Fringe Benefit Tax (FBT) Series 1 - Basics

Fringe Benefits Tax (FBT) Basics: What Every Employer Needs to Know

Many businesses provide benefits to their employees in addition to salary and wages — whether it’s a company car, meals, or even paying for personal expenses. These benefits may be subject to Fringe Benefits Tax (FBT).

In this blog series, we’ll unpack the key areas of FBT, starting today with the fundamentals.

What is FBT and Who Receives Fringe Benefits?

FBT is separate from income tax and is calculated on the grossed-up taxable value of the fringe benefits provided.

FBT is a tax paid by employers on certain benefits they provide to their employees — or their employees’ associates (like family members) — in place of, or in addition to, salary or wages.

For FBT purposes, an employee includes a:

• current, future or past employee

• director of a company

• beneficiary of a trust who works in the business.

If you're a sole trader or a partner in a partnership, you are not an employee and fringe benefits you provide to yourself are not subject to FBT. However, the benefits provided to you might not be tax deductible expenses if they are private in nature.

Who Pays FBT?

Employers are responsible for paying FBT — not the employees receiving the benefits. If your business provides any non-cash benefits to employees, you may have an FBT liability. FBT liability reflects the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax. FBT is then paid by the employer at the top marginal tax rate plus medicare. As such, there is no benefit to receiving fringe benefits unless those benefits are exempt from FBT or concessionally taxed under the FBT regime.

The grossed up value of the benefit will be shown on the income statement as a Reportable Fringe Benefit Amount (if Reportable Fringe Benefit Amount exceed $2,000 for an FBT year) and will be taken into consideration for certain income tests (such as for liability for the medicare levy surcharge, Private Health Insurance Tax Offset, compulsory Study and Training Loan Repayments), but the employee is not liable for FBT on these amounts.

Common Types of Fringe Benefits

Some typical fringe benefits include:

• Company cars used for private purposes

• Car parking

• Entertainment (meals, drinks, tickets to events)

• Reimbursement or payment of private expenses (e.g. school fees, gym memberships)

• Living-away-from-home allowances

• Loans at reduced interest rates or loans forgiven for an employee

• Housing and accommodation

We’ll dive deeper into common fringe benefits used by businesses in the future articles.

FBT Year and Key Dates

The FBT year is 1 April to 31 March. Important dates to keep in mind:

• 21 May – FBT return and payment due (paper lodgers)

• 28 May – Payment due for electronic lodgement

• 25 June – Due date for electronic lodgement (through a tax agent)

How to Minimise FBT

There are ways to reduce FBT, including:

• Using employee contributions (after-tax payments by employees)

• Providing exempt benefits (e.g. work-related items)

• Using salary packaging effectively

• Applying minor benefits or otherwise deductible rules

We’ll explore these strategies in upcoming articles.

Final Thoughts

FBT can be a complex area with many traps for the unwary. Staying on top of your obligations not only avoids penalties but can help you manage your overall tax position more effectively.

In the next post, we’ll take a closer look at car fringe benefits — one of the most common (and often misunderstood) areas of FBT.

If you’re unsure about your FBT obligations or want to discuss strategies to minimise your liability, feel free to get in touch with us (https://www.goodpca.com.au/contact-us).

Disclaimer

This content is intended as a general guide for GOOD PEOPLE ACCOUNTING SERVICES clients. The information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. Although every effort has been made to verify the accuracy of the information contained above, GOOD PEOPLE ACCOUNTING SERVICES disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained on this website or any loss or damage suffered by any person directly or indirectly through relying on this information.