Advivo Business Advisors and Accountants share some strategies you can use to reduce your FBT
Fringe benefits tax (FBT) is separate from income tax and is imposed only on employers. It is applied to the value of non-cash benefits provided by an employer that are paid in place of wages or salary to an employee or their associates. The following strategies can reduce the FBT you pay:
1. Ask employees to contribute towards the cost of a company’s fringe benefit.
This can be a one-off payment or can be routinely set up. If the company is going to pay for personal expenses frequently, employee contributions or loan offset strategies should be routinely set up. Most payroll systems will be able to do this and help business owners to manage their cash flow and tax obligations better.
2. Provide employees with a cash bonus instead of a fringe benefit.
This would cause the tax liability to fall with the employee as opposed to you as an employer. Another option that could save the employee tax on their cash bonuses would be if they were to salary sacrifice all or part of it into their superannuation fund. Note, however, this could mean less cash available for the employee to make payments towards whatever the reason was for the fringe benefit in the first instance.
3. Where possible, limit the private use of company assets (including cars and commercial uses).
- Commercial Vehicles – We suggest that the company has a clear policy stating that commercial vehicles are not to be used for any purpose apart from work-related use and travelling to and from work.
- Cars – We suggest the same policy mentioned above be used. Travel to and from work is considered private use for cars. This can often result in a low logbook business use %. Logbooks allow you to choose between two methods to see which provides the best result for the situation.
4. You can reduce FBT proportionately by the number of days in the FBT year for which the asset was NOT available for private use.
For example, a car will not be considered ‘available’ for private use if it is garaged at a workplace that is a different location from your residence. This could result in the logbook having a high business use %
Please note that if your company provides an employee with a benefit that they would otherwise have been able to claim as a tax deduction, you may not be liable for FBT.
If you would like to discuss your own FBT and shareholder/director loan minimisation strategies for your business we’d love to hear from you. Please contact us today to speak to our team of experienced business advisors and accountants.