A new personal income tax rate is to come into effect on 1 April 2021, which increases the amount of gross income that the government deems subject to tax. This outcome will impact current Fringe Benefit Tax rates for all employers.
FBT rules have been designed and structured to ensure that any of these fringe benefits that you receive during your employment (i.e. company car) will be taxed at the same rate as cash salary and wages.
Personal income tax has a new rate of 39%, which will apply to any income earned by an individual over $180 000. As an employer, consider how the new FBT rates will be applied within the business, even if no employees are earning over $180 000. FBT can be paid at either a flat rate, or the fringe benefits can be attributed to individual employees and taxed at a rate appropriate to the employee’s marginal tax rate (the highest rate of tax).
The new rates per pay range are as follows:
- $0 – 12, 530 will have a tax rate of 11.73%
- $12, 531 – $40, 580 will have a tax rate of 21.21%
- $40, 581 – $55, 980 will have a tax rate of 42.86%
- $40, 581 – $55, 980 will have a tax rate of 42.86%
- $55, 981 – $129, 680 will have a tax rate of 49.25%
- $129, 681 and up will have a tax rate of 63.93%
To put this into perspective, the flat rate of FBT for salary earners of over $129, 681 is increasing from 49.25% to 63.93%.
Now is the time for employers to consider the increases in FBT tax that could cost their business and consider reviewing their FBT controls, processes, and software use. A simple and easy way to do this and ensure that the business remains compliant with FBT is to engage a specialist accountant.
