What is fringe benefit tax (FBT), and how does it affect you? If an employer provides employee benefits (i.e., income other than normal wages) for employees, joint-stock employees, or persons associated with their company’s business, then the employer must pay the corresponding fringe benefit tax based on this benefit value.
The Different Categories of Fringe Benefit Tax
These benefits can cover the following four main categories:
1. Employer contributions to employee funds.
If the employer provides employees with benefit funds or insurance, the employer may need to pay FBT. For example, premiums for life or health insurance.
2. Employer provided goods and services.
If the employer provides subsidized or discounted goods and services to employees, the employer may need to pay FBT. For example, subsidized transport.
3. Employer provided low-interest loans.
If the interest rate provided by the employer to the employee is lower than the interest rate provided by the public, the employer may need to pay FBT. For example, interest rates are lower than banks.
4. Employer provided motor vehicles for private use.
This is the most common category of FBT. If the employer provides business motor vehicles to employees for their private use, the employer may need to pay FBT. Even you are a sole trader or a partnership, when you use the business motor vehicle for private use, you may need to pay the tax as you are a shareholder employee.
Fringe Benefit Tax Rates
There are three different fringe benefit tax rates. You should choose one that best suits your business.
|Single rate||49.25%||Employees earn less than $70,000 per year.|
|Short form alternate rate||49.25% for non-attributed benefits provided to major shareholder employees; 42.86% for non-attributed benefits provided to other employees.||Employees earning less than $70,000; Applied to attributed benefits.|
|Full alternate rate||between 11.73% and 49.25%||Only applied to attributed benefits.|
Common Fringe Benefit Tax Problems
- You may not be entirely sure whether you need to pay FBT on an item.
- Not sure of the specific tax rates of FBT.
- Missed the payment date of FBT.
- Missed the filing due date of FBT return.
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