Fringe Benefits Tax ... what? or FBT for short
If you save income tax and GST, then you can't avoid Fringe Benefits Tax.
The good news is... you're still in front!
Here's the simplified version of FBT but as always, you are advised to read the fine print when you get to talk to Zenra and see the documents.
Statutory FBT is calculated on the value of the vehicle and dictates the pre and post tax values for the salary deductions.
In other words... The ATO holds its hand out for FBT, when an employer, provides its employees with non-cash benefits (ie Novated lease) in lieu of salary.
Your FBT liability is then factored into the monthly budget.
Since the 1st April 2014, the FBT rate is 20% regardless of how far you drive.
No more having to catch up missing kms prior to the 31st of March each year.
Now (of course) its complicated. (Hey it's not our fault!).
Your FBT liability can be offset using the 'Employee Contribution Method', where you opt to pay the FBT as a 'Post-tax deduction', removing the FBT liability.
So here's to your employer... paying for someone in HR to administer their end of the Novated Leasing Agreement... they obviously think you're worth it and that you'll turn in a big effort for them.
Yes, there are variations such as 'Statutory method' and 'Operating Cost Method' and we'll happily talk about your suitability and the dollars involved well before the Agreement is drawn up for everyone's signature. It's on our when-we-get-down-to-business-with-you checklist.
Talk to our Novated Packaging Specialists today
Call on 1300 71 38 12 or email firstname.lastname@example.org
Actual FBT Formula
Taxable Value = (A x B x C)/D - E
A = the cost of the vehicle
B = the statutory percentage
C = the number of days in the FBT year when the car was used or available for private use by the employee
D = the number of days in the FBT year
E = the employee contribution (if any)
Fringe Benefits Tax = [Taxable Value] x [Gross-up factor] x [FBT rate]
Gross-up = 2.0802% as at 2014
FBT rate = 49% as at 2014
Pre 2014 FBT Example
What if you are aiming to drive 25,000 km for the year and you're "blundering", projecting to do 19,800 km, moving from 11% to the higher 20% FBT and guess what, you're up for the difference.
Sure, sure, no one could be that stupid and not go for a few drives to the country for a weekend or two before March. But its September and you're projecting to be 5,000 km short of your FBT year end target, what are you going to do? Drive to Perth (or Perth to Sydney) and back just to save a couple of grand in tax?
Maybe driving the extra distance isn't worth it
If you do the sums, 5,000 km at even 100 kph, is 50 hours behind the wheel, there's fuel and accommodation plus meals plus wear and a higher incidence of becoming a nasty road statistic... and even if you decide to press on to make the 25,000, there is the loss in resale value at trade in time.
Nah! better to let Zenra help you re plot your FBT target adjust your budget, and monitor your progress (through your regular odometer readings every time you fuel up). After all, a few minutes on the phone and Zenra can change your FBT target with a mid-year adjustment.