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FBT Rate Increases Coming Soon – Take Action!
Effective 1 April 2015, Fringe Benefits Tax will increase from 47% to 49%. In order to prevent individuals who earn more than $180,000 from self-sacrificing into fringe benefits to avoid extra tax, the temporary budget repair levy of another 2% has been imposed.
In order to entice the best staff, minimise turnover and increase efficiency, employers usually come up with competitive salary packages. Fringe benefits are often used as salary sacrifices to make the entire employment package more attractive for all parties.
The question is, what is the effect of the higher FBT rate to your business? The rise in the rate could possibly have an impact on your business and an individual arrangement you have in place.
Revision of current fringe benefits for those who earn less than $180,000 a year may be beneficial for both the employee and the employer. Converting fringe benefits into additional salary may limit the probable extra costs as the salary may be taxed at a considerably lower rate than 49%.
On 31 March 2017, the FBT rate will return to its current rate.
Contact your accountant at McKinley Plowman to ensure that your current strategy and approach is still relevant and consistent with your objectives.
written by:
McKinley Plowman
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