Fringe Benefits Tax is a tax payable by employers for the benefits they offer to their employees in replacement of salary or wages. Fringe benefits are a beneficial way to encourage a positive culture in a workplace and they can assist with attracting high-calibre employees.
In the current era, it is common for employees to complete a certain portion of their work at home, rather than in the workplace. In many cases, the employer reimburses the employee for the part of their home phone or internet costs that were related to work usage.
Often, our small business clients question whether this home phone or internet usage provided to an employee for work purposes can be considered a fringe benefit.
Generally, this scenario is labelled as an ‘expense payment fringe benefit’.
Expense payment fringe benefits are when the employer either:
- Reimburses the employee for the expenses
- Pays a third party the cost of the expenses
Broadly, the ‘taxable value’ of an expense payment fringe benefit is the amount you pay the third party or reimburse to your employee.
The taxable value is reduced by any amount that the employee would be able to claim as an income tax deduction, such as the business use percentage of the phone and internet.
If the amount you pay the third party or reimburse your employee for home phone or internet per FBT year is:
- up to $50 – your employee just needs to provide you with a declaration to substantiate their business use claim
- over $50 – you and your employee both need to keep records of the actual expenses and substantiate the claim.
(Source: ATO)
Fringe Benefits Tax can be confusing, so it is best to speak to a qualified small business tax champion to help with your claims and understandings. For more information, contact the team at Paris Financial on 1300 4 PARIS.
