Fringe Benefits Tax

FBT Car 1 Fringe benefits tax (FBT) is paid by employers on some benefits that they provide to their employees.

Benefits can be provided by an employer, an associate of an employer, or a third party by arrangement with an employer.

An employee can be a former, current, or future employee.  Benefits paid to an associate of an employee are also caught.

FBT is a separate tax from Income Tax and is based on the taxable value of the various fringe benefits provided.

The FBT year runs from 1 April – 31 March.

What benefits are subject to FBT?

The following categories of fringe benefits apply, with specific calculations applicable to each:

  • Airline transport
  • Board — e.g.: two meals a day
  • Car — e.g.: letting employees use a work vehicle for a private purpose
  • Car parking
  • Debt waiver
  • Entertainment — e.g.: food, drink, recreation
  • Expense payment — e.g.: reimbursing an expense incurred by an employee such as school fees
  • Housing
  • Living-away-from-home allowance
  • Loan — e.g.: granting an employee a cheap loan
  • Property
  • Residual

What benefits are NOT caught?

  • Approved employee share acquisition schemes
  • Employer contributions to complying superannuation funds
  • Employment termination payments — e.g.: company car given or sold to employee when they leave
  • Certain benefits provided by religious institutions to their religious practitioner

Reducing FBT

You can reduce the amount of FBT you pay by:

  • Replacing fringe benefits with a cash salary
  • Providing benefits that your employees would be entitled to claim as an income tax deduction if they had paid for the benefits themselves -‘Otherwise deductible rule’
  • Providing benefits that are ‘exempt’ from FBT
  • Using ‘employee contributions’

MORE: Read more aboutFBT for small businesseson the ATO website.

FBT is a very expensive tax and employers can get caught out if they don’t do their numbers before offering benefits to employees.  As a rule of thumb – FBT costs about $ 1 for every $1 of benefit paid.  That’ll make you sit up and pay attention.

We can help you plan a benefits programme for your employees that offers effectives rewards without costing you dearly.

Do you want to talk it through? Call the office on (03) 9585 7555 and ask for Noel or Amanda,
orcontact us by email.