Employers treat their employees with a certain amount of benefits and perks, which can be from a transport vehicle to a meals and entertainment services. These added benefits help the employers provide their employees a certain kind of recognition or reconciliation for their contribution to the business, but some of these benefits are liable for fringe benefit tax (FBT)
FBT or Fringe Benefit Tax is basically an amount of tax paid on the benefits which have been received by the employees whether the employee has enjoyed them in the past, present or the future during their employment in that respective business or firm. The Fringe Benefit Tax (FBT) is levied on employees as well as shareholder employees that another person has provided. In case Fringe Benefit Tax (FBT) is providing benefits to their employees, that may include benefits given to shareholder employees and their families, they are liable to pay Fringe Benefit Tax on the complete value of these benefits provided.
WHAT DOES FRINGE BENEFIT TAX INCLUDE?
Some of the common benefits that have Fringe Benefit Tax (FBT) levied on them are –
- Interest Loans provided on low funds.
- Discounted or free of cost services and goods.
- Transport costs and various subsidies.
- Provision of private vehicle for transport of the employee
- Contribution of the employer to the employee’s accident, sick or death benefits funds.
- Certain benefits are levied by FBT if the cost of the services is above an allotted threshold.
CALCULATION OF FRINGE TAX BENEFIT (FBT)
There are basically 3 methods of calculation by employer of the fringe tax benefit levied for the benefits provided by them to their employees
Single rate Fringe Tax Benefit:
The employer is at liberty to choose single rate FBT at the rate of 49.25% tax amount on all the benefits that they provide their employees with, that includes share holder employees as well.
Alternate Rate calculation process:
The fringe benefits of the employees provided by their employers are taxed at their marginal rate under the alternate rate calculation process of Fringe Benefit Tax. This method of FBT taxation is exercised in order to make sure that employees that earn less than 70,000$ aren’t taxed at higher rates that they would in case of single rate Fringe Tax Benefit.
Short form alternate rate calculations:
Short form alternate rate or formerly known as short form multi-rate calculations are completed in the annual year of the employer. The benefits provided by the employer are classified as attributed benefits and non-attributed benefits. Attributed benefits are taxed a the rate of 49.25% whereas the non-attributed benefits provided to the employee are taxed at 42.86% and at 49.25% to shareholder employees of the firm or business.