A fringe benefit is an extra incentive provided to employees that is not cash based. This is given on top of their base salary and is a way to attract quality staff to your business. Common examples include company cars, entertainment benefits, and subsidised housing. This provides employers with a way to reward their staff without actually having to increase their wages. Fringe benefits are also positive for employees as they don’t have to include them in their taxable income.
Types of Fringe Benefits
The ATO breaks down fringe benefits into 13 different categories. These include the following:
- Cars (using statutory formula)
- Cars (using operating cost method)
- Loans
- Debt Waiver
- Expense Payments
- Housing
- Living away from home allowance
- Board
- Property
- Entertainment
- Residual
- Car Parking
- Meals
Fringe Benefits Tax
If you are an employer considering fringe benefits for your staff, be aware that there are certain tax implications. You will have to pay fringe benefits tax (FBT) on any benefits you provide to your employees. This is calculated by determining the taxable value of the benefits you choose, and then multiplying it by the fringe benefits tax rate. It is important you register and keep track of your FBT records. You must also report your employees fringe benefits on their payment summaries. Also note that there are various FBT tax exemptions and concessions that may apply to you as an employer. It may be helpful to seek the advice of a taxation lawyer if you are unsure about the process.
Why Do Employer’s Provide Fringe Benefits?
Although fringe benefits appear to be a bunch of extra perks for employees to enjoy, they can be an advantage to you as an employer. Fringe benefits are an effective tool in attracting and retaining the best talent for your business. In a competitive landscape additional benefits can be the difference in an employee choosing your business over a competitor. They can also act as recognition for high performing staff and an incentive to stay on.
Additionally, there can be an overall financial advantage for your business. There are a number fringe benefits that are more cost effective than increasing an employee’s wages or salary. This still provides staff with a reward for their efforts but does not hit your business’ bottom line as hard. The tax concessions available on certain benefits also offer another saving opportunity.
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