March 19, 2024

The Fringe Benefits Tax labyrinth

As we inch closer to the FBT year's end on March 31, it's crucial for businesses to sharpen their pencils and ensure they're not caught off-guard. Let's dive into the key areas that demand your attention.

Electric Vehicles: A spark in FBT regulations

In 2022, the government introduced a concession allowing some electric vehicles (EVs) to be provided to employees without the usual 47% FBT on private use. This exemption is a game-changer for environmentally conscious workplaces. However, here's the fine print:

The vehicle must be below the luxury car tax threshold ($89,332 for the 2023-24 financial year) and first held and used on or after July 1, 2022.

Post-March 31, 2025, plug-in hybrid vehicles will lose this exemption unless certain preconditions are met.

Common pitfalls and how to avoid them

Who's Eligible: The exemption targets vehicles provided by employers to employees, including under salary sacrifice agreements. Partners of a partnership and sole traders can't access this exemption personally.

Luxury Car Tax (LCT): If a vehicle doesn't meet the exemption criteria from the get-go due to surpassing the luxury car limit or pre-use before July 1, 2022, it can't qualify later.

Home charging stations: These are not included under the exemption. If an employer installs or pays for one at an employee's home, it's considered a separate fringe benefit.

The paperwork: Even with exemptions, the value of fringe benefits is reported on the employee's income statement, impacting various income tests and obligations.

Other FBT areas to watch

Registration: Most businesses will provide some form of fringe benefits. Not being registered for FBT when you should be can attract the ATO's spotlight.

Travel expenses: The distinction between work-related travel (deductible and FBT-free) versus commuting (not deductible andFBT-applicable) is critical. Recent court decisions underscore the importance of understanding this distinction thoroughly.


A New Horizon for Taxpayers

The revised Stage 3 tax cuts, effective from July 1, 2024, promise to simplify the personal income tax system. But what does this mean for you and your salary packaging?

Tax rate adjustments: As tax rates and thresholds are adjusted, checking and potentially restructuring salary sacrifice agreements might be necessary to continue maximising tax benefits.

The new brackets: Understanding how the updated brackets affect your take-home pay and tax obligations is essential for forward financial planning.

Tax rates

For the 2024-25 financial year, here's a quick summary of the changes:

The 19% tax bracket extends up to $45,000, aligning with previous thresholds but preparing for broader tax rate adjustments in higher income brackets.

The significant change comes in the mid to high-income brackets, where the 32.5% rate now applies up to $120,000, and a new 30% rate is introduced for incomes between $45,001 and $135,000, broadening the middle-income tax relief.

The top rate of 45% kicks in for incomes over $180,000, adjusting upwards to apply for incomes over $190,000 in the 2024-25 year, reflecting a shift designed to lessen the tax load on high-income earners.

We’re here to help

Understanding the twists and turns of the Fringe BenefitsTax and adapting to the landscape reshaped by the Stage 3 tax cuts requires diligence and strategic planning.

If you have concerns about navigating these complexities, reach out to us at Lead Advisory Group. Our experts are committed to guiding you through these updates, ensuring you capitalise on the benefits while minimising your tax load.

Happy Easter

As we sign off, we’d like to wish everyone a Happy Easter! Enjoy this time to recharge with loved ones.

Our office will be closed for the holiday from March 29 toApril 2.

Until then, stay strategic and savour the Easter celebrations!

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Financial Advisors Bendigo Country Road at Dawn Lead Advisory Group
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