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Fringe Benefit Tax Fix A Win For Employers

Chartered Accountants Australia and New Zealand is praising the Government’s decision to implement a solution proposed by the peak accounting body that will make it easier for employers to meet their Fringe Benefit Tax (FBT) obligations.

In March, CA ANZ raised the issue that the new top personal tax rate of 39% for income over $180,000 would effectively lift the Fringe Benefit Tax up to a new flat rate of 63.93%, from 49%, as the two are tied together.

Because few employers have staff earning over this amount, most were left with the unenviable choice to either pay the new FBT rate, in essence a 30% increase or face an increased compliance burden, undertaking separate and detailed calculations for each employee at year end.

CA ANZ proposed that employers should be allowed to use a flat FBT rate of 49.25% for fringe benefits provided to employees with income under $180,000, with complex calculations only required for those employees with income over $180,000.

Now, Mr Cuthbertson is pleased to see that the Government and Inland Revenue have mostly implemented the solution proposed by CA ANZ.

“We’re pleased that the Government has listened and a more targeted approach to Fringe Benefit Tax is being implemented in the latest supplementary order paper.”

“Employers will now be able to use a flat FBT rate of 49.25% for fringe benefits provided to employees with all-inclusive pay under $129,681. Complex calculations will only be required for those employees with all-inclusive pay on or over $129,681.”

All-inclusive pay picks up after tax employment income and fringe benefits. The above amount -$129,681 - is the after-tax equivalent of gross employment income of $180,000.

“Employers will not be required to complete complex calculations for employees where it is obvious that their all-inclusive income is less than $129,681. This should avoid a compliance burden and cashflow crunch for businesses, particularly SMEs, who let’s face it, will have no or very few employees earning over $180,000.”

“This will be enacted in early 2022 and is intended to apply retrospectively from the 2021-2022 income year.”

“The whole situation could have been avoided if there had been limited consultation with employers and tax advisors.”

“Throughout the year many employers would have faced a trade-off – either pay additional FBT using a flat rate out of step with their employee income or incur extra compliance costs. That’s not ideal.”

“The good news is that the Government has listened to our feedback and acted on it,” concluded Mr Cuthbertson.

Final legislation will be in place before fourth quarter “wash-up” FBT returns are due to be filed.

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