You’ve thrown the company Christmas party and given appropriate benefits to employees; the holly-jolly holiday season is over and it’s time to get back to business! But before you go full steam ahead with turning over a new year of sales – remember, the Fringe Benefits Tax (FBT) year is quickly coming to a close – so you need some punch some numbers for that declaration now, before it’s too late.
If you’re knee-deep in FBT expense receipts, then I have a life-line for you – just take a moment to review some important information below on how and when to claim them.
For those who want to get a bit clearer on what FBT actually is, be sure to read my explanation about FBT here before you continue on.
The FBT Year
It seems the ATO likes to keep FBT complicated for us, and to ensure it stays as confusing as possible – they not only change the yearly rate from time to time – but they’ve set the time frame for claims in a completely different period to the standard financial tax year (1 July to 30 June) – crazy, eh?
To be clear, the Fringe Benefits Tax year runs from 1 April to 31 March, which means if you’re reading this article at the time of publishing (February 2015), you don’t have a whole lot of time up your sleeve to make sense of its complexities, calculate and get your claim in.
I must warn you, assessing and calculating FBT isn’t something I suggest you do on your own, unless you’re an experienced Chartered Accountant yourself. But for those of you who are game enough to try – here is some vital information and tips on getting the job done.
The first thing you need to work out is the ‘gross-up’ rate – what is the taxable value of the benefits you provided to your employees’ gross salary, at the highest tax rate? Again, just to make it a little more complex, the ATO have two gross-up rates for calculation:
Type 1: Higher gross-up rate
Also known as GST-creditable benefits, you only use type 1 if and when you’ve paid GST on a benefit and you’re entitled to receive a GST credit back for GST paid. The gross-up rate for this type: 2.0802.
Type 2: Lower gross-up rate
This one’s a bit easier, as it’s the rate you use when there’s not GST credit entitlement to claim. Today’s Type 2 gross up rate is at 1.8868.
Oh, and for the FBT year ending 31 March 2015, the rate is 47% (which is 0.5% higher than last year). So you multiply the fringe benefits taxable amount by this rate.
5 Steps to Claiming
Have your paperwork, a calculator, and a good strong drink handy? Okay, let’s get to it!
1. Calculate the FBT benefit for each employee.
2. Figure out those benefits for which you can claim a GST credit – and work out the gross-up rate amounts.
3. Move onto the benefits where you can’t claim a GST credit – then work out the appropriate gross-up rate totals for those.
4. Combine the total gross-up amounts from both the GST-creditable benefits, and non-creditable benefits – and that’s your FBT amount.
5. Multiply that FBT amount by the current rate, which is 47% as of today. This is the total you’ll need to pay.
There’s no need to be confused.
As I said before, unless you’re and accountant or well versed in FBT claiming, there’s no need to be concerned about getting this important part of your tax paperwork done.
Simply ring me or my team on 1300 135 918 and we’ll will be able to help get everything done in time for the FBT year end.