FIVE TIPS TO MAXIMISE FRINGE BENEFITS TAX

Written on the 16 April 2015

FIVE TIPS TO MAXIMISE FRINGE BENEFITS TAX

SMALL to medium sized businesses risk paying more fringe benefits tax (FBT) than necessary by using the wrong calculation method, according to Concur.

The travel and expense management provider says many businesses can control company expenses and save money by improving the way they calculate meals and entertainment.

FBT for expenses is generally calculated on an annual basis using either the 50/50 split method, the 12-week register or the actual method.

Concur Australia & New Zealand managing director Matt Goss says most businesses have a handle on identifying FBT, but use the incorrect calculation process.

"While many organisations can confidently identify where FBT is applicable or not, they often struggle to identify which method is best for their business and as a result pay more FBT than necessary," Goss says.

"In an economic climate where expenses are increasing and budgets are shrinking, you simply cannot afford to over-calculate your FBT obligations nor choose the wrong method of calculation.

"In fact, the Australian Taxation Office (ATO) encourages businesses to select the method which results in the lowest FBT payment.

"A better understanding of the three FBT calculation methods will help guide you in the right direction.

"However, the only way to confirm which method is best is to test them on a case-by-case basis and ensure you have the tools in place to optimise the calculation processes to start delivering real savings back to your business."

Goss says most businesses use the 50/50 method, as they don't have the systems in place to analyse the most effective FBT calculation method.


CONCUR'S TOP FIVE FBT STRATEGIES


1. Automate the expense management process.

Automating the process lets SMBs determine the lowest FBT liability automatically. It provides full visibility into expenses and enforces the travel and entertainment policy to optimise the expense management process. It also saves employee time.

2. Use clear descriptive definitions for meal and entertainment expenses.

Over-complicating it will confuse employees and impact the quality of data from both a calculation and compliance perspective.

3. Train employees.

Ensure employees understand the difference between the travelling and non-travelling employee status as this affects the FBT liability.

4. Use an employee master list to ensure data accuracy.

Make it simple to search for employee data and avoid multiple versions of the same data.

5. Review the FBT reporting method annually.

Don't assume a specific calculation method will always equate to the lowest FBT liability.


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