When the fringe benefits tax (FBT) rate increases in 2015, you should reconsider your current fringe-benefit arrangements, according to RSM Bird Cameron.
From 1 April 2015, the rate of fringe benefits tax (FBT) in Australia will increase from 47% to 49%, to prevent individuals earning over $180,000 from salary-sacrificing into fringe benefits and avoid paying the temporary 2% 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 businesses?
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.
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, said, ‘There are many different options to offer as salary sacrifices, including the use of a car, healthcare, school fees, entertainment and cheap loans.’
In relation to employees on packages under $180,000 p.a., it may be beneficial to provide remuneration via salary and allowances rather than fringe benefits which will be taxed at 49%. For example, where employers provide benefits such as private health insurance the employer could provide additional salary (grossed up at their marginal rate) which, would be taxed at a substantially lower rate than 49%.
‘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. 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.’
