--- title: "ISSUE #40 - FBT 2016 & COLLECTIBLES HELD BY SMSF'S" description: "Fbt 2016; the top 5 things every business needs to know\nIf your business is in the hospital/non-profit sector and uses salary packaging for team members, you’re a small business, or provide team members with a gym or space to do yoga, then there are a few things you need to know beyond the basic FBT changes when the new FBT year starts on 1 April 2016.\n1. You will pay more FBT\nThe Fringe Benefits Tax (FBT) rate is currently 49%.  The rate increased from 47% on 1 April 2015 in conjunction with the introduction of the 2% debt tax on high-income earners (Temporary Budget Repair Levy).  The FBT year that is just ending is the first year at the higher tax rate - which means if you have an FBT liability, you will pay more tax.\nThe FBT rate will stay at 49% until 31 March 2017 when the impact of the debt tax is scheduled to be removed.\n2. Meal entertainment crackdown – medical professionals beware\nIf your business is an FBT exempt entity (public and not-for-profit hospitals, public benevolent institutions, health promotion charities, public ambulance service) or qualifies for the FBT rebate, then there are significant changes that come into play on 1 April you need to be across.\nIn the past, employees of FBT exempt and rebatable entities have been able to salary sacrifice an unlimited amount of meal entertainment expenses (e.g., restaurant meals) with no impact on their existing annual caps.  But, this will all change on 1 April 2016.  From this date, a separate single grossed-up cap of $5,000 for salary sacrificed meal entertainment benefits for employees of exempt and rebatable employers will apply.\nTo give you some idea of the impact let’s look at the example of a doctor employed by a public hospital who salary sacrifices $32,000 of meal entertainment benefits.  If the doctor salary sacrificed these benefits in the 2015-16 FBT year, the full $32,000 would be exempt from FBT and he has nothing to report in his tax return.  If the doctor salary sacrifices these benefits in the 2016-17 FBT year, then the first $5,000 will not count towards their annual exemption cap. However, the balance will be taken into account in determining whether the employee exceeds their exemption cap for the year.  If this excess amount causes the employee to exceed their annual exemption cap then an FBT liability will arise.  The entire amount (including the first $5,000) will also be included in their reportable fringe benefits amount for the year, which could impact on their ability to satisfy other income based tests within the tax system.\nAs an employer, it will be essential to review the existing salary packages of team members affected by the changes as someone will be paying the extra FBT that arises as a result of the new cap being introduced.\n3. Salary sacrificing may not be worth it\nBy now you should have reviewed any salary sacrifice agreements to ensure that they are still viable at the higher 49% FBT rate.  In some cases, salary sacrifice agreements may no longer achieve the intended goals and simply create an administrative burden for little to no benefit.\nFor high income earners (above $180k) however, the difference in timing between the FBT year and the income year means that there will be a planning opportunity between 1 April 2017 when the FBT\nrate reduces back to 47% and 30 June 2017 when the 2% debt tax is removed.\nWith any salary sacrifice agreement just be aware that certain rules must be followed. For example, the appropriate documentation needs to be in place to ensure that the arrangement is ‘effective’. This means that the employee should agree in writing to forgo an amount of salary and wages before that entitlement has been earned. If it’s after, it’s not valid and the employee will simply be taxed on that amount. The business would also be liable for obligations such as PAYG withholding and superannuation guarantee amounts.\nTalk to a SMSF accountant for more extensive information." image: https://content.koustas.com.au/hubfs/FBT-2016-collectibles-held-by-SMSF-s.a10deb.jpg --- [![Koustas](https://content.koustas.com.au/hubfs/Koustas_April2018/image/logo.svg)](https://koustas.com.au/) - [+613 8530 1600](tel:+613%208530%201600) - - - - - [Home](https://koustas.com.au/) - [About Us](https://koustas.com.au/about-us/our-mission-purpose-values.html) - [Our Mission, Purpose & Values](https://koustas.com.au/about-us/our-mission-purpose-values.html) - [Service Standards](https://koustas.com.au/about-us/service-standards.html) - [Careers](https://koustas.com.au/about-us/careers.html) - [Case Studies and Testimonials](https://koustas.com.au/about-us/case-studies.html) - [Awards](https://koustas.com.au/about-us/awards.html) - [Our Services](https://koustas.com.au/our-services.html) - [Accountants for Business](https://koustas.com.au/our-services/accounting-for-business.html) - 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[Professional Services](http://koustas.com.au/our-services/accounting-for-business/details/6/accountants-for-the-professional-services-industry.html) - [Marketing & Creative](http://koustas.com.au/our-services/accounting-for-business/details/7/accountants-for-the-marketing-multimedia-online-creative-industries.html) - [Our People](https://koustas.com.au/our-people.html) - [Client Resources](https://content.koustas.com.au/blog) - [The Koustas Oracle](https://content.koustas.com.au/blog) - [Client Portal Login](https://koustas.com.au/client-resources/client-portal-login.html) - [Trust Assessments](https://koustas.com.au/client-resources/trust-assessments.html) - [Contact](https://koustas.com.au/contact.html) - [Client Resources](https://content.koustas.com.au/blog) - The Koustas ORAcle # ISSUE #40 - FBT 2016 & COLLECTIBLES HELD BY SMSF'S This month we highlight and discuss the looming deadline on how collectibles held by SMSF's will need to be treated post-1 July 2016 and also, we give you the things you need to know in terms of managing FBT from 1 April 2016 and onwards ![FBT-2016-collectibles-held-by-SMSF-s.a10deb](https://content.koustas.com.au/hs-fs/hubfs/FBT-2016-collectibles-held-by-SMSF-s.a10deb.jpg?width=960&height=420&name=FBT-2016-collectibles-held-by-SMSF-s.a10deb.jpg)   ### Fbt 2016; the top 5 things every business needs to know If your business is in the hospital/non-profit sector and uses salary packaging for team members, you’re a small business, or provide team members with a gym or space to do yoga, then there are a few things you need to know beyond the basic FBT changes when the new FBT year starts on 1 April 2016. #### 1. You will pay more FBT The Fringe Benefits Tax (FBT) rate is currently 49%.  The rate increased from 47% on 1 April 2015 in conjunction with the introduction of the 2% debt tax on high-income earners (Temporary Budget Repair Levy).  The FBT year that is just ending is the first year at the higher tax rate - which means if you have an FBT liability, you will pay more tax. The FBT rate will stay at 49% until 31 March 2017 when the impact of the debt tax is scheduled to be removed. #### 2. Meal entertainment crackdown – medical professionals beware If your business is an FBT exempt entity (public and not-for-profit hospitals, public benevolent institutions, health promotion charities, public ambulance service) or qualifies for the FBT rebate, then there are significant changes that come into play on 1 April you need to be across. In the past, employees of FBT exempt and rebatable entities have been able to salary sacrifice an unlimited amount of meal entertainment expenses (e.g., restaurant meals) with no impact on their existing annual caps.  But, this will all change on 1 April 2016.  From this date, a separate single grossed-up cap of $5,000 for salary sacrificed meal entertainment benefits for employees of exempt and rebatable employers will apply. To give you some idea of the impact let’s look at the example of a doctor employed by a public hospital who salary sacrifices $32,000 of meal entertainment benefits.  If the doctor salary sacrificed these benefits in the 2015-16 FBT year, the full $32,000 would be exempt from FBT and he has nothing to report in his tax return.  If the doctor salary sacrifices these benefits in the 2016-17 FBT year, then the first $5,000 will not count towards their annual exemption cap. However, the balance will be taken into account in determining whether the employee exceeds their exemption cap for the year.  If this excess amount causes the employee to exceed their annual exemption cap then an FBT liability will arise.  The entire amount (including the first $5,000) will also be included in their reportable fringe benefits amount for the year, which could impact on their ability to satisfy other income based tests within the tax system. As an employer, it will be essential to review the existing salary packages of team members affected by the changes as someone will be paying the extra FBT that arises as a result of the new cap being introduced. #### 3. Salary sacrificing may not be worth it By now you should have reviewed any salary sacrifice agreements to ensure that they are still viable at the higher 49% FBT rate.  In some cases, salary sacrifice agreements may no longer achieve the intended goals and simply create an administrative burden for little to no benefit. For high income earners (above $180k) however, the difference in timing between the FBT year and the income year means that there will be a planning opportunity between 1 April 2017 when the FBT rate reduces back to 47% and 30 June 2017 when the 2% debt tax is removed. With any salary sacrifice agreement just be aware that certain rules must be followed. For example, the appropriate documentation needs to be in place to ensure that the arrangement is ‘effective’. This means that the employee should agree in writing to forgo an amount of salary and wages before that entitlement has been earned. If it’s after, it’s not valid and the employee will simply be taxed on that amount. The business would also be liable for obligations such as PAYG withholding and superannuation guarantee amounts. Talk to a [SMSF accountant](https://content.koustas.com.au/our-services/accountants-for-smsf.html) for more extensive information. --- [Back to The Koustas ORAcle](https://content.koustas.com.au/blog) You can find us on: [![Koustas](https://content.koustas.com.au/hubfs/Koustas_April2018/image/logo.svg)](https://koustas.com.au/) L9 636 St Kilda Road, Melbourne VIC 3004 PO Box 6750, St Kilda Road Central VIC 3004 [+613 8530 1600](tel:+613%208530%201600) [+613 8530 1616](https://content.koustas.com.au/blog/-issue-40-fbt-2016-collectibles-held-by-smsfs#+613%208530%201616) - Quick Navigation - [Home](https://koustas.com.au/) - [About Us](https://koustas.com.au/about-us/our-mission-purpose-values.html) - [Our Services](https://koustas.com.au/our-services.html) - [Industries](https://koustas.com.au/our-services/accounting-for-business.html) - [Our People](https://koustas.com.au/our-people.html) - [Client Resources](https://koustas.com.au/client-resources/the-koustas-oracle.html) - [Contact](https://koustas.com.au/contact.html) ### Our Accreditations [![Chartered Accountants](https://content.koustas.com.au/hubfs/Koustas_April2018/image/chartered-accountants.png)](http://www.charteredaccountants.com.au/) [![Tax Institute](https://content.koustas.com.au/hubfs/Koustas_April2018/image/the-tax-institute.png)](http://www.taxinstitute.com.au/) [![Self Managed](https://content.koustas.com.au/hubfs/Koustas_April2018/image/self-managed-super-fund-association.png)](http://www.smsfassociation.com/) [![Australian Institute](https://content.koustas.com.au/hubfs/Koustas_April2018/image/australian-institute-of-company-directors.png)](http://aicd.companydirectors.com.au/) [![xero](https://content.koustas.com.au/hubfs/Koustas_April2018/image/xero-partner.png)](https://www.xero.com/au/) ### Newsletter + The Koustas Oracle Liability limited by a scheme approved under Professional Standards Legislation Copyright © 2018 Koustas+Co. 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