WHAT ARE REPORTABLE FRINGE BENEFITS IN AUSTRALIA?
Fringe benefits is a term that you may have often heard of but never put much of your attention to up until it is tax season. Entrepreneurs in Brisbane and other parts of Australia are accountable for the tax applications on fringe benefits such as compensation and retirement plans that their workforce are enjoying.
Having a great bookkeeper by your side can help make sure aware of your tax responsibilities. But if you are a start-up entrepreneur and do not have any knowledge of these workforce benefits, then it is vital for you to become familiar with all the information you will need regarding this matter. So, without further ado, here are a few of the essential facts that you need to know about fringe benefits as an employer.
DEFINING FRINGE BENEFITS
Apart from salaries and wages, ‘Fringe Benefits’, from the name itself, are extra incentives provided to employees by their employers. These incentives can be a lot of things like health insurance, commuter benefits, company cars, paid holidays and more. These benefits are provided in recognition of the employment. This include reimbursing the employee for going to meet with a potential or business client to a distant location.
There are employers that provide additional incentives instead of giving the employee a salary increases, after, of course, the employee agrees to give up. The advantage of this is that the employee is able to lessen their taxable income, which is especially advantageous for a worker with high taxable income.
Every employer is required to pay Fringe Benefits Tax or FBT and it does not depend on the type of business owned by an entrepreneur in Brisbane. One of the best effects of fringe benefits is that they are good at encouraging and motivating the business’ workforce to provide a better performance. It also reaches the satisfaction and contentment of the employees; thus, they choose to stay with the company for longer period of time. Thereby decreasing the rate of attrition in a company.
Benefits such as shopping store discounts, free concert or movie tickets or free monthly groceries can also help make a business a highly appreciated workplace and will most likely gather high ratings from its previous and present workers.
THE POPULAR FRINGE BENEFITS PROVIDED BY BUSINESSES
A lot of times, business owners in Brisbane are unaware that they have already been giving fringe benefits to their employees. An experienced bookkeeper in Brisbane will be able to identify these incentives for an employer since they are taxable. Regardless, for your benefit, we have listed a bunch of fringe benefits.
- Company vehicles provided to staff members for private and business use
- Payment of an employee’s debt
- Obtaining loans with reduced interest rates in Brisbane
- Living allowance for employees who are working far from their home
- Food and drinks provisions
- Providing entertainment
- Worker’s non-business expenditures payment
- Providing house in Brisbane for employee to live in
- Arranging a salary package for workers
- Discounts at grocery or shopping stores
REPORTABLE FRINGE BENEFITS
If you have a bookkeeper beside you, he or she can work on all the reportable incentives in Brisbane. Still, it is essential for an entrepreneur to know the terms as well as their importance. Once the total fringe benefit is greater than 2000 AUD in 1st April to 31st March Fringe Benefits Tax year, the business owner is required to account the grossed-up taxable cost of the benefits.
This needs to be stated on the Single Touch Payroll or summary of payment for the related fiscal year, which covers from July 1st to June 30th. The reportable incentives are allocated to each specific employee and comprises the fringe benefits provided to the associates of the employer.
The total sum that is reported on the revenue statement or summary of payment in myGov should not be included in the calculable revenue of the employee. In addition, it will not affect the payable amount as basic Medicare tax in Brisbane.
Contrastingly, it plays a role in the government benefits and responsibilities’ income tests. A bookkeeper will allocate the shares to each related worker accordingly in the event that the employees shared incentives.
REDUCING LIABILITIES ON FRINGE BENEFIT TAX
When it comes to effectively making deductions on tax liabilities that goes with fringe benefit tax of different companies, a bookkeeping company in Brisbane can provide you with the best assistance. Then will even provide you with various suggestions that you can use in reducing liabilities. Here they are:
- Offer Incentives to Employees which are Exempted from Tax
One of the most efficient way an employer in Brisbane can reduce the FBT by offering benefits to your employees, which can be exempted from tax. For example: you can offer clothing and smart phones to your employees, these are among the incentives that cannot be taxed.
Furthermore, there are some entrepreneurs who give their employees the right to purchase shares, which are not be technically considered fringe benefits, as long as it is compliant with the requirements of revenue tax.
- Providing Cash Salary rather than Incentives
Most bookkeepers in Brisbane would offer additional cash as wages to their workers rather than providing additional benefits. This way, the entrepreneur is not accountable to Fringe Benefits Tax. The responsibility for paying taxes will fall on the employee, since it will be added to their income tax. Therefore, the entrepreneur will not be liable to pay for PBT
- Offer Tax-Deductible Incentives
An entrepreneur will not be responsible for paying for FBT in the event that he or she paid for the expenditure that the worker can claim as revenue tax deduction.
- Asking Employee to Contribute
A bookkeeper commonly suggests for a businessowner to ask their workers to pay for a portion of the incentives in order to get out of paying the entire FBT. Cash payments collected from the employees to receive fringe benefits are known as employee contributions.
Nevertheless, it is important to know that the services rendered by workers cannot be considered as employee contribution for the Fringe Benefits Tax. The contribution is only legitimate if it was made through the deducted tax revenue of the worker in Brisbane.
THINGS THAT CANNOT BE LABELED AS FRINGE BENEFITS
It is the obligation of an employer in Brisbane to provide an assortment of allowances to their employees. But not all of these can be identified as fringe benefits. Here is a list of excluded in the additional incentives:
Salaries and Wages
This is defined as the payments made to employees for their rendered services. As such these cannot be included to Fringe Benefits Tax.
This is the contribution made by an employee for super fund. It is also a contribution made for the employee’s retirement plan. As such it is not subjected to FBT. A bookkeeping company in Brisbane can help in determining payments that can be subjected to taxes including super fund payment made for an associate of the worker.
These are payments made for when the contract or service of a worker is terminated. Such payment is not considered as a fringe benefit. This also includes paying the final payment made to a retiring employee.
Fringe Benefits Tax is important not just the purpose of tax report, but also for boosting the morale of your employees. However, it is important to get the services of a bookkeeper in Brisbane to ensure that your business is compliant with the regulations of reportable fringe benefits. Therefore, make sure to bear in mind the pointers that we have mentioned in this article during tax season.