RSM Australia has pointed to the high compliance costs and complexity relating to FBT, despite it contributing less than 1 per cent of total revenue collections each year, raking in $4 billion annually compared to the $85 billion in corporate taxes and $220 billion from individuals.
“In a generally inefficient tax system such as Australia’s, FBT stands out as a highly inefficient tax,” said RSM senior manager Belinda Crowley.
“Ideally, FBT should be removed altogether, with benefits being taxed the same way as wages. This would simplify the system and reduce the burden of compliance for employers.”
Ms Crowley believes the government could test run doing away with FBT by first exempting regional businesses.
The move would be in line with the government’s decentralisation agenda, and help regional businesses attract new staff members by providing fringe benefits such as gym memberships, a company car and entertainment that they would currently be taxed on.
“By exempting benefits provided to employees based in regional areas, the government can help regional businesses achieve immediate cash savings. This cash can then be injected into the business, accelerating recovery,” Ms Crowley said.
“Alternatively, the government could exempt benefits provided in regional areas regardless of where employees are based. This might encourage organisations to hold their national conference in a regional area, for example, which would result in direct expenditure at facilities and also encourage employees to spend at local businesses.
“A third option might be to exempt certain industries that are heavily centred in regional areas, such as primary producers and tourism operators. Again, this would deliver an immediate benefit that would flow to surrounding businesses.”
RSM’s proposal comes after the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) had also recently called for FBT to be scrapped for small businesses.
The ASBFEO noted that while many large businesses could offer benefits such as child care and gym memberships on premises and escape FBT, small businesses could not afford to do so.
The Tax Institute have also argued that FBT is “not fit for the 21st century”, noting that Australia is only one of three countries which impose an FBT on employers, with New Zealand and India being the other two.
Are you thinking of expanding your offering into SMSFs to grow your client base? Become a pro at SMSF fundamentals and make your clients bulletproof with the SMSF Foundations course. Learn directly from Aaron Dunn from Smarter SMSF as he deep-dives into the fundamentals you need to know to successfully undertake your work as an SMSF practitioner. Earn up to 21 CPD hours! Learn more
Jotham Lian is the editor of Accountants Daily, the leading source of breaking news, analysis and insight for Australian accounting professionals.
Before joining the team in 2017, Jotham wrote for a range of national mastheads including the Sydney Morning Herald, and Channel NewsAsia.