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There are three different fringe benefit tax (FBT) rates. Choose the one that best suits your business and apply it to the taxable value of your fringe benefits.
Consider your situation when deciding which FBT rate to apply to the fringe benefits you provide. There are pros and cons to each of the three options and we discuss these below.
The single rate is 49.25%. This is the highest FBT rate.
You apply this rate to all fringe benefits provided.
Using the single rate for all your FBT returns is the easiest option, but if any of your employees earn an annual income of less than $70,000, you'll end up overpaying. The alternate rate deals with this situation.
The short form alternate rate is:
You apply the appropriate rate to all fringe benefits provided.
The short form alternate rate can be a good option if you have employees earning less than $70,000 or if you provide a number of non-attributed benefits.
A major shareholder-employee is a person who owns, controls or has the right to acquire 10% or more of the ordinary shares, voting rights or control of a close company, and is also an employee of that company.
Non-attributed benefits are pooled or shared fringe benefits that are not assigned to an individual employee. This option is useful when all employees have the same or similar rights to a particular benefit. For example, a work motor vehicle that everyone can use.
The full alternate rate only applies to attributed benefits.
If you choose the full alternate rate, you need to do a separate calculation for each employee. This can require more record keeping and a lengthier calculation process, but these demands may be offset by tax savings.
Our Fringe benefit tax alternate rate calculator can do the calculations for you, or you can follow these steps for each employee:
If you file quarterly returns, deduct all FBT paid for the employee in the previous three quarters. You only need to pay the net amount in the fourth quarter.
Full alternate FBT rates are:
These rates are applied to each "layer" of the employee's FBICR to calculate Total A.
For example, a FBICR of $38,000 would give you a Total A of $6,871.94:
|$12,530 at 11.73%||$1,469.76|
|$25,470 at 21.21%||$5,402.18|
Consider your situation when deciding which FBT rate to apply to the fringe benefits you provide. Think about the:
If you file an annual return, you can choose any of the three FBT rates and change rates from year-to-year.
If you file quarterly, you can swap between FBT rates during the year. This can help you more accurately calculate your annual FBT. For example, you might choose to calculate FBT on all fringe benefits for the first three quarters at the single rate of 49.25%. Then use the short form alternate rate or full alternate rate in the fourth quarter. This option will "square up" your FBT for the year.
If you elect and pay FBT using the alternate rate in any of the first three quarters, you must complete the alternate rate calculation process in the fourth (final) quarter.
Once you’ve chosen a FBT tax rate, find out the next steps in the FBT return process.