When the fringe benefits tax (FBT) rate increases in 2015 small businesses are likely to be affected. Employers should reconsider their current fringe benefit arrangements in light of the increase, suggests accounting firm RSM Bird Cameron.
From 1 April 2015, the rate of fringe benefits tax (FBT) in Australia will increase from 47 percent to 49 percent, to prevent individuals who earn more than $180,000 from salary sacrificing into fringe benefits and avoid paying the temporary two percent debt levy. The FBT will return to normal on 31 March 2017, to align with the FBT year and the end of the temporary debt levy.
SO WHAT DOES THIS MEAN FOR SMALL BUSINESS?
Competitive salary packages are often the key to success for small businesses. They let employers attract the right talent, minimise staff turnover and increase productivity.
Andrew Graham, national head of business solutions, RSM Bird Cameron, says “Fringe benefits are an excellent option for employers seeking to make salary packages more attractive. There are many different possibilities and options to offer as salary sacrifices, including the use of a car, healthcare, school fees, entertainment and cheap loans.”
For employees on packages under $180,000 per annum, it may be beneficial to provide remuneration via salary and allowances rather than fringe benefits which will be taxed at 49 percent. As an example, where employers provide benefits, such as paying for an employee’s private health insurance, the employer could provide additional salary which, would be taxed at a substantially lower rate than 49 percent.
“The increase in FBT means that employers should reconsider all current fringe benefits arrangements. If not passed onto the employees, this will result in additional costs to the employer,” says Graham. “Employers should review their salary packaging arrangements with their staff to limit the impact of the additional cost and ensure that any arrangement is still as beneficial as possible, for both the employee and the employer.”