One of the best ways to attract high-quality staff is through offering fringe benefits to employees. It just makes good sense. When workers are treated well, and enjoy some extra perks, they are motivated to both maintain a high standard of work practice, as well as be more inclined to remain at their current position, rather than looking for more promising jobs elsewhere. In this sense, fringe benefits, though they may appear to benefit employees, provide employers with both better work, and more stable employee retention.
But in Australia, you can’t just offer fringe benefits and be done with it. There is a fringe benefit tax that must be calculated and paid for the perks that you offer to employees. For some businesses, this is a fairly straightforward procedure that doesn’t require much other than a little bit of number crunching as the tax season arrives. But for the professional transportation and cargo industries, fbt reporting can get a bit more complicated thanks to the mobile nature of the work that employees do.
Easy But Expensive
For better or for worse, the Australian government introduced a method for FBT tax calculation in 2011 that made it easier for employers to figure out their FBT reporting obligations. It’s a flat, 20% rate that doesn’t involve much in the way of complex calculations to arrive at this result. Of course, the downside to such a simple system is that it can be inefficient and expensive. This statutory fraction formula method is based on the price of the vehicle being used.
So, for example, a $35000 vehicle that has travelled a total of 26000 km for the year would have a payment amount of roughly $20000 using the easier statutory fraction method. However, there is another option for employers. It’s called the operational cost method, and it uses actual reported activity. In this case, that 26000 km, when correctly logged and used to calculate FBT would amount to just $11000. That’s a 40% saving on FBT payment for choosing to be more accurate.
Record As You Go
In the past —and for companies that have not yet updated their systems— if an employer chose to go with the more accurate and efficient operational cost method, the process of calculating FBT reporting for drivers was much more tedious. It involved requiring drivers to make a note of exactly how much distance was travelled, which necessitated keeping log books that had to dutifully be kept up to date, on top of expecting drivers to perform their actual job to the best of their ability.
This could often have its own pitfalls as drivers used estimates, rounded figures up or down, or simply forgot to make entries for a particular journey, requiring guesswork and more estimates at a later date. In short, manual entry, while potentially more accurate, can be more demanding and more prone to error when using traditional methods of log/bookkeeping.
The Digital Difference
Using a modern, fully integrated GPS tracking system like those offered by Fleetdynamics makes the operational cost method easier, more efficient and more financially viable. Now, the accuracy of the travel data has been taken out of the hands of the employee and put in a computer. A GPS system, because of its primary function as a location device, can track the entire journey and note the exact distances. Some GPS vehicle tracking companies also offer the ability to log which routes are for personal use and which are for business purposes, further simplifying the FBT tax output.
With a GPS system, you can reap the benefits of operational cost calculation without making any extra demands on either drivers or finance department staff. The required data is automatically recorded and easy to access in a table format that can be forwarded on to your accountant.