, and other work-related items provided to employees are exempt from FBT, provided they are primarily used for work. This includes:
- Laptops, tablets, and mobile phones: Generally, one of each type per FBT year per employee is exempt, unless it's a replacement item.
- Tools of trade.
- Protective clothing.
- Briefcases.
- Calculators.
These items are exempt even if they are available for private use, as long as their primary purpose is work-related.
2. Minor Benefits Exemption
A benefit may be exempt from FBT if its value is less than $300 per employee, and it is provided infrequently and irregularly. This exemption typically applies to:
- Small, ad-hoc gifts: Such as a modest birthday gift or flowers.
- Occasional staff social functions: For example, a small team lunch or coffee outing.
The key is that the benefit should be minor, infrequent, and irregular. For instance, a small Christmas gift might qualify, but regular weekly lunches for staff would not.
3. Taxi, Ride-Sourcing, and Public Transport Exemptions
Travel by taxi, ride-sourcing services, or public transport is exempt from FBT in specific circumstances:
- Single-trip taxi/ride-sourcing travel: An exemption applies to a single trip beginning or ending at the employee's place of work.
- Sickness or injury: Travel by taxi, ride-sourcing, or other similar transport to or from work due to an employee's sickness or injury.
- Public transport: Certain benefits provided for public transport travel can be exempt under specific conditions, particularly for travel to or from work.
4. Emergency Assistance
Benefits provided as emergency assistance to an employee or their family are exempt from FBT. This covers situations such as:
- Counselling related to a work-related trauma.
- First aid or other emergency health care.
- Food, transport, or temporary accommodation due to an emergency (e.g., natural disaster, serious illness).
5. Retraining and Reskilling Exemption
Benefits provided for retraining or reskilling an employee are exempt from FBT if the training is primarily aimed at helping the employee gain new employment, or to prepare them for a different role within the employer's business. This exemption applies even if the training is not directly related to their current employment duties.
6. Contributions to Approved Worker Entitlement Funds
Contributions made by an employer to an approved worker entitlement fund are exempt from FBT. These funds are typically established to provide benefits to employees for entitlements like long service leave, sick leave, or redundancy payments within a specific industry.
General Strategies and Best Practices
Beyond specific exemptions, general strategies can help manage FBT:
- Understanding the Taxable Value: Even if a benefit is not fully exempt, understanding how its taxable value is calculated (and potentially reduced by employee contributions or the 'otherwise deductible' rule) is important.
- "Otherwise Deductible" Rule: If an employee would have been able to claim a tax deduction for the cost of a benefit had they paid for it themselves, the taxable value of the fringe benefit can be reduced by that deductible amount. For example, if an employer pays for a work-related training course, and the employee could have deducted the cost, the FBT liability might be reduced to nil.
- Record Keeping: Maintain meticulous records of all benefits provided, their value, and the circumstances under which they were given. This is crucial for demonstrating compliance and justifying any exemptions applied.
By carefully planning and structuring the benefits provided to employees, businesses can effectively manage and often avoid Fringe Benefits Tax liability. For comprehensive details on FBT and its exemptions, always refer to official government tax resources. You can find more information on exemptions, concessions, and other ways to reduce FBT on the ATO website.
