Get­ting FBT to work for you

Townsville Bulletin - - NEWS -

ELISE has asked: I re­cently changed jobs and my em­ployer pro­vided me with a list of things that I can choose to salary sac­ri­fice. I am not sure whether some of these things are re­ally ben­e­fi­cial and just what some of them are.

The con­cept of salary sac­ri­fic­ing is you agree to take less salary for re­ceiv­ing a ben­e­fit in kind. Less salary means you pay less tax; the amount of sav­ing de­pends on whether your em­ployer pays FBT ( and how much). The FBT the em­ployer pays is passed on to you as a cost to pro­vide that ben­e­fit.

Some of the most com­mon fringe ben­e­fits in­clude a mo­tor ve­hi­cle, su­per, mo­bile phone, lap­top, con­fer­ence costs, pro­fes­sional mem­ber­ship and air­line club mem­ber­ship. These are pop­u­lar as they ei­ther have a re­duced tax value or can be ex­empt – giv­ing you a true tax sav­ing.

Not all pro­vide you with a tax sav­ing be­cause if you paid for the item you may get a tax de­duc­tion any­way. There­fore salary sac­ri­fic­ing of those “oth­er­wise de­ductible” items only pro­vides you with a tim­ing ben­e­fit ie; re­im­burse­ment now rather than when you lodge you tax re­turn.

“Oth­er­wise de­ductible” ben­e­fits in­clude pro­fes­sional mem­ber­ships, air­line club mem­ber­ships and con­fer­ence costs.

Specif­i­cally ex­empt ben­e­fits in­clude su­per con­tri­bu­tions and the fol­low­ing: lap­tops, mo­bile phones, and Epads/ iPads used pre­dom­i­nantly for work.

A car ben­e­fit can be cal­cu­lated us­ing the statu­tory method ( now 20%). The rate is ap­plied to the cost of the ini­tial pur­chase of the car to de­ter­mine the value to which a gross up amount is ap­plied to de­ter­mine the amount of the fringe ben­e­fit. Your em­ployer then pays FBT at a rate 49% of the fringe ben­e­fit. A com­mon strat­egy ( em­ployee con­tri­bu­tion method) is for the em­ployee to pay an amount to their em­ployer from their af­ter tax wage to re­duce the fringe ben­e­fit re­sult­ing in an ef­fec­tive tax rate equal to your mar­ginal tax rate, rather than the 49% FBT rate.

Re­mem­ber though any tax sav­ing is premised on the idea you would have bought the ve­hi­cle any­way.

Email ques­tions to D a v i d . H a l l @ c r o w e h o r - wath. com. au

This ad­vice is gen­eral in na­ture, the per­sonal opin­ion of the writer; read­ers should seek spe­cial­ist ad­vice be­fore mak­ing de­ci­sions.

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