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Work drinks as tax deducation

Fringe Benefits Tax – Do I provide employee benefits?

Fringe Benefit Tax (FBT) – where do we start? Yep – it’s approaching that time of year where an annual review of your business’s benefits is undertaken. A return is lodged or most commonly “we don’t provide any benefits to our employees” is the main point of action.

As we harp on every year…..EVERY BUSINESS PROVIDES BENEFITS in some form or another! Given the time consumption/complexity/can’t be arsed approach we are led to not even lodging a return in some instances. All employers should be lodging an FBT return, even if it is a nil return. Another annual echo from the Connolly accounting team!

We would like to provide a brief overview of the most common benefits provided (albeit not the only benefits).

Entertainment and gifts to employees and their associates

We will begin with the minefield of all taxes…..gifts and entertainment! I will save the waffle and illustrate it via the tables below:

Meal Entertainment*

AmountIncome TaxGST CreditFBT
Under $300 per headNon-deductibleNoNo
Over $300 per headDeductibleYesYes
Provided to clientsNon-deductibleNoNo

work celebrations as tax deducation *What constitutes meal entertainment? Social situations and rewards generally lean towards meal entertainment. The more substantial the meal (3-course meal) and if alcohol is provided would tip the scales towards meal entertainment. Light lunches, overtime meals and morning teas would be more sustenance (tax-deductible and GST applicable).

Entertainment gifts such as tickets to a musical, theatre, film, sporting events or a holiday:

AmountIncome TaxGST CreditFBT
Under $300 per headNon-deductibleNoNo
Over $300 per headDeductibleYesYes
Provided to clientsNon-deductibleNoNo


Non-entertainment gifts include skincare, beauty products, flowers, wine, perfume, gift cards and hampers:

AmountIncome TaxGST CreditFBT
Under $300 per headDeductibleYesNo
Over $300 per headDeductibleYesYes
Provided to clientsDeductibleYesNo


Private use of commercial motor vehicles

work vehicle tax deductions It is very common to supply a work ute/van to an employee with minor private use. The minor private use of work utes/vans is generally exempt as they are provided for work purposes.

In our blog last year “Fringe Benefits Tax, What To Look Out For“, we highlighted a recent ATO practical guideline (PCG 2018/3 should you need some bedtime reading) to base “minor private use” around, as follows:

  • No private journey exceeding 1,000kms for the year in total
  • No private journey that adds a 2km diversion from work to home
  • No private return journey that exceeding 200kms.

This is merely a guide as there were years of uncertainty around “minor private use.” We highly recommend reviewing the private use by employees (including directors/business owners).

We also recommend keeping sufficient logbooks to be able to substantiate private/business usage. These need to be detailed logbooks reflecting odometer readings, description, and the purpose of each journey.

Car parking

Small businesses that provide car parking (not in a commercial car park) to employees with turnover below $10 million are off the hook, they are exempt from car parking fringe benefits.

Should you be a business with a turnover of more than $10 million, with a commercial car park within a 1km radius of the premises charging $9.15 (2021 rate), a potential car parking fringe benefit will arise.

Should your turnover be more than $10 million and supplying car parking benefits to employees, we recommend a review of any FBT exposure.


What next? We recommend a review of all benefits to employees and associates, in particular the ones mentioned above being the most common.

As always, we invite you to contact our business accounting team should you have any concerns.

 

 

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