Understanding Fringe Benefits Tax: A Guide for Employers

Employers must pay the Fringe Benefits Tax (FBT) on certain benefits they give to their workers or their employees’ associates. FBT is based on the taxable value of the various fringe benefits offered and is separate from income tax.

The FBT year spans from 1 April through to 31 March. Employers are required to file an FBT return and self-assess their FBT liability for the FBT year. Currently, the grossed-up taxable value of the fringe benefit is subject to an FBT rate of 47%.

Here are some examples of fringe benefits:

– Car fringe benefits, in which the employer offers or makes a car available to an employee or an associate for personal use.

– Entertainment fringe benefits, in which an employer provides food, drink, or entertainment to an employee or their associate.

– Fringe benefits that cover expenses incurred by an employee or their associate and are paid for by the employer or a third party.

– Loan fringe benefits, in which an employer gives a loan to a worker or their associate and taxes either no interest or a minimal interest rate.

– Housing fringe benefits, in which an employer offers housing to a worker or their associate as their primary residence.

Some benefits, like the following, are exempt from FBT or receive concessional treatment such as:

– Minor benefits with a notional taxable value of less than $300 that are irregular and infrequent.

– Tools of the trade and work-related equipment, including laptops, cell phones, protective gear, and clothing.

– Certain taxi rides taken by a worker.

– A few advantages offered by small businesses regarding parking.

– A few perks offered to staff members of public hospitals, public ambulance services, public and not-for-profit health promotion charities, and a few other organisations.

Employers may be able to lower their FBT liability by

– Offering benefits that are exempt from FBT or receive concessional treatment.

– Paying a higher salary in cash rather than offering benefits.

– Paying for the benefit jointly with the employee through a contribution from them.

– Applying the best valuation technique to determine the benefit’s taxable value.

Depending on your legal structure and objectives, you as a not-for-profit employer might qualify for a higher capping threshold or an FBT rebate. The gross-up taxable value of the fringe benefits you can offer to each employee before you must pay FBT is known as the capping threshold. Your FBT liability is decreased by a specific percentage thanks to the FBT rebate. The capping thresholds and the FBT rebate rate are unchanged from the prior year for the FBT year ending 31 March 2022. You may be exempt from FBT if you are a Not-for profit organisation or another industry that has exemption caps available.

Employers who are unsure of their FBT obligations should seek professional advice because FBT is a complicated area of taxation. Visit the Australian Taxation Office’s website at https://www.ato.gov.au/general/fringe-benefits-tax-(fbt)/ for more information.