A business expert has called for the complete abolishment of the fringe benefits tax (FBT) ahead of the 11 May budget, deeming it “a source of confusion and frustration” for Aussie businesses.
FBT is payable where employers provide their employees benefits in addition to their normal pay, including items like entertainment, gym memberships or using a company car for private purposes.
But for Belinda Crowley, senior manager at RSM Australia, this “highly inefficient tax” should be removed altogether to reduce the burden on employers.
In fact, RSM has identified three reasons to overhaul FBT, including the high cost of compliance and its general complexity.
Moreover, Ms Crowley argued, given that FBT is applied at the top rate of tax, but personal income tax rates are falling, fewer people are being assessed at that rate, meaning employers are paying more in FBT than they would if the employee received the benefit as salary.
“The Australian economy is under pressure from bushfires, drought and COVID-19. Recovery depends on businesses. Meanwhile, the government is pursuing a decentralisation agenda, getting more people to move to regional areas to stimulate their economies,” Ms Crowley said.
“Exempting businesses in regional areas from FBT would cut complexity and costs, while still letting those businesses attract new staff members by providing fringe benefits.”
According to Ms Crowley, by exempting benefits provided to employees based in regional areas, the government could help regional businesses achieve immediate cash savings.
“This cash can then be injected into the business, accelerating recovery,” she said.
Alternatively, Ms Crowley noted, the government could exempt benefits provided in regional areas regardless of where employees are based.
She said: “This might encourage organisations to hold their national conference in a regional area, for example, which would result in direct expenditure at facilities and also encourage employees to spend at local businesses.
“A third option might be to exempt certain industries that are heavily centred in regional areas, such as primary producers and tourism operators. Again, this would deliver an immediate benefit that would flow to surrounding businesses.”
Overall, Ms Crowley concluded, “there is no reason for the government to maintain a dying tax like FBT”.
“Instead, the government can use tax reform to support a stronger and faster national economic recovery,” she said.