5 tips to unlock FBT savings
When a benefit is subject to FBT in full, its cost effectively doubles. When you factor in administration, including chasing down documentation, preparing and lodging the FBT return and summarising and issuing reportable fringe benefits statements to employees, the cost increases even more. Here are some practical tips to reduce the cost associated with FBT.
1. Critically assess last year’s return
Many employers pay little attention to what is driving their FBT cost. While it’s common to make a quick comparison to the prior year’s cost, it’s far less common to really consider the role each benefit plays in the organisation and whether it remains fit for purpose. This may involve reconsidering expatriate packages, the structure of incentive programs and salary packaging arrangements. It may be timely to revisit what employees really value. This valuable process can serve the dual purpose of improving the power of fringe benefits as a remuneration tool while also reducing cost.
2. Use exemptions well
Exempt benefits have no FBT cost while still generally being tax deductible to the employer. Examples include work-related items, professional memberships, superannuation contributions, many remote and relocation benefits and minor benefits. Exempt fringe benefits don’t have to be reported on the FBT return either, reducing admin costs.
3. Make the most of shortcuts for documentary requirements
Getting employee declarations, logbooks, travel diaries and the right supporting invoices and receipts is essential to take advantage of reductions in valuing benefits. In many cases, the right declaration is the difference between FBT doubling the cost of the benefit or being eliminated altogether. There are lots of recent simplifications that can streamline the process of meeting documentary requirements and reduce the time and effort of chasing up employees but using these also requires planning.
4. Penetrate data with technology
Data analytics and workflows are being applied exceptionally well to penetrate large volumes of data and provide the opportunity to use valuation methods that may not have been available in the past. For example, analytics can give much better insight into meal entertainment and car parking data and enable various methods to be compared.
5. Plan ahead when introducing new benefits
When considering a new remuneration item such as assistance with health insurance or the ability to package a novated lease, good advice can help make sure you structure it in the most effective way and understand the records you need to keep. Incorporating this into your systems and processes from the outset will save effort down the line.
Disclaimer
The advice and information contained in this summary are of a general nature and should not be relied upon as professional advice, nor an exhaustive outline of considerations. It is recommended that you seek appropriate professional advice tailored to your organisation’s specific circumstances before making any decisions or taking any actions based on the content herein.