The Council of Small Business Australia (COSBOA) is today calling on the government to create an even playing field by removing the Fringe Benefits Tax (FBT) on childcare and health services for small business employees.
Peter Strong, sovaldi sick Chief Executive said, search “We appreciate that the government is focusing more on the needs and wants to support small business. We currently have a situation where on-site crèches and fitness services provided by big businesses are FBT exempt, while small businesses owners and employees have to pay FBT for exactly the same service off-site. That’s an extra 88% that a big business employees may not have to pay. The FBT was introduced to stop the wealthy from manipulating the tax system to their advantage, but childcare and fitness is not the realm of the rich but a service for us all.”
“Removal of the FBT for small business is a great idea that would not have a big impact on the budget but will greatly benefit health, families, work place productivity and increase employment opportunities. This is the right support for government to give to small businesses with very little negative impact on government revenue in the short term and a positive economic impact in the medium term” Mr Strong added.
COSBOA has today also congratulated Fitness Australia, the national health and fitness industry association, on their campaign (FITnotFBT) to remove Fringe Benefits Tax (FBT) for small businesses.
“COSBOA knows that the impact on the budget is likely to be low as these types of services are not often taken up due to the extra cost of the FBT. A submission from Deloitte to the Federal Treasurer shows that expanding the FBT exemption to external providers would not significantly decrease FBT revenue to government. Deloitte further concluded that any costs would be recouped via the flow-on benefits of reduced health care costs, increased workplace productivity and extra income tax from the fitness industry. This must also apply equally to childcare and will further increase the health and welfare of families, individuals and small business,” Mr Strong concluded.
INFORMATION FROM THE ATO BELOW – and an example of how FBT will be determined
Child care and gym memberships are subject to FBT unless an exemption applies.
Child Care has two common exemptions:
1. When the care is provided on business premises of the employer or an associated entity (FBTAA sub-section 47(2).
Business premises can include a separate building specifically established for child care. Facility can be operated by a third party provider and a number of unrelated employers can jointly lease a facility and be eligible for this exemption.
2. Priority of access payments made by an employer to reserve places for children of employees (FBTAA sub-section 47(8). This exemption only applies to the priority of access payment i.e. it does not apply to the costs of the ongoing care.
Gym membership exemption:
Use of recreational facility, including a gym, located on business premises of the employer or an associated entity is FBT exempt (FBTAA sub-section 47(2).
Amount of FBT payable
If an exemption does not apply, FBT is charged at the general rate (unless the employer is a not-for-profit entity eligible for additional FBT concession). The general rate apples a gross-up formula using the top income tax rate of 47%, ensuring the same tax liability as if the benefit was provided as salary to an employee on the top rate.
For example, if an employer reimburses $10,000 of child care expenses, there would be an FBT liability of $8,868. ($10,000 / 0.53) x 0.47. The 0.53 is used to determine what the employee would need to earn to have the $10,000 for childcare, the 0.47 is the FBT rate applied to that potential income.