An FBT credit card is a credit card provided by an employer to an employee for business purposes like a business trip or lunch. Any personal usage of the card by the employee is considered a fringe benefit, and the employer has to pay FBT on the value of that personal usage.
Fringe Benefits Tax (FBT) is a tax that employers in Australia have to pay on certain benefits they provide to their employees.
For example, if an employee uses an FBT credit card to buy $100 worth of groceries, the employer has to calculate the FBT payable on those transactions.
Fringe Benefits Tax (FBT Credit Card) Explained
How is FBT Calculated?
The FBT rate is currently 47% (for the 2022-23 FBT year). So in the above example, the employer would have to pay $47 FBT on the $100 grocery purchase.
Employers need to have proper systems to track transactions made on company cards.
How Do Corporate Credit Cards Trigger FBT?
In the corporate world, credit cards are more than just a payment tool. They’re a symbol of trust, responsibility, and convenience. But with great power comes great responsibility, especially when it comes to the Australian Taxation Office (ATO) and Fringe Benefits Tax (FBT). Ever wondered how the use of corporate credit cards can lead to FBT implications? Let’s dive in.
Facts about FBT and company credit cards
Fringe Benefits Tax (FBT) is something every employer needs to know about if they provide company credit cards to staff.
Here are the key points:
- Any personal purchases on a company card – like groceries or food – trigger FBT which the employer must pay.
- To reduce FBT, employers should require staff to submit their purchase receipts explaining all card transactions. This helps identify personal costs.
- Have a clear policy that states personal use of company cards is not allowed and will lead to FBT charges.
- Stay on top of record keeping and calculations for all FBT owed. You can also use FBT calculators.
Understanding the ins and outs of FBT and company credit cards protects your business from unexpected costs down the road.
The Role of Corporate Credit Cards
Benefits for Employees
Corporate credit cards offer employees the convenience of not having to use personal cards for business-related expenses. They can easily track their expenses, and it removes the need for reimbursements.
Implications for Employers
While it’s a great tool for employees, employers need to be careful. Any personal use of the corporate card by the employee is considered a fringe benefit. This means employers could be hit with a hefty FBT bill if not monitored.
Tips for Employers for FBT Credit Card
- Implement clear policies on corporate card usage.
- Regularly review transaction statements.
- Educate employees about FBT implications.
Advice for Employees
- Keep personal and business expenses separate.
- Report any accidental personal expenses immediately.
- Be aware of the FBT implications and the cost it can impose on your employer.
FAQs on FBT Credit Card
What is the current FBT rate?
The current FBT rate is 47%.
Can employees use corporate credit cards for personal expenses?
While they can, it leads to FBT implications for the employer.
How can employers avoid hefty FBT bills?
By monitoring card usage, implementing clear policies, and educating employees.
Are there any potential reforms for FBT in the future?
There’s a call for reforms, but specifics are yet to be determined.
What are the benefits of corporate credit cards for employees?
They offer convenience, easy expense tracking, and eliminate the need for reimbursements.
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