Home-based business – Part 9
Fringe benefits tax (FBT)
Examples of fringe benefits include:
- allowing an employee to use a work car for private purposes
- giving an employee a discounted loan
- paying an employee’s gym membership
- providing entertainment by way of free tickets to concerts
- reimbursing an expense incurred by an employee, such as school fees
- giving benefits under a salary sacrifice arrangement with an employee.
The following are not fringe benefits:
- salary and wages
- shares purchased under approved employee share acquisition schemes
- employer contributions to complying super funds
- employment termination payments (including for example, the gift or sale at a discount of a company car to an employee on termination)
- payment of amounts deemed to be dividends under Division 7A
- benefits provided to volunteers and contractors
- exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.
What is fringe benefits tax
FBT is paid by employers on certain benefits they provide to their employees or their employees’ family or other associates. FBT applies even if the benefit is provided by a third party under an arrangement with the employer.
FBT is separate to income tax and is calculated on the taxable value of the fringe benefit. The employer must self-assess their FBT liability for the FBT year (that is, 1 April to 31 March) and lodge an FBT return.
Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. Employers can also generally claim GST credits for items provided as fringe benefits.
Specific concessions apply to some non-profit organisation’s financial professionals
Claiming a tax deduction for expenses for a home-based business
If you operate some or all of your business from your home, you may be able to claim tax deductions for home-based business expenses in the following categories:
- occupancy expenses (such as mortgage interest or rent, council rates, land taxes, house insurance premiums)
- running expenses (such as electricity, phone, decline in value of plant and equipment, furniture and furnishing repairs, cleaning)
- the expenses of motor vehicle trips between your home and other locations, if the travel is for business purposes.
To make it easier for people to claim deductions for working from home due to COVID-19, the ATO are accepting a temporary shortcut method from 1 March 2020 until at least 30 June 2020. This will allow people to claim a rate of 80 cents per hour for all their running expenses, rather than needing to calculate costs for specific running expenses. It also applies to home-based businesses.
When you sell your home, you may have to pay capital gains tax (CGT). It’s important to keep the right records to work out your deductions or CGT.
If you’re entitled to goods and services tax (GST) input tax credits, you must claim your deduction in your income tax return at the GST exclusive amount.