That ICPA (Aust) lobbies relevant ministers to support the removal of the Fringe Benefits Tax (FBT) for businesses who assist their employees residing in geographically isolated areas, by providing financial assistance to enable their children to attend boarding school.
Currently many businesses across remote Australia are faced with the financial challenge of helping to fund the education of employee’s children.
Financial assistance is essential to support families employed in remote areas of Australia as they are unable to afford the exorbitant expenses of sending their children to board for secondary schooling. Families who have no choice but to leave their homes and place of employment to continue their child’s education, simply because they cannot afford the costs of boarding, leaves employers with a hard to fill gap in the remote workplace. These remote and rural workplaces struggle to fill vacancies.
Businesses able to provide financial assistance for boarding and secondary school retain their valuable employees. However, it is these businesses able to offer financial aid that are struck with the added costs of paying Fringe Benefits Tax on the assistance provided.
For example, a business who offers to cover 50% of a boarding school fee that totals $50,000 will be subject to 47% FBT and pay approximately $23,500 in tax on top of the $25,000 of assistance. A total cost of $48,500 to that employer, almost doubling the costs of their financial support. This is a significant deterrent for any business thinking of offering assistance.
It is most likely that more employers would be able to offer financial assistance to their employees if the FBT was removed. This would help stabilise a rural workforce and keep valuable families in rural and remote Australia.
Employers could increase the employee’ssalary to "cover" the fee amount but then the employee is taxed depending on their tax rate so they don't receive the full amount.
So effectively the employer pays double, they can claim it as a deduction and claim any GST but still because of the tax it would mean that many employers would not do so.
There are some FBT exemptions for remote areas but they are very limited. One is that employers can provide housing for their employees. The ATO states the reason is because:
● there is insufficient suitable residential accommodation otherwise available at or near the place where the employee is employed.
This argument also applies in regard to secondary school options. There are often insufficient suitable secondary school options available in remote areas, so the removal of FBT for employers assisting their employees in educating their children would be beneficial to regional and remote Australians.
Also, if an employee receives a fringe benefit it is not part of their taxable income but is reported in the tax return and is used to calculate income thresholds for Centrelink benefits etc so would affect eligibility for certain benefits.
