What is a Fringe Benefits Tax (FBT)?

Fringe Benefits Tax (FBT) is a tax paid by employers on certain benefits provided to their employees, their families, or other associates.

An employee can include current, future, or past employees, and directors of a company. Sole traders and partners in a partnership are not considered employees, and benefits provided to you are not subject to FBT. It’s separate from income tax and is calculated based on the taxable value of the fringe benefit. As an employer, you self-assess your FBT liability for the FBT year (which runs from 1 April to 31 March). If you have an FBT liability, you must lodge a FBT return and pay the FBT owed.

What counts as a Fringe Benefit?

A fringe benefit is like a payment to an employee but takes a different form than salary or wages.

Here are some examples of fringe benefits:

  • Allowing an employee to use a car owned by the employer or salary packaged by the employee (e.g. under a novated lease) for private purposes.
  • Providing car parking (subject to certain exemptions).
  • Paying an employee’s gym membership.
  • Offering entertainment through free concert tickets.
  • Reimbursing an employee’s expenses (e.g., school fees, private travel costs).
  • Giving discounted loans.
  • Benefits under salary sacrifice arrangements.

However, certain items are not considered fringe benefits, including salary and wages, employer contributions to complying super funds, and shares provided under certain employee share schemes.

How much FBT do employers pay?

To calculate FBT, employers “gross up” the taxable value of the benefits provided. This means in effect determining the gross income employees would need to earn (assuming the highest marginal tax rate, including the Medicare levy) to pay for those benefits themselves. The actual FBT paid is 47% of this “grossed-up” value of the fringe benefits.

Example: FBT on a Gym Membership

Jenni, who runs a small consulting firm, provides her employee, Anton, with a gym membership costing $1,100 (including $100 GST). The FBT payable would be calculated based on the grossed-up value of this benefit. This is calculated as follows: $1,100 (taxable value) x 2.0802 (Type 1 gross-up rate) = $2,288.22 (grossed-up taxable value). FBT payable = $2,288.22 x 47% (FBT rate) = $1,075.46.

Are there any fringe benefits that are exempt from FBT?

Here’s a list of the most common exempt benefits under FBT law in Australia:

1. Work-related items exempt from FBT:

  • Certain work-related items are exempt from FBT. These include:
    • Portable electronic devices (such as work laptops, tablets, and mobile phones).
    • Tools of trade necessary for carrying out employment duties.

2. Minor benefits exemption:

  • The minor benefits exemption applies to certain small benefits provided to employees that are under $300 each.

3. Taxi, ride-sharing, and public transport exemptions:

  • Travel by your employees in taxis or ride share services to or from the workplace, or on public transport you operate, may be exempt from FBT

If you are required to pay FBT and require assistance preparing your FBT return or calculating what’s due, please contact your usual Mazars advisor or one of our experts via the form below or on:

Brisbane – Nathanael Lee

Melbourne – Liliana Harris

Sydney – Dean Newman

+61 7 3218 3900

+61 3 9252 0800

+ 61 2 9922 1166

 Author: Nathanael Lee

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Source: https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/how-fringe-benefits-tax-works

Published: 13/03/2024

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