If you’ve been one of the lower level workers who’s just had a pack packet to take home with the PAYG taken out of it already up to now, it can be a bit bewildering to hear all the talk about FBT or Fringe Benefit Tax for the first time. If the new salary package involves a novated lease for a car, you’ll definitely hear the term being bandied about.’ There you are, just moved up the corporate ladder to a new position with a nice salary and a few perks like a great new car, and they’re talking about this new tax. You could just tamely accept it and let the accounting people sort it out (they will). Or you could ask a few questions.
In short, a fringe benefit tax is a tax on the non-cash perks that you get with your job. Technically, although this should include things like the boss saying that you can take a couple of big cardboard boxes home for the kids to play houses in, it doesn’t. If the company is giving it to you instead of putting it in the bin, it isn’t a fringe benefit and can’t be taxed as what you are technically being given from an accountant’s perspective is rubbish worth nothing (tell that to the kids playing for hours in a big box). Fringe benefits are usually things like the use of a car for private purposes (one of the most common ones), a low-interest loan from the company, accommodation provided by the company, getting free car parking so you don’t have to use the metered parking down the road and so forth. If you get it as part of the job on a regular basis instead of getting a salary raise, it’s a fringe benefit and will incur a fringe benefit tax.
If you’re uncertain about whether something is or isn’t a fringe benefit, then ask your accountant, who will probably explain what is and what isn’t a fringe benefit it’s his or her job to know. But one thing is for certain: if you are getting a car that you can use for whatever you like whenever you like via novated lease where the repayments come out of your pay packet before the tax is calculated, then this is a fringe benefit.
It’s easy to understand why fringe benefit taxes are imposed if you put yourself mentally down the ladder again. Chances are you look at what your supervisors and the other higher-ups get and start grumbling: Look at what they get a free car park right by the door while us lot down the bottom have to pay to park the cars. And they get the ruddy car as well for diddly-squat, really, while we have to pay for our own cars. It’s not fair.Fringe benefit taxes make things a bit fairer, recognising that the perks are worth something and ought to be taxed just to level things a wee bit. Here, we could get into a huge political debate, but we won’t!
If you have any other questions about fringe benefit taxes and novated leases, don’t hesitate to ask us.