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Tax Planning Strategy #1:  

Fringe Benefits Tax (FBT) – Avoid Common Traps, learn how to save $

FBT may not be relevant to your situation, however please free free to forward this email to friends and family

For a quick VIDEO PRESENTATION on this email click here

Fringe Benefits Tax (FBT) is a tax that many business owners try to forget until the deadline is upon them. The end of year for FBT is 31 March 2013, and the deadline for lodging a FBT Return is 21 May 2013.

The Government introduced FBT many years ago to ensure that employees do not receive income disguised in another form and therefore avoid paying income tax.

What expenses are subject to FBT?

As a general rule, any non-business expense payment an employer makes on behalf of an employee may be subject to FBT.

Some business expenses are subject to FBT and some are exempt.

The most common FBT expenses are those associated with the private use of a car, including car parking. But they can also be things like the provision of a low-interest loan or payment of an employee's child's school fees. Various entertainment expenses are also subject to FBT.

When it comes to exempt expenses, the most common are mobile phones, laptop computers and iPads used mostly for work. While there are other exemptions, the rules are tricky so it's worth contacting our office ASAP to determine what might apply to your business.

Correct Record Keeping is ESSENTIAL

Whether or not your employee's benefits are included or exempt from FBT, you still need to account for them. So it's very important to collect the correct information about all employee expenses throughout the year.

The question of what information to collect will depend on how you decide to calculate the tax. For common types of expenses there is more than one calculation method available under the tax laws.

As an example - consider car expenses. One calculation method - known as "the statutory method" - is a formula based on the cost of the car and the number of business kilometres driven in the FBT year.

You could also use the "operating cost method", which takes into account all the running costs of the car and multiplies that by your business use versus private use to calculate its value for FBT purposes.

So in this case, knowing how cars are used and how the expenses are incurred can help determine which method to use, thereby potentially reducing your FBT bill.

Reducing FBT on Entertainment

On many occasions, business owners have calculated entertainment FBT based on the "50/50 method".

However, if they changed to the so called "actual method" they could reduce their FBT bill by collecting more accurate records, enabling them to more precisely determine FBT expenses and exemptions.

Big FBT Tax Planning Opportunities

It's not all bad news! On the other side of FBT compliance are these FBT tax saving opportunities:

  • Relocation expenses for employees
  • Bringing your spouse to conferences
  • FBT exempt utes
  • Laptop computers and iPads

Contact our office to discuss how you like to benefit from tax savings on the above items.

Your Action Plan

FBT is an area of tax law that changes regularly. Getting prepared early, collecting the right records and taking the time to speak with your Accountant at MJ Business Solutions Pty Ltd about FBT could be well worth the effort, and may save you thousands of $ in FBT!

Contact your accountant at MJ Business Solutions Pty Ltd TODAY to discuss:

1. The types of expenses that you pay in your business that may be subject to FBT

2. The records you should be keeping to help minimise your FBT

3. What you can do NOW to reduce your FBT

4.  Click on the link to retrieve the FBT - Motor Vehicle Odometer Reading Form.pdf document and email back to our office at reception@mjbs.com.au