Understanding Fringe Benefits Tax: A Guide for Employees

Fringe Benefits Tax (FBT) is a tax that employers pay on certain benefits they provide to their employees or their employees’ family or other associates. FBT is separate from income tax and is based on the taxable value of the various fringe benefits provided.

Some examples of fringe benefits are:

– Allowing your employee to use a work car for private purposes

– Giving your employee a cheap loan

– Paying an employee’s gym membership

– Providing entertainment by way of free tickets to concerts

– Reimbursing an expense incurred by your employee, such as school fees

– Giving benefits under a salary sacrifice arrangement with your employee

As an employee, you may not have to pay income tax on the value of the fringe benefits you receive. However, you may have to report the taxable value of some fringe benefits on your tax return, which may affect your:

– Private health insurance rebate

– Family Tax Benefit

– Child support payments

– Higher Education Loan Program (HELP) and Trade Support Loan (TSL) repayments

Your employer is required to report the grossed-up taxable value of certain fringe benefits exceeding $2,000 for the FBT year (1 April to 31 March) on your payment summary or income statement for the corresponding income year (1 July to 30 June).

The grossed-up taxable value is calculated by multiplying the taxable value of the benefit by either the type 1 or type 2 gross-up rate, depending on whether your employer can claim a GST credit for providing the benefit.

The type 1 gross-up rate for the 2022–23 FBT year is 2.0802 and the type 2 gross-up rate is 1.8868. These rates have not changed since the FBT year ending 31 March 2019

For example, if you receive a car fringe benefit with a taxable value of $5,000 and your employer can claim a GST credit for providing the car, the grossed-up taxable value reported on your payment summary or income statement will be $5,000 x 2.0802 = $10,401.

If you have any questions about how FBT affects you as an employee, you can contact the Australian Taxation Office (ATO) or seek professional advice from a tax agent.

There are some industries that have FBT exemptions such as Not-For Profits which means you could potentially access further tax advantages.