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Changes to Working from Home Tax Deductions3 March 2023
As another Fringe Benefits Tax (FBT) year-end approaches, businesses with employees must review the fringe benefits offered to their staff between 1st April 2021 and 31st March 2022.
Work benefits provided by an employer are taxable and must be included in the employee’s adjusted taxable income unless expressly excluded by law.
Common types of benefits are:
- Cars and car parking
- Gym memberships
- Entertainment (e.g. Melbourne Cup and team functions)
- Payment of private expenses (e.g. insurance, gifts over $300)
- Bonuses – That haven’t been recorded through payroll
According to the ATO (Australian Taxation Office), FBT can apply even in scenarios where the benefits are provided by any third party working with the employer and are payable for the FBT year running from 1st April – 31st March.
Although some benefits are exempt from FBT, such as:
- Minor gifts that cost below $300
- Portable devices necessary for employees to perform their jobs (e.g. laptops, software, work phones)
- Vehicles for work use (private use must be minor)
But, as an employer, how do you know precisely what constitutes reportable fringe benefits?
What is a Reportable Fringe Benefits Amount (RFBA)?
If the total taxable value of the fringe benefits provided in an FBT year exceeds $2,000, employees should have a reportable fringe benefits amount in their end-of-financial-year income statement (formerly called a payment summary). Some fringe benefits, like meals and employer-provided car parking, aren’t included in the reportable amount.
While an RFBA isn’t deemed taxable income, depending on personal circumstances, it will be used to determine whether the employee is entitled to or liable for several benefits and obligations. These include Family Tax Benefits, Medicare levy surcharge, private health insurance rebate, child support payments, superannuation co-contributions, Higher Education Loan Program (HELP), tax offsets, and Financial Supplement repayments.
Reducing your FBT liability
Employers can claim an income tax deduction for the cost of the benefits provided and the FBT they pay. You may reduce your FBT liability by:
- Providing cash salary instead of fringe benefits
- Providing benefits that are income tax-deductible
- Providing benefits that are exempt from FBT
- Using employee contributions or salary packaging
Often, fringe benefits are offered to employees through salary sacrifice as part of a salary packaging arrangement. Depending on personal circumstances, this might push them down into a lower tax bracket – a great plus if they’re a higher income earner.
Examples of taxable fringe benefits
- Non-deductable Tuition
- Car and parking expenses
- Employee discounts
- Accommodation and food
- Loans and debt waivers
- Accident and health benefits
- Athletic/Gym facilities
- Borrowing of employer’s equipment (e.g. camera, tools)
- Home mortgage expenses
We understand the end of March can be a busy time for many businesses as we head into tax season. So be sure to look at how you can maximise the benefits provided and reduce liabilities before the end of the FBT year (EOFBTY) to avoid any last-minute panic on 31 March.
Contact one of our experts at 1300 826 494 or email us at firstname.lastname@example.org.