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03 September 2020

Axe fringe benefits tax to stimulate cash flow: Ombudsman

The Australian Small Business and Family Enterprise Ombudsman Kate Carnell has urged the Federal Government to abolish fringe benefits tax (FBT) for at least two years to provide a much-needed cash flow boost to the economy and support struggling small businesses.

In a letter to Treasurer Josh Frydenberg, Ms Carnell argued this small change to the tax system would provide a big boost to small businesses in the industries hardest hit by the COVID crisis.

“Small businesses are unfairly impacted by the fringe benefits tax,” Ms Carnell says.

“As it stands, small businesses are required to pay FBT on items that large businesses often provide in-house to retain staff such as meals, gyms and childcare centres.

“Larger businesses can actually claim some services as business expenses, without paying FBT.

“But small businesses that provide the same benefits to their teams offsite have to pay FBT.

“At the same time, high rates of FBT acts as a disincentive to businesses spending with small businesses, particularly those in the hospitality and tourism sectors which are hurting the most right now.

“A weekend away, lunch at a restaurant or a team bonding game of golf, all attract FBT.

“FBT is discouraging businesses from spending with small businesses, which reduces the amount of money flowing into the economy.

“Fringe benefits tax accounted for less than 1% of government revenue in 2019/2020 and that figure is likely to be even less in the current financial year due to the economic downturn.

“Abolishing the FBT would cost no more than $4 billion a year to the Government but it would be an effective support measure for small businesses and also stimulate cash flow into the economy at a time when we need it most.

EY modelling done on behalf of Tourism Accommodation Australia (TAA) and the Australian Hotels Association (AHA) indicates suspending FBT on accommodation, meals and beverages alone, would produce economic returns of up to 3.8 times the direct cost to Government.”