If you’re planning to offer salary sacrifice arrangements to employees, allowing them to buy or lease a car or make other purchases using pre-taxed salary deductions, you will be required to pay fringe benefits tax (FBT).
How fringe benefits tax is calculated
Fringe benefits tax for vehicles can be calculated in two ways – using the statutory formula method or the operating cost method. Your salary package provider or accountant can explain the differences between these two payment methods, and help you decide which one is best suited to your business. Under the statutory formula method, the car’s taxable value is a percentage of the vehicle’s value, depending on factors such as its make, age and distance travelled. Under the operating cost approach to fringe benefits tax, a percentage of the total cost of annual car operation is paid instead.
Responsibilities of employers
When employees take out a novated lease or other salary package, including low interest loans or payment of private expenses, their employers will be responsible for paying a variety of fringe benefits. This includes making sure you calculate the correct fringe benefits tax for each part of the salary package, as well as inform employees how to manage their salary sacrifice payments, leases and fuel cards.
How to salary sacrifice in Albany
Fleet Network administers novated leasing in Geraldton, Perth and other areas, allowing employers to add value to their benefits packages and improve attraction and retention of employees. For more details of how to calculate fringe benefits tax and what is involved in salary packaging, call 08 6555 3854.