Benefits provided to employees or their associates in addition to salary or wages are known as fringe benefits. These benefits are paid for by the employer from pre-tax earnings, making the provision of benefits attractive to employees as it may reduce their taxable income while receiving payment in other forms. 

However, this isn't all good news as Fringe benefits tax (FBT) may apply based on the type of benefit provided.  Employers can generally claim a tax deduction for the benefits and related tax payable, but at 47% tax, this is not the best outcome for everybody.
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Tax is payable because the benefits are a different form of payment by an employer instead of salary and wages. The tax is calculated on the taxable value of the benefit, which reflects the grossed-up salary the employee would have had to earn to pay for the benefits from post-tax earnings.  

Types of Benefits 
There are many different types of fringe benefits employers may provide to employees. These include: 

• Vehicle owned by the business provided for private use 
• Vehicle lease arrangements 

• Car parking 
• Entertainment, such as golf club membership or tickets to major events 
• Expense payments, such as credit cards or health insurance 
• Other types include debt waiver, loans from the employer at low or no interest, living away from home allowance, or property benefits. 

Some benefits provided to employees don't attract FBT. If you pay for expenses that an employee would otherwise have been able to claim as a work-related tax deduction, FBT won't apply. For example, if you pay for employees to attend a professional development course, there won't be any FBT liability on this benefit. COVID-19 tests required for employment are also exempt from FBT. 

Amounts below $300 (inclusive of GST) spent on employees on an infrequent basis, are not subject to FBT. Tax deductibility may depend on the expense. For example, entertainment expenditure (meals, movie tickets, sporting events, airline tickets) would be non-tax deductible. However, gifts such as hampers, gift vouchers and bottles of alcohol will be tax deductible. 

FBT Administration 
The fringe benefits tax year runs from 1 April to 31 March. You must then include the reportable amount for each employee on their Single Touch Payroll finalisation by 14 July, so it flows through to their annual income statement. 

As with all business transactions, keeping accurate records is essential to determining whether FBT applies and how much needs to be included on the employee's income statement, if any. 

There are two methods to calculating the FBT on benefits: 

1. Actual Method (the default method) is where the employer pays FBT on all taxable meal entertainment provided to employees and their associates (no election is necessary). Entertainment expenditure on customers, contractors or suppliers is not subject to FBT, but is not tax deductible. 

1. The 50:50 method. This is where the employer pays FBT on 50% of all meal entertainment including employees AND contractors, customers, suppliers etc. Regardless of the cost. This method allows 50% as a tax deduction (as FBT is paid) and 50% is nontax-deductible. The employer must make an election to use this method.  

If you're interested in seeing how fringe benefits might apply to your business, talk to us about FBT registration and administration. We can advise on the types of benefits available; how much tax is payable or how to reduce the FBT liability. We'll also get your bookkeeping software set up to make record keeping easy. 

FBT on the Christmas party and gifts    
Christmas is an opportunity for employers to say ‘thank you’ to the team for a job well done, and to celebrate the wins. Unfortunately, Christmas expenditure can attract the interest of the taxman!  
Let’s take the information above and work it into a non-FBT Christmas function example; 
When booking a restaurant, or similar, ensure the cost per employee and their associate (e.g. spouse) is less than $300. You can also give them a non-entertainment gift such as a voucher, hamper or a bottle of wine. The gift must also be less than the $300 and not something you do often, making it an infrequent gift. 

If you have any questions about FBT and how it may affect your business, please don't hesitate to contact us.

On 25 October 2022, the Federal Government handed out its first budget. It was aimed at relieving the cost-of-living pressures, specifically at reducing the inflationary pressures.

Whether you’re refilling the petrol tank or paying at the supermarket checkout, the higher cost of living is hitting every household hard. 

Across the world, everyday essentials are surging in price, up 7.2% year on year across the OECD. Unfortunately, experts predict that prices will keep rising for at least the rest of the year, and into 2023. 

What can you do to try to keep up with the increasing cost of living? 
Here are our 12 top tips:

Look for ways to earn more 

• Grow your business’ profitability (talk to us about improving your profits) or ask for a pay rise. 

• Take in a boarder or flatmate. 
• Sell your unwanted items online. 

Cut back where you can 

• Prepare more meals at home and spend less at cafés and restaurants. 

• Create a budget and keep your spending under control. 
• Reduce the amount of meat you buy. 
• Find ways to use your car less. 
• Pay out and cancel your credit card(s) and any ‘buy now pay later’ accounts. 
• Review your ongoing expenses like utilities, insurance and subscriptions – cancel or switch providers to get better deals. 

Invest in your future 

• Think about investing in ways that are likely to outperform inflation – both shares and the property market have historically provided returns higher than inflation. 
• Start a new business, launch a new product or service, or try a side hustle. 
• Teach yourself about money and finances using free tools online and books from the library. Better money management will help you make the most of what you’ve got. 

If prices rise by 7% this year, it won’t be easy to increase your income by the same amount. But if you can increase your income by 5%, then make up the rest through savings while also investing for the future, you can still come out on top once inflation settles down and prices stabilise. 

Worried about money? Talk to us.
We have years of experience through many economic cycles, including previous periods of high inflation – and we’re always here to help.

A capital gain (or loss) occurs when an asset is sold. The difference between the purchase price and the sale price is the gain or loss. Capital gains tax (CGT) applies to money you have made from selling an eligible asset.

Capital gains tax events occur when an asset is sold, or other triggers arise, such as the loss, theft, or destruction of an asset, or creating contractual or other rights to an asset.

Not all assets are subject to CGT. Common exemptions include the main residence or family home, granny flats, cars and motorcycles, personal use assets such as boats, furniture, household items or loans to family and friends. Many types of lump sum payments are also not subject to CGT, and business sales may also be exempt depending on the circumstances.

Most property is subject to CGT, including land, commercial premises, rental properties, holiday houses and hobby farms. CGT also applies to shares, investments, cryptocurrency, many collectables, foreign currency and intangible assets.

Visit the ATO list of CGT assets and exemptions here.

There are special rules for some specific situations, for example, inheriting assets, relationship breakdown, foreign residents, insurance or compensation payments.