It's fringe benefits tax time!

It’s Fringe Benefits tax time! What does that mean?

Firstly, for some reason the fringe benefits tax year is different to the regular tax year. It runs from 1 April to 31 March.

A fringe benefit is anything that a business pays to an employee other than their wages or salary. Cars are the most common benefit to fall under this category.

Often clients fall into the trap of thinking they can buy a car in their business name and claim everything on tax.

Unfortunately, fringe benefits tax rules make sure that’s not the case. The reason is that typically the car will be left at home overnight, driven after hours and on weekends for private use. On this basis, fringe benefits apply and are taxed.

The biggest issue with fringe benefits is that they’re taxed at a massive 47%.

However, there are ways to minimise the FBT burden, including purchasing a vehicle in your own personal name, which removes the need to be registered for FBT, but you can still claim the business portion of the vehicle expenses in your personal tax return.

In other circumstances, if used in conjunction with the instant asset write-off scheme, it might actually be beneficial to purchase the vehicle in a business name, write it off, then pay the FBT. In this way, the FBT might actually lower your tax liability.

Fringe benefits tax is another confusing area of the tax system, but with the right advice, you can make it work to your advantage.

If you have any questions, please don’t hesitate to get in touch.