Wow, the time has flown by and the end of the Fringe Benefits Tax (FBT) year is almost here. Accountants are in a flurry trying to prepare returns and audits. But for you, as an employee, it’s a great time to test out benefits and start your FBT year on track. Get the answers to some common questions we get and get the most out of Fringe Benefits.
Do you work for a hospital or charity?
It’s time test your PBI cap again and make sure it is meeting your goals and needs.
Are you not 100% sure what you can claim?
Well, you might be surprised on exactly what you are eligible for. I recently visited a school that were unaware that they were eligible for remote area housing benefit, allowing their staff to exempt 50% of their rent tax free!
Some Benefits You May Be Eligible For
Who can I use as my Salary Packaging provider?
It always pays to check with your employer about who you can use for your packaging. If your employer only offers novated leasing then they may be unaware of some of the options that are available. Sometimes HR is unaware of what can be done and it’s a great time to recalibrate and test out what is available.
A few questions can save you thousands. Pay less, get more; it’s the SPA way.
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An example of the benefits.
Liz is a carer at a nursing home and has a salary of $48,000 per annum before super. Her fortnightly take home pay before tax is $1,840. Liz’s rent is $620 per fortnight, which is over $1,200 per month. After she pays her rent, her fortnightly earnings go down to $1,029 after tax. If Liz were to take her rent out using her pre-tax earnings, she would take home an extra $187.73 every fortnight compared to paying it from her net salary.
Some common questions about FBT
When is the FBT year?
The FBT years runs from April 1 to March 31 every year.
What is PBI?
A PBI is a non-profit organisation which includes charities, clubs, societies, and associations. A Public Benevolent Institution (PBI) can provide a certain limit of FBT free fringe benefits to its employees.
Examples of a PBI:
- Directly provide relief to people in need, such as: some hospitals and hospices
- some disability support services
- some aged care services, or
- providers of low rental or subsidised housing, for people in need
- Directly engage others to provide relief to people in need, such as a charity that promotes benevolent relief by entering into contracts with service providers to deliver that relief in different areas, or
- Provide relief within a relationship of collaboration, such as a charity that raises funds in order to channel these funds to specific programs that provide benevolent relief, through a collaborative arrangement with another organisation that delivers those programs.
What is the FBT Exemption Threshold?
A PBI can provide fringe benefits to its employees free of FBT if the grossed-up taxable value of fringe benefits does not exceed $30,000 per employee. Grossing-up refers to increasing the taxable value of a benefit to reflect the gross salary of an employee would have to earn at the highest marginal tax rate, including the Medicare levy if they had received a cash salary rather than the fringe benefit. The grossed-up taxable value of benefits provided in excess of this capping threshold will be subject to FBT at 47%. Accordingly, most PBIs ensure that they only provide benefits that utilise this threshold.
The two separate gross up rates are:
- Type 1 – 2.0802
This rate is used where the benefit provider is entitled to an FSR credit in respect to the provision of a benefit.
- Type 2 – 1.8868
This rate is used if the benefit provider is not entitled to claim GST credits.
Am I eligible for the FBT Exemption cap?
It’s best to check with your employer. If they are unsure you can always check on the Australian Charities and Not-for-profits Commission website or on ABN look up. This will show up under the companies ABN.
What if I reach the FBT Exemption cap before the end of the FBT year?
You can only spend $15,900 per annum under the cap (GST free) or $9,010 (GST free) if working for a public hospital or ambulance service. If you breach this amount your packaging company should cease deductions or rollover funds balances into the next FBT year.
What if I don’t reach the FBT exemption cap limit in the current FBT year?
Unfortunately, you will miss out on the exemption tax benefit. It’s a great idea to make sure you have maximised all of your potential benefits and have submitted all claims before the end of the FBT year.
How do I organise additional contributions with payroll?
SPA generally sets clients caps to maximise them within the FBT year. Whilst it might be too late this year. It’s a great idea to get on track for next year.
What other benefits might I be eligible for?
Dependant on your employer’s guidelines, items to claim could be the following:
- Rental payments
- Personal loan payment
- Mortgage payments
- Credit card payments/living expense cards
- General living expenses
- Utility bills or rates notices
These are only some to name a few.
How can SPA help you before the end of the FBT year?
It’s best to get your claims in ASAP. Once the year is over the ability to claim is lost.
Don’t let another year go by…
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