Fringe Benefits Tax
Fringe benefits are
$300, portable electronic devices such as laptop,
benefits paid to an
PDAs, and mobile phones (limited to a maximum
employee (or
of one per employee per year) provided primarily
associate) in respect
for use in an employee’s employment and
of employment,
relocation expenses incurred when an employee
such as a car, car
changes their job location.
parking, low interest
Concessionally valued fringe benefits
loan and payments
of private expenses.
Fringe Benefits Tax
(FBT) is the tax payable on the provision of these
benefits. FBT is separate from income tax and is
calculated on the taxable value of the various
benefits provided.
A concessionally valued benefit is where the
deemed taxable value of the item is less than its
actual cost. Examples of concessionally valued
benefits are “in-house” benefits, car parking and
an employer-provided car.
Car fringe benefits
If your business provides fringe benefits to
The taxable value of an employer-provided car
employees then you need to:
can be ascertained by using the “statutory
calculate how much FBT you have to pay
method”. Under this method the car’s “base
keep the necessary FBT records
value” is multiplied by a statutory percentage,
register for FBT
determined by the kilometres travelled.
report fringe benefits on your employees’
payment summaries
As the resulting notional value is usually less than
lodge a return and pay FBT to the Australian
the actual costs of the car, the benefit can be
Taxation Office (ATO)
valued on a concessional basis.
understand which benefits are exempt from
An alternative to the statutory method is the
FBT.
“operating cost” method. Under this method an
employee maintains a log book for a twelve-week
Type of fringe benefits
representative period to establish the business
The range of fringe benefits eligible to be
usage. All costs associated with the motor vehicle
provided can be categorised as exempt fringe
benefits, concessionally valued fringe benefits and
ordinary fringe benefits.
are summarised at the end of the FBT year, and
multiplied by the non-business usage to ascertain
the taxable value of the fringe benefit.
Exempt fringe benefits
The operating cost method can generally achieve
Exempt benefits are those that have no taxable
a lower taxable value where the car has
value, regardless of the status of the employer.
significant business usage or is expensive.
They are not required to be disclosed on a
recipient’s payment summary and are not subject
Ordinary fringe benefits
to payroll on-costs, such as Workcover and payroll
An ordinary or fully taxable benefit is where the
tax.
taxable value of an item is the same as it cost,
Examples of exempt fringe benefits include minor
benefits provided infrequently valued less than
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20 Albert Street / PO Box 256
Blackburn Victoria 3130
T: 03 9894 2500 F: 03 9894 1622
contact@youraccountant.com.au
less any work-related or “otherwise deductible”
use. An example of this is payment of a personal
Published May 2014
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expense, such as a health insurance costs.
Further information
What fringe benefits should be
packaged?
For further information on Salary Packaging see
When undertaking salary packaging analysis it is
generally advantageous to concentrate on fringe
benefits which have a taxable value that can be
reduced or eliminated in some way. This will be
the case with exempt or concessionally valued
fringe benefits.
It is generally recommended not to package an
ordinary fringe benefit. This is particularly relevant
the following FocusOn information sheets:
Salary packaging overview
Salary packaging - Public benefit
institutions
Salary packaging - Rebatable employers
Salary packaging - Religious institutions
or contact any of the following people at our
office on 9894 2500, or via email:
Murray Nicholls murray.nicholls@youraccountant.com.au
for ordinary employers where the taxable value of
the benefit attracts FBT at the full rate of 46.5%.
In such circumstances there is no tax advantage if
the employee’s marginal tax rate is at least
Simon Dinér
simon.diner@youraccountant.com.au
Andreas Faulwetter
andreas.faulwetter@youraccountant.com.au
46.5%. However, a tax disadvantage will result if
the employee’s marginal tax rate is less than
46.5% due to the fringe benefit being subject to a
higher rate of tax than the salary that would
otherwise be earned.
How can FBT be reduced?
Liability limited by a scheme approved under Professional
Standards Legislation
Disclaimer: This publication has been prepared on the basis of
information available at the date of preparation. The
information is general in nature and is not to be taken as a
substitute for specific professional advice. We recommend that
our advice be sought on specific issues prior to acting on
transactions affected.
As stated above, the provision of a fringe benefit
usually attracts FBT which is effectively calculated
at the top marginal rate of 46.5%. As this
marginal rate of tax only applies to higher levels
of income, the imposition of FBT can result in this
form of remuneration being subject to a higher
rate of tax than if it had been taken as salary.
To avoid this undesirable outcome, many
employees believe that they should simply avoid
salary packaging altogether. However, in many
instances it is not the provision of the benefit that
is not tax-effective but the imposition of FBT.
To avoid FBT it is possible for an employee to
make a contribution to their employer for the cost
of the benefit. This essentially reduces the taxable
value of the benefit to zero, thus avoiding the
need for the benefit to be grossed-up and for FBT
to be calculated.
FocusOn FBT