Advice Budgeting Business Strategy Tax

Business Tax: A Quick Guide For Support Workers

14/10/2022

As an independent support worker, managing your tax can sometimes be confusing. That’s why we’ve prepared this simple guide to help you understand your GST obligations, work allowances and the expenses you can claim as deductions, so you are not paying more tax than you need to.

If you’re a participant or nominated representative under the National Disability Insurance Scheme (NDIS), your NDIS payments are tax-free. Any expenses you incur cannot be claimed as deductions if you are not required to pay tax.

Do I need to register for GST?

You don’t need to be registered for GST because you are a support worker. However, you will likely be required to register for GST if you earn over $75,000 per annum.

You are not permitted to charge GST unless you are registered for GST. Once you register, you will need to include 10% GST on applicable services.

You must also submit a quarterly BAS (Business Activity Statement).

Under the NDIS scheme, certain supports and services provided to NDIS participants are exempt from GST, which means that you do not need to collect the additional 10% GST for specific services.

It can be a little confusing, so to make sure you are meeting your tax obligations and correctly collecting GST, it is best to have a chat to help you get started.

You can also find more information about GST requirements under the NDIS on the Australian Taxation Office website.

Work Allowances for Independent Support Workers

When preparing your tax return, you must include all the income earned in the financial year. This includes your salary and any allowances your employer has paid you.

Allowances may include payments for car expenses, clothing and laundry. You may also receive travel or overtime meal allowances received under industrial law, award or agreement, which can be seen on your payslip.

If you are a Sole Trader, you must keep records of any expenses, such as travel you undertake as part of your services.

Expenses You Can Claim

Firstly, to claim tax deductions as an independent support worker, you must:

  • If you are an employee, ensure your employer didn’t reimburse you for the expense
  • Keep a record of any expenses you want to claim. E.g. receipts or invoices
    • The ATO has a free app to help you keep track of your records
    • If you are a Sole Trader, platforms such as Xero and MYOB can help you keep track of your expenses
  • If you are using personal items, such as a phone, for your job, you can only claim the work-related part of your expense
    • For mobile phone usage, you cannot include personal time spent on your phone

The following expenses may be claimed as tax deductions for independent support workers:

Work Clothing

If you have clothing that is solely used for work purposes, you may be able to claim deductions on the following:

  • Protective clothing such as gloves, shoes, scrubs and masks
  • Compulsory uniforms that are specified in your employer’s uniform policy

Work Equipment

If you rely on various equipment in your work as a disability support worker, these tax deductions may apply:

  • Buying and repairing equipment you use at work (including medical equipment, computers, and mobile phones)
  • Any materials or supplies that you buy for use at work, e.g. art equipment, sunscreen, face masks and hand sanitiser, learning equipment such as sensory toys
  • Stationery, including diaries, work bags or briefcases

Training and Education

If you pay for any courses or training to help increase your knowledge or skills, these tax deductions may apply:

  • Short training courses such as First Aid & CPR certifications
  • Tertiary-level courses such as a Nursing degree or Certificate IV in Community Services, Disability or Aged Care (not including HECS/HELP)
  • The cost of books, stationery, equipment, internet and travel required for your course or training
  • Any accommodation you have to pay for to complete a course, e.g. if you live in a regional area and have to stay overnight

Travel

The cost of travelling between your home and place of employment is usually considered private and cannot be claimed as a deduction. However, you may be able to claim the following travel expenses:

  • The transport of clients during your shift, e.g. to doctors’ appointments or client activities such as the shopping centre or cinema
  • Any parking, tolls or public transport you pay for during this time
  • Travelling from one workplace to another, e.g. from one client to another or a second job
  • Travelling from your home to an alternative workplace, e.g. attending a training course or meeting at a different location than your typical workplace

Meals and Entertainment

In the course of your work, you make need to purchase food and drink or other non-cash entertainment such as movie tickets for you and/or your client.

This is categorised as entertainment for tax purposes. Entertainment expenses are a complex area of your tax return, especially for sole traders who typically don’t have an allowance or expense account for such purchases.

It’s important to understand that the provision of entertainment is a benefit subject to Fringe Benefits Tax (FBT).

Some entertainment costs are not tax-deductible, and GST input tax credits cannot be claimed, depending on how the business values these benefits.

It is always a good idea to discuss with us what you can claim as entertainment, so you know what is and is not a claimable expense.

Other Work-Related Expenses Disability Support Workers May Claim:

  • The cost of annual memberships or union fees
  • The cost of work-related telephone calls and internet connection fees
  • The cost of work related to books, magazines and journals
  • The cost of any checks you may need, such as a National Police Check, NDIS Worker Screening Check and Working with Children Checks

Lastly, did you know your tax agent fees are also 100% claimable as a deduction? As Tax Accountants and NDIS Plan Managers, we understand the challenges of managing your expenses as a support worker and offer expert advice to minimise your tax bill and maximise your refund.

Book your appointment today so you can relax and get back to providing care to your clients, knowing that you won’t be paying more than you need to at tax time.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Budgeting Business Strategy Tax

What Small Business Expenses Are Tax Deductible?

27/09/2022

We have all heard the saying that you have to spend money to make money. Simply put, there are costs involved in running a business, and these costs are called your business expenses. You can claim these work-related expenses as a tax deduction.

Like with a personal tax return, what you claim lowers your taxable income. It isn’t a refund of the money you have spent on your business.

The ATO has guidelines about what can be claimed as a business expense. So it is essential to understand what you can and can’t claim to make sure you are not paying more tax than you need to.

Some business expenses are straightforward, such as the rent on your commercial space. But some expenses aren’t quite as simple to calculate; for instance if you rent a 2-bedroom apartment and the second room is a dedicated work-from-home office, can you claim your rent as a business expense?

Types of Business Expenses

Let’s start by understanding the various business expenses you may incur. To take full advantage of these tax offsets and lower your tax liability, you must account for all the business expenses incurred by your business.

To support small businesses, there are other incentives that can also help you to lower your taxable income. Some of these can be short-term such as the Small Business Technology Investment Boost applies to expenditure incurred between 29 March 2022 until 30 June 2023. This boost allows you to claim 120% “of the cost incurred on business expenses that support their digital adoption”. That is, if you spend $10,000 on eligible portable payment devices, cyber security systems or subscriptions to cloud-based services, the boost allows you to claim $12,000 on your 22/23 tax return.

We often discuss expenses in the context of cash flow, income, profit and loss. However, understanding your expenses and accurately recording them for your tax can not only save time and headaches when it comes to your tax return. It can directly influence your bottom line if you are not correctly claiming the tax offsets for which you are eligible.

Start-up Expenses

Depending on your business type, you may have an initial outlay (capital) you need to spend to get started. For example, you may require equipment, tools, a new computer or even a website.

These start-up expenses are typically upfront costs. You may be able to claim a deduction for the costs associated with setting up a business or raising finance, such as:

  • Establishing a company or other business structure
  • Converting your business structure to a different structure
  • Raising equity for your business
  • Defending your business against a takeover
  • Unsuccessfully attempting a takeover

For the expenses in the above list, you can claim a deduction amortised over a five-year period (that is, 20% in the year you incur them and in each of the following four years).

It can be costly to start a business, and it is recommended to have a business plan in place so you have a clear idea of when you will incur a profit from your company. These initial expenses are all tax deductible, but they are still expenses you incur.

If you are considering starting a business, you can book a review with me to look at the best strategy to minimise your tax obligations and the incentives you may be eligible for.

Operating Expenses

Your ongoing operating costs, including stationery, IT and other software you use for business purposes and marketing, such as your website and Newsletters, can all be claimed as taxable expenses.

If you have taken out a business loan, you may be able to claim interest expenses as tax deductions. On the other hand, if you have a business account that accrues interest, you may have to declare the interest as a taxable income.

With much of the workforce working from home or having a flexible work option, the line between a business and personal expense can become blurred, especially if you are running your business from home.

If you need to pay utilities such as electricity and gas for commercial premises, these are tax deductible expenses. However, personal expenses are not tax deductible. If you work from home and use your internet for both personal and business, you will need to determine how much of the shared resources are used for business and how much for personal. If 50% of internet usage is estimated to be business, 50% of your internet bill could be claimed as a business expense. However, if you claim the work-from-home allowance as a Sole Trader, there may be other considerations.

If you are renting an apartment with an extra room specifically for your home office, then perhaps 30% of the floor area is exclusively for business purposes. You may be entitled to claim 30% of your rent as a business expense. Where you are unsure what you can claim, it is worth chatting to us to ensure that you are not paying more tax than you need to but are not making any errors that could result in a bill from the tax office.

In some instances, there are different methods for calculating your tax offset, and we can work out which way is the best for your business.

Capital Expenses

Finally, you are allowed to claim depreciation on certain capital expenses and capital works. Capital works used to produce income, including buildings and structural improvements, are written off over a more extended period than other depreciating assets.

A depreciating asset has a limited effective life and can reasonably be expected to decline in value over the time it’s used. For example, a machine purchased to upgrade your output or services would likely be a depreciating asset.

How Do Business Expenses Impact or Reduce Taxes?

Tax deductions reduce taxable income, which is the balance of your income minus expenses.

For example, you are a Sole Trader and your income for the financial year is $100,000. Your tax bracket for the 22/23 financial year would mean your tax rate is 32.5%. The tax on your income is $22,967.

However, you have had a number of expenses, such as tools you needed to purchase as you started your business this year. Once you account for your expenses, your taxable income is $45,000.

This not only brings down the portion of the income you can be taxed on, but it also changes your tax bracket to 19.0%. The tax on your taxable income in this example is $5,092.

Knowing what you can deduct and making sure you are keeping sufficient records to make your tax claims is crucial in minimising your taxable income.

Records you need to keep for deductions

You must keep receipts and invoices for any tax deductions you claim. Records are written evidence of your income or expenses in paper or electronic form. In most cases, you must keep records for five years from the date you lodge your tax return.

If you claim a deduction, you must have records to show how you work out your claims. Records are usually a receipt from the supplier of the goods or services. A receipt must show the following:

  • Name of the supplier
  • Amount of the expense
  • Nature of the goods or services
  • Date the cost was paid
  • Date of the document

Tracking Business Expenses With Software

There are several different software options to help you track your business expenses and income. When set up correctly, they can help streamline your business so that you have a comprehensive understanding of your actual cash position, as well as your profit and loss.

They can also help you make sure you don’t miss any important deductions, store your records appropriately, and categorise your expenses correctly, so you are not paying more tax than you are required to.

What Are Business Expense Categories?

Businesses generate a range of expenses that can be challenging without consistent bookkeeping. Most software solutions will allow you to categorise the costs, so you can easily see the areas you spend money. By understanding your expenses, you ensure you are not paying for expenses you don’t need.

Having expense categories can:

  • Provide insight into what, where, and why money is spent
  • Enable data-driven decisions around budgeting and cost optimisations
  • Provide a bird’s eye view of spending across different expense categories

Another reason you need to organise your business expenses is to determine your tax deductions. Knowing which class each expense falls into lets you take advantage of applicable deductions.

Please book an appointment with me if you would like any assistance with your tax, setting up your software, or training to get the most out of your bookkeeping software.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Budgeting Business Education Strategy Tax

Contractors, Employees and Your Cash Flow

17/08/2022

As a small business owner, getting the support you need can be hard work. Understanding what tasks can be outsourced, the time required to interview and bring on new staff, not to mention the time needed to train and hand over processes.

All whilst you are trying to get the actual work done! Once you find the time to map out what support you need and what tasks can be outsourced, understanding the finances around expanding your team is an entirely new labyrinth to navigate, especially for those transitioning from a Sole Trader to engaging your first team member.

Know Your Finances

You may have the workload to bring someone on board, but do you have the budget? Having an accounting program set up and used correctly can help you understand your actual financial position.

We can help set you up with a suitable system to track your finances.

Streamline and Stay On Track

Accounting Software can save you headaches by streamlining tasks such as tracking Super and Payroll tax obligations automatically.

They often can be integrated with online timesheet options or, better yet, have the functionality built-in to streamline tracking your staff time.

For those who work on client projects, you can even set them up to review the cash flow on each project, so you have real-time clarity around:

  • How much are you paying staff and suppliers vs how much are your clients paying you for a project
  • If you are keeping to your budget
  • Which types of jobs consistently go over?

The software can help you understand what is working and what is not, all in real-time, which gives you certainty about where you can afford to bring on help and where it might not be feasible.

Contractor vs Employee: Payment, taxation and benefits

There are key differences between contractors and employees, which is important to understand so you can hire the correct type of support for your business. The ATO has a decision tool to help you understand which is the right fit for your business.

What is an employee?

An employee is generally someone you engage to work within your business. All employees in Australia are covered by Fair Work, and as an Employer, you are responsible for understanding your legal obligations when offering someone employment. When you hire an Employee, you may be required to withhold PAYG and pay Super and Payroll Tax. You will most likely need WorkCover as well.

What is an independent contractor?

Contractors you engage directly will generally have a specified task or project to complete. This gives parameters around the timeframe and cost before starting.

They are typically project-based or task-based work.

In some cases, you may need to pay independent contractors Super; however, as they are not employees, you typically would not be required to pay PAYG or Payroll Tax.

If you hire contractors via an outsourcing company, their role may be like an in-house employee, but you pay the organisation and not the staff directly.

Extra Fees When You Grow

You may also incur other fees when you bring on new staff or independent contractors, it could be as simple as hosting a new email address, or a new staff member could require a significant investment in vehicles and tools.

Don’t Get Caught In a Bidding Frenzy

When the market becomes competitive for acquiring new staff, having a strategy behind what assistance you need and what you can afford can make all the difference. If not, then you might find your business model isn’t viable.

Understanding what you can outsource and your financial position can help you to evaluate the feasibility of your options to acquire staff.

Offer More Than Just A Pay Check

Many small businesses that can’t compete with the salaries of bigger organisations may have a competitive edge in offering flexibility and other non-monetary incentives to staff. These could range from RDOs, work-from-home options, and upskilling programs. These types of incentives for employees may help to capture your quality long-term staff.

If you are thinking it is time to grow your business, book a chat with our team. We can review your finances and help you walk through your cash flow so you can understand the feasibility of growing your team.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Education Personal Strategy Tax

Top Tips For Tax Time

25/05/2022

Let’s face it; no one likes tax time. Whether you are doing your personal or business tax, submitting the paperwork is something many procrastinate doing.

When it comes to Tax time, it pays to be organised! Most taxpayers will be expecting a refund, so getting your paperwork in order means you don’t miss or forget any expenses from the year, and everything you need is on hand to take the hassle out of your tax time.

Find All Your Documents

Saving everything to one place means it is there when you need it. You likely already have an accounts file for business expenses if you run a business. We don’t always consider doing this for our personal account keeping, but it does make tax time easier.

You might have receipts for tools and clothing in either physical or electronic form; saving them all to a file on your computer can make things easier, especially if you have a few email accounts!

Without accurate records, you may miss expenses which you can claim. When it comes to claiming deductions on your income, a good rule to follow is if you are going to claim it, you need to prove it.

Some other documents you may have an area:

  • Previous years’ tax return
  • Records of sale or purchase of any shares, business or property
  • Private Health Insurance Details
  • Spouse details
  • Income statement from work, rental properties, interest, dividends, cryptocurrencies and foreign income
  • Expense records such as receipts for work-related expenses, donations, applicable self-education, and any costs incurred for managing your tax affairs – such as an accountant preparing your tax
Create a List of Work-Related Expenses

Every profession has tools of the trade; some are physical tools, and others might be software subscriptions. Eligible work-related expenses may include car expenses, uniforms, mobile phone bills, and union fees. If something you require to do your job or that helps you do a better job is not reimbursed by your employer, you may be eligible to claim it as a work expense.

Once you have your list, make sure you have documents to support your claim.

Working At Home Expenses

With lock-downs and hybrid working arrangements on the rise, what you can claim as a work from home expense can be pretty confusing. Everyone’s circumstances are different, and a good accountant can walk you through the expenses you are eligible to claim.

In general, you can claim a deduction for the additional expenses you acquire due to working from home. These are called running expenses and relate to the use of facilities within your home and include:

  • Electricity expenses for heating or cooling and lighting
  • Decline in value of office furniture and furnishings as well other items used for work – for example, a laptop
  • Internet expenses
  • Phone expenses

As an employee working from home, generally:

  • you can’t claim occupancy expenses
  • there will be no capital gains tax (CGT) implications for your home.

In certain circumstances, you may also be entitled to claim occupancy expenses. The ATO refers to expenses you pay to own, rent or use your home as occupancy expenses. They include:

  • Mortgage interest
  • Rent
  • Council and water rates
  • Land taxes
  • House insurance premiums

If you are entitled to claim occupancy expenses, you may be taxed on any Capital Gains should you sell the property.

What To Send Your Accountant

If you are using an accountant to assist with your tax lodgement, they will need your list of documents and to supply:

  • Identification
    • Such as your driver’s license or passport
  • Bank account details
    • For your refund
  • Medicare card or number
  • Private health insurance information
  • Spouse details
    • Including details of their income

Understanding what you are eligible to claim can be confusing, primarily if you work remotely or have multiple income streams. If you are a business owner, sometimes it’s not clear what is a business expense and what is a personal expense.

We are here to help. Talk to our team about taking the stress out of tax time!

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Business Strategy Tax

What is PAYG?

24/04/2022

PAYG refers to the ‘Pay As You Go’ tax system and describes two different processes overseen by the Australian Tax Office (ATO). The two processes are PAYG instalments and PAYG withholding.

If you have employees you pay through the PAYG system, you will likely be required to withhold their income tax to pay to the ATO. It is important to note that PAYG differs from Payroll tax, which you may also be obligated to pay.

If you are a Sole Trader and do not pay yourself through the PAYG system, you may consider setting aside funds throughout the year, so you are not surprised by a large tax bill at the End of Financial Year (EOFY).

The PAYG tax system allows employers to vary the amount of tax that is withheld from employees on each payment. The amount is withheld in anticipation of the employees’ end of year tax liability and is paid to the ATO in instalments.

Rather than requiring employees to pay a large tax bill at EOFY, the PAYG system is designed to facilitate partial payments over the year, making it easier for those who are paid through PAYG to meet taxation obligations. When an employee does their tax return at the end of the year, they will get a tax bill or refund.

Let’s take a moment to take a deeper look at Withholding and Instalments:

PAYG Withholding

PAYG withholding is a system of withholding income tax from an employee or contractor’s salary or wages. The employer pays the tax directly to the ATO on behalf of the employee or contractor.

These payments are made based on your expected income level for the year (calculated by the corresponding tax bracket) and will be considered when assessing your tax at EOFY.

PAYG Instalments

Generally, PAYG instalments will apply to individuals, organisations or trusts who earn a certain amount of individual, gross business or investment outcome.

PAYG Instalments is a system for the business to make payments as quarterly instalments. These quarterly payments go towards the expected income tax obligation from your business (or investments) for the current financial year.

Special rules and exceptions apply to PAYG instalments for different business and company structures, trusts, primary producers, and consolidated groups. It is best to be prepared and chat with us to make sure you are across the obligations that apply to your circumstances.

Who does PAYG Withholding apply to?

You are obligated to withhold tax if your business:

    • Has employees
    • Has contractors or other workers who have voluntarily agreed that you will withhold amounts from your payments to them

If an employee or contractor earns under the tax-free threshold, they can claim a tax refund through their individual tax return which is processed at the end of the financial year. As an employer, you must follow the guidelines for paying the appropriate level of tax.

If you are making payments to businesses that does not quote their Australian Business Number (ABN), you will be obligated to withhold tax.

PAYG Tax Variations

Your employee may request a tax variation to vary the rate of withholding so that they can:

  • Lower the amount of tax withheld
  • Increase the amount of tax withheld
    • To avoid receiving a large tax bill at the end of the year

In the instance of a downward variation, the employee will need to submit a PAYG Withholding variation application.

Register for PAYG Withholding

If you are making payments under the PAYG system, you must be registered. This simple process can be done through the Australian Business Register on the ATO website. If you already have an ABN, you can use the ATO’s Business Portal to register.

You will need to be registered before you withhold your first payment.

Exceptions to PAYG Withholding Obligations

You may be exempt from withholding income if your business is a sole trader or partnership structure and you ‘draw’ amounts from the business. Meaning you are not paid through the PAYG system.

Owners’ drawings are not considered a wage, so these drawings are not subject to PAYG withholding.

It is essential to make sure you understand your tax obligations and that you are withholding the correct amount and paying your instalments on time. Failure to meet these obligations can result in fines and other easily avoided repercussions by the ATO.

I am here to help if you want to talk through your obligations and any compliance concerns. A correctly set-up bookkeeping system can minimise errors and streamline calculating withholding amounts and employee payments. I can review or set up your system to help minimise the administrative burden of meeting your business tax obligations. Book a chat with me to see how I can help.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Advice Business Strategy Tax

ATO Change To Common Trust Distribution Rules

11/03/2022

The ATO has released four tax rulings that will stop commonly used trust distributions to family members. It’s one of the most significant developments for the taxation of trusts in over two decades.

If you currently distribute funds from a trust to family or intend to, it is crucial to understand how these changes will affect you in this 2022 tax year and your future tax obligation changes.

As a result of these ATO rulings:

  • Your options to spread your trust income across your family members may be vastly limited; and
  • Your family group’s overall tax payable will probably increase.

For many years, it has been common practice by all business owners and investors who use Family (Discretionary) Trusts to look to spread trust income across family member beneficiaries.

Trust distributions are often made to adult children for asset protection and estate planning purposes.

Sometimes, the adult children in a family may have lower tax rates than their parents, so the overall tax rate % for the family group is lower due to the spread of these trust distributions.

What does this mean for you?

You must take steps now to plan for the extra tax payments that you may need to make.

On 23 February 2022, the ATO issued Taxpayer Alert TA 2022/1″ Parents benefitting from the trust entitlements of their children over 18 years of age”.

This means that the ATO believes parents who make trust distributions to their adult children and then arrange for their children to give the distribution back to them are only doing this to reduce tax. The ATO plans to invalidate the trust distribution and tax the trustee of the trust at 47% on the distribution amount.

The ATO has stated that they can go back as far as the 2015 tax year to review trust distributions.

Tax Planning Review

If you could be affected by these changes, it is vital to have a strategy in place to minimise your tax obligations before the end of the financial year.

We can walk you through how these ATO tax law changes affect you and discuss new strategies that you might be able to use.

Book a chat with me to see how I can help.

This blog post is intended for informational and educational purposes only. The information provided in this blog post should not be taken as professional accounting advice or recommendations.

Liability limited by a scheme approved under Professional Standards Legislation.

Budgeting Business Strategy Tax

Fringe Benefit Tax & Your Small Business

05/02/2022

As a small business owner, offering extra benefits to your staff can be a great way to incentivise your recruitment and retention programs when you don’t have the same budget as a larger business.

If you choose to provide your workers with additional benefits on top of their regular pay, you need to consider if any of these benefits could be taxable.

Fringe benefits are a payment type, but different from salary or wages. As such, FBT is separate from Income Tax, and is calculated on the taxable value of the benefits you provide.

Generally speaking, a Fringe Benefit Tax (FBT) is tax employers pay on benefits paid to an employee (or their family members). It is a tax imposed on the employer, and therefore it does not affect the employee’s individual income tax liability. However, it may affect certain income thresholds depending on the employee’s personal circumstances.

What is the classification of a cash bonus?

A cash bonus is not liable for FBT. If you pay a cash bonus the employee will pay income tax on the amount.

FBT Assessment

As an employer, you must self-assess any FBT liability for the FBT year. The FBT year is different to the financial year. Your FBT year is between the 1st of April to the 31st of March.

Employers can generally claim an income tax deduction for the cost of providing fringe benefits, and for any FBT they pay. You may also be able to claim GST credits for items provided as fringe benefits.

Common examples of fringe benefits include:

  • Using a work car for private purposes
  • Giving an employee a discounted loan
  • Paying an employee’s gym membership
  • Entertainment such as free tickets to concerts or your Christmas Party

Benefits that are legally required are not fringe benefits; these include:

  • Salary and wages
  • Contributions to Super Funds
  • Employment termination payments

Registering for FBT

If you provide fringe benefits (including those mentioned in the above list) to your employees, the Australian Taxation Office (ATO) recommends registering for FBT.

Employers must be registered for fringe benefits tax (FBT) and are obligated to lodge an FBT return if they’re liable to pay FBT. Generally, you will need to submit your return the same FBT year you are liable to pay FBT.

Which fringe benefits are exempt?

Some benefits are exempt, or have concessions from FBT. Benefits that are exempt from FBT include providing tools or electronic devices (laptops, phones, etc.) that are mainly used for work purposes. Also, living-away-from-home allowances may be an exempt benefit.

‘Minor benefits’ are also FBT-free. A minor benefit is one with a value of less than $300. If you host an event such as a dinner for staff, it will likely be a minor benefit if it is under $300 per head.

Certain not-for-profit organisations like charities, public hospitals and religious institutions may have exemptions or concessions available to them.

FBT and COVID-19

If your employees working from home has resulted in you paying for benefits or items you usually do not provide (computer, internet access, etc.), you may be eligible for FBT concessions and exemptions.

Conclusion

It is important to understand the difference between legally required benefits and how to identify which additional benefits are taxable.

Incorporating fringe benefits into a hiring and retention program can be an excellent way for employers to source and retain top talent. However, to use fringe benefits effectively, employers should know about the types of fringe benefits, their tax obligations, and how to value them appropriately.

If you are unsure if you need to register for FBT or would like some assistance with your FBT return book in a chat with Amanda.

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