Earn
The $40bn hidden tax hurting Australian businesses
Businesses rewarding hard-working staff with a Christmas bonus are paying for it through compliance costs associated with Fringe Benefit Tax (FBT), an industry expert argues.
The $40bn hidden tax hurting Australian businesses
Businesses rewarding hard-working staff with a Christmas bonus are paying for it through compliance costs associated with Fringe Benefit Tax (FBT), an industry expert argues.
The Tax Institute’s director tax policy and technical, Andrew Mills, said the compliance cost of Fringe Benefit Tax is costing businesses an estimated $40 billion.
“That’s a deadweight cost on the economy and 10 per cent of total tax collections, effectively imposing an additional 10 per cent ‘hidden’ tax on businesses due to the inefficiencies and complexities within our system,” Mr Millions said at The Tax Summit: Project Reform.
While costing businesses a lot in compliance, FBT only contributes $4 billion to government revenue or 1 per cent of the total, the tax expert highlighted.
“This is a system designed in the 1980s that is not fit for the 21st century. For the amount of revenue raised, the cost and complexity within the system is unjustifiable,” Mr Mills said.
The tax professional urged the government to phase out the tax into a new regime, although acknowledging that the $4 billion raised in revenue is substantial enough that it can’t be removed altogether.
“There are many ways we could transition out of FBT and into a new regime. We could “suspend” FBT for two or three years while the FBT system is redesigned without suspending tax payments,” Mr Mills said.
The director argued for a more effective system where both salary and non-salary forms of remuneration are subject to income tax in the hands of the employee.
“A move away from FBT would remove the need to compare the provision of sandwiches to a more substantive meal at the work Christmas party, or otherwise comparing the provision of a gift hamper or voucher rather than tickets to a sporting event or musical; and that is before you consider the various elections and exceptions available under the FBT Act,” Mr Mills concluded.
RELATED ARTICLES
About the author
About the author
Tax refund
The ATO will be focusing on these four issues at tax time
The tax office has indicated it will be scrutinising areas where taxpayers are known to make mistakes. Read more
Tax refund
More than half of Aussies get stressed at tax time, survey finds
Many taxpayers feel that they may be missing out on deductions in their tax returns. Read more
Tax refund
Engage or face firmer action, ATO warns taxpayers with unpaid debts
The tax office is offering support and assistance to those with overdue debts. Read more
Tax refund
How to prepare for your tax return
While the end of the financial year is still a couple of months away, you can take action now to help maximise your tax return. Read more
Tax refund
What issues will be on the ATO’s radar this year?
H&R Block has outlined two main areas that the tax office is expected to focus on. Read more
Tax refund
How does the expanded low and middle income tax offset work?
Millions of taxpayers will receive hundreds of dollars more in their tax return this year. Read more
Tax refund
Why 90% of taxpayers could face a higher tax bill next financial year
A tax offset for over 10 million Aussies may not be extended in next month’s budget. Read more
Tax refund
PM ponders extension of low and middle income tax offset
Scott Morrison has hinted that a popular tax-saving measure may return in 2022. Read more
Tax refund
The ATO will be focusing on these four issues at tax time
The tax office has indicated it will be scrutinising areas where taxpayers are known to make mistakes. Read more
Tax refund
More than half of Aussies get stressed at tax time, survey finds
Many taxpayers feel that they may be missing out on deductions in their tax returns. Read more
Tax refund
Engage or face firmer action, ATO warns taxpayers with unpaid debts
The tax office is offering support and assistance to those with overdue debts. Read more
Tax refund
How to prepare for your tax return
While the end of the financial year is still a couple of months away, you can take action now to help maximise your tax return. Read more
Tax refund
What issues will be on the ATO’s radar this year?
H&R Block has outlined two main areas that the tax office is expected to focus on. Read more
Tax refund
How does the expanded low and middle income tax offset work?
Millions of taxpayers will receive hundreds of dollars more in their tax return this year. Read more
Tax refund
Why 90% of taxpayers could face a higher tax bill next financial year
A tax offset for over 10 million Aussies may not be extended in next month’s budget. Read more
Tax refund
PM ponders extension of low and middle income tax offset
Scott Morrison has hinted that a popular tax-saving measure may return in 2022. Read more
