What is the Fringe Benefit Tax (FBT)?

Fringe benefits tax (FBT) is a tax employers pay on certain benefits they provide to their employees, including their employees’ family or other associates. The benefit may be in addition to, or part of, their salary or wages package.

If you are a director of a company or trust, benefits you receive may be subject to FBT.

Fringe benefits tax is separate to income tax and is calculated on the taxable value of the fringe benefits provided.

The FBT year runs from 1 April to 31 March.

Follow the links below for more information on:

Source: https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/ 

Does size matter in Salary Packaging?

3406bbd.jpgIn some situations ‘bigger’ is most certainly better.

Let’s start with pay-cheques – not many people want a smaller one of those.

And how about a single bed over a luxurious king? A shy smile from your child, or a beaming grin?

One decision where ‘bigger’ does not equate to ‘better’ is when it comes choosing your Salary Packaging provider.

Why? The success of a salary packaging program has little to do with size and everything to do with the technological infrastructure and the customer service ethos that underpins its delivery.

Most providers are comfortable to offer the same tried and tested approaches to service their clients regardless of quality – are these more likely to be the bigger or the smaller providers?

The real value is gained when salary packaging companies invest in new technologies that consistently improve the customer experience and lead to greater efficiency. Who is more likely to be proactive and embrace changes in technology, the big or the small end of town? I don’t think I have the answer but this is where you will need to do your homework.

The sign of a good salary packaging provider is that they have the capacity to address and respond with solutions to your employees’ queries in a timely manner and this has nothing to do with size but a lot to do with technological capability.

The exponential growth in the popularity of mobile platforms as a customer service tool should be leading many providers to improve their game in this sphere. This is something I’ll cover in further depth another time but for the purposes of this conversation remember that this technology is not out of reach of the small fellas.

It’s also important to remember your role as an employer in the salary packaging relationship.

Advocacy, as the principal advocate for your employees you need to demand information to be delivered in a timely and considerate fashion from your salary package provider. This isn’t something that should be left to the supplier as they tend to get lazy and the bigger they are the lazier they can get.

Communication, the key is to clearly communicate your service-level expectations to your provider – ideally at the outset – but doing this during any stage of the relationship is better than not doing it at all and the smaller they are the more likely they will listen and importantly respond.

If your salary packaging provider regardless of their size does not have the capability, resources or technology to respond to employee communications in what you deem a timely manner, you need to reconsider who you’re working with.

Hostage to your Salary Packaging software provider?

Salary Packaging Alternative Rout

Aytunc Tezay
Founder & Chairman – LeasePLUS Group of Companies

Recently a LinkedIn contact working in the Health industry approached me to ask what other Salary Packaging software options are available in the market.
If you currently use the same tired, inflexible and uninspiring software as many others in the market place, I recommend you read on!
For many years software providers have provided the same old and clunky salary packaging software to its clients and ignored the need to upgrade the look, feel and functionality of its product. My LinkedIn contact was told that their software was being refreshed, however it will come at a cost through significant higher licencing costs. The alternative is….. well… there isn’t an alternative because the current version which they have been using and putting up with for so many years is no longer going to be supported. Or the other alternative given to my LinkedIn contact was to have the same company providing the software, outsource the whole salary packaging administration function – how convenient!
This doesn’t seem very fair does it? Clients who have been patient and loyal over many years supporting software that hasn’t met expectations, are now being forced to pay more or get out!
If the story above relates to you, there is now an alternative – MySalPack.
The MySalPack software is a web based solution to facilitate the processing and reporting of salary packaging in the Corporate, Rebatable, Public Hospital and Not-for-Profit employment sectors. The functional aspects of the MySalPack software is to support the business by automating the processing of data efficiently and accurately while meeting all regulatory and compliance requirements.
One of the significant strengths of MySalPack is the MyKiosk customer portal that delivers live data and information to employees about their salary packaging account on both their desktops and mobile devices.
This is achieved by understanding the specific requirements of the various organisations within each industry sector. MySalPack has the capability of supporting both the outsourced as well as the in-house solutions, integrating robust security, audit and importantly flexible reporting capabilities.
Key features:

  • Ability to calculate Meal Entertainment and show the share of saving and admin as a separate line item.
  • To incorporate direct data feeds through file transfer protocol from Payroll to take into account specified factors for calculating an employee’s package.
  • Uploaded files are produced in the correct format for loading into Payroll and includes an adjustment file for any changes.
  • Automation of banking details can be loaded from Payroll to reduce manual entry, reducing error rates and improving productivity and compliance.
  • Detailed evidence register that updates automatically when a package is entered or copied from a previous year.
  • Efficient reporting tools including payroll reconciliation after each pay.
  • Easier access to updating of tax rates, benefit items, cost centre and facility lists, pay periods and banking.
  • On-line calculators for General, Novated Leasing, GST worksheets plus many more features, that can be emailed, saved and printed.
  • Form letters can be produced based on criteria, including the bulk send out of renewal letters each year.
  • Novated Leasing functionality with the ability to interface to external systems if required.

The team behind MySalPack is a Australian company called SafeCode who can provide you with further information and demonstrate the software.

website safecode.com.au
phone 1300 20 82 77

Federal Budget 2015 – Workers pushed into higher tax brackets

Hundreds of thousands of Australian workers will find themselves in higher tax brackets after [the] federal budget left tax brackets unchanged.

The failure to reset tax brackets will push the average full-time worker, earning $78,000 a year, into the second-highest tax bracket in 2015-16, with any earnings over $80,000 subject to a 37 per cent tax rate, 39 per cent including the Medicare levy. As a result, the average worker will be slugged an extra $1200 in tax a year, and the average income tax rate will rise from 21.7 per cent to 27.4 per cent over the next decade.

It’s not a pretty picture.

The picture is even less pretty for the thousands of individuals who will pushed into the top tax bracket, which kicks in at $180,000… “This makes the top marginal rate 49 per cent, giving a 10 per cent hike in the marginal tax rate, so beyond $180,000 the employee loses almost half of every extra dollar earned…” notes HLB Mann Judd Sydney taxation services partner Peter Bembrick.

For families at the lower end of the pay scale, increased earnings can also mean the unwelcome end of government benefits, such as family tax benefits.

“It is important that people know their effective tax rate and not just their marginal tax rate to determine if how hard they are working is worthwhile, especially those in the lower brackets,” says the managing director of  BFG Financial Services, Suzanne Haddan.

Prescott Securities senior economist and financial adviser Alan Hutchinson says there are a number of options for taxpayers who are in danger of jumping into a higher tax bracket.

Cutting back on the hours worked is one option, although possibly not the best if there are mortgages and school fees to pay, he says. Another strategy is salary sacrificing into superannuation.

“Salary sacrificing is the main strategy available to people wanting to avoid bracket creep, and it is the one that works,” says Hutchinson.

ipacSecurities head of technical services Colin Lewis says salary-packaging motor vehicles and laptops used for work-related purposes may be an option for some employees as a way of reducing assessable income.

Employees of public benevolent institutions such as public hospitals or not-for-profit organisations are still able to salary-package almost anything including living expenses, education costs, loan and mortgage repayments, rent, credit card payments and bills, he says.

AFR Contributor

*Source Bina Brown – Australian Financial Review

See the full report here.

2014 Federal Budget

FRINGE BENEFITS TAX AND SALARY PACKAGING

FBT rate
The FBT rate is being increased from 47% to 49% to align with the highest marginal tax rate inclusive of the Temporary Budget Repair Levy of 2%. Whilst the increased income tax rate will apply from 1 July 2014, the increased FBT rate will not apply until 1 April 2015. Further, whilst the Temporary Budget Repair Levy applies until 30 June 2017, the FBT rate is to drop again as of 1 April 2017.

Changing the FBT rate also changes the FBT gross-up rates, as follows:

2014-15 FBT year 2015-16 FBT year 2016-17 FBT year 2017-18 FBT year
FBT rate 47% 49% 49% 47%
Type 1 gross-up 2.0802 2.1463 2.1463 2.0802
Type 2 gross-up 1.8868 1.9608 1.9608 1.8868

Salary packaging
The reason for increasing the FBT rate is stated to be “To prevent high income earners from utilising fringe benefits to avoid the levy”. But you would need to salary package a lot of income to take advantage of this 2% differential. For instance, packaging $20,000 would only produce a saving of around $400.

So whilst there appears to be an opportunity in both the year ending 30 June 2015 and the year ending 30 June 2017, for high income earners to take fringe benefits in the period where the lower FBT rate applies, it would only be useful to the extent the employee earns above $180,000 and the minimal savings probably mean they are unlikely to bother.

Not-for-profit caps
In order to protect the value of fringe benefits provided in the not-for-profit sector, that otherwise diminishes with an FBT rate increase, the annual caps for concessional treatment are to be increased. Confirmation of the new amounts has not yet been provided.

FBT rebate
The FBT rebate (currently 48%) is to be aligned with the FBT rate as of 1 April 2015.

Leight Penberthy
Chief Executive Office

*Source Elizabeth Lucas – Grant Thornton Australia

Media release – Innovation patent supplied to SalaryPackagingPLUS for its MySalPack software

We are proud to announce the grant of our innovation patent 2014100041 by the Australian Patent Office on 20 February 2014. This patent covers our SalaryPackagingPlusTM product, and is testament to the creativity of the team involved.

I especially thank Linden Footman and Abhi Mishra who worked tirelessly to overcome the many hurdles that are inevitably faced in creating a product such as this. Their problem solving skills were key in achieving a quality product.

I thank also Ronnel Magdaluyo who was employed by us to write a proportion of the code under the direction of myself, Linden and Abhi.

Message to all our supporters

To all our followers and friends – thank you for your support. It has been an exhausting two months, but what a tremendous outcome.

To quote Tony Abbott’s open letter to the car industry, employers and employees, the FBT changes are “null and void”.

This is a wonderful outcome for the hundreds of thousands of workers who access a car under the FBT arrangements; the NFP, health, aged and community services sectors who utilise these arrangements and for the local manufacturing, car leasing and broader automotive industries.

Its back to business as usual for our customers, staff and suppliers.

Thank you.

Aytunc Tezay

LeasePLUS Group Managing Director

Tony Abbott’s letterTony Abbott's letter

A statement from Richard Dudley, CEO, Australian Automobile Dealers Association

Carr just doesn’t get cars

Australian car dealers are justifiably outraged with comments made by the Minister for Innovation, Senator Hon Kim Carr, on Melbourne radio yesterday when he misquoted car sales data to suggest sales are strong despite the automotive industry imploding since changes to FBT car leasing were announced.

On the 16th July the Labor Government ripped $1.8 billion out of the Australian motor industry when it announced significant and far reaching changes to the Fringe Benefit Taxation system, without any prior consultation with the industry. The immediate effect has been 10,000 car orders cancelled or suspended, with the impact to car dealers and the broader automotive industry devastating and obvious for all to see.

Senator Carr must think the motor dealers and the public are ignorant when he says that the FBT changes won’t impact the car industry. Despite his misinformed assurances that sales remain strong, I can report that:

  • Nearly 80% of car dealers have reported lost sales – between 1 and 100 car sales have either been cancelled or suspended at individual dealerships around Australia
  • More than 60% of car dealers are reporting they will need to consider staff number reductions if the changes are introduced

Our figures were reinforced in the VFACTS sales data which was released on Monday. Federal Chamber of Automotive Industries (FCAI) Chief Executive Tony Weber said:

“It is disappointing that even after only a few weeks, we are seeing sales significantly impacted by the Government’s FBT announcement. The full impact, however, will take some time to completely work its way through sales figures.”

The Labor Government continues to ignore the real facts. The impact of these changes has already cost jobs in dealerships and throughout the automotive industry supply chain.

We also note that the $200 million bailout package announced by the Government has no detail attached to it. What will it be used for and who will benefit? Car dealers in Australia, who have millions of dollars invested and employ thousands of people, need assurances that the Labor Government will overturn this catastrophic decision. I encourage Senator Carr to visit dealers and inspect the damage that these changes have caused first hand.

The Federal Opposition Leader was right when he said the bailout package was like putting a band-aid over a bullet wound.

Richard Dudley
CEO AADA

Download the .pdf