A Guide for Fringe Benefit Tax

FBT – a guide for employers

The Fringe Benefits Tax (FBT) lodgement and payment deadline for the FBT year (1 April to 31 March) is 21 May. However, if you lodge electronically using a registered tax agent, your deadline is generally extended to 25 June.

A fringe benefit is like a payment to an employee, but in a different form to salary or wages.

There are different types of fringe benefits. Examples include:

  • allowing an employee to use a work car for private purposes
  • car parking
  • paying an employee’s gym membership
  • providing entertainment by way of free tickets to concerts
  • reimbursing an expense incurred by an employee, such as school fees
  • giving an employee a discounted loan
  • giving benefits under a salary sacrifice arrangement with an employee.

The following are not fringe benefits:

  • salary and wages
  • employer contributions to complying super funds
  • shares or rights provided under approved employee share acquisition schemes
  • employment termination payments (including, for example, the gift or sale at a discount of a company car to an employee on termination)
  • payments deemed to be dividends under Division 7A
  • benefits provided to volunteers and contractors
  • exempt benefits, such as certain benefits provided by religious institutions to their religious practitioners.

Who receives fringe benefits?

FBT applies to fringe benefits provided to your employees, or to your employees’ families or other associates.

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. Benefits you provide to yourself are not subject to FBT.

Your clients are not employees. Benefits you provide to clients, such as entertainment, are not subject to FBT.

Who pays FBT?

The employer pays FBT.

This is the case even if the benefit is provided by a third party under an arrangement with the employer.

How much FBT do you pay?

To work out how much FBT to pay, you ‘gross-up’ the taxable value of the benefits you’ve provided. This is equivalent to the gross income your employees would have to earn, at the highest marginal tax rate (including the Medicare levy), to buy the benefits themselves.

The FBT you pay is 47% of this ‘grossed-up’ value of the fringe benefits.

Fringe Benefits Tax (FBT) calculations for GST items depend on whether you can claim a GST input tax credit for the benefit.

GST-inclusive items require a “Type 1” gross-up rate of 2.0802,

while non-GST items use a “Type 2” rate of 1.8868.

Example: FBT on gym membership (type 1)

Jenni runs a small consulting firm. She provides her employee, Anton, with a gym membership that costs $1,100 (including $100 GST).

This is a fringe benefit. Jenni works out the FBT as follows:

Taxable value of the benefit ($1,100 GST inclusive)

× the gross-up rate (for a GST-inclusive fringe benefit the rate is 2.0802)

× the FBT rate (47%)

1100 x 2.0802 x 47% = 1075.46

= FBT of $1,075.46.

Jenni must prepare and lodge an annual FBT return, and pay her FBT liability.

She may also need to calculate and report Anton’s reportable fringe benefits amount in his end-of-year payment information.

As the gym membership is subject to FBT, Jenni can claim:

  • an income tax deduction and GST credit for the cost of the gym membership
  • an income tax deduction for the FBT paid.

Can employers claim deductions and GST credits?

As an employer, you can claim:

  • an income tax deduction and GST credits for the cost of providing fringe benefits
    • if you can claim GST credits, you claim the GST-exclusive amount as an income tax deduction
    • if you can’t claim GST credits, you claim the full amount as an income tax deduction
  • an income tax deduction for the FBT you are required to pay.

What do you need to do?

As an employer, you need to:

  1. Identify the types of fringe benefits you provide.
  2. Check for FBT concessions and ways you can reduce FBT.  
  3. Some Benefits FBT exempted: general work-related expenses.

Portable electronic devices

Portable electronic devices that are mainly used for work purposes are exempt from fringe benefits tax (FBT).

The exemption applies to one item per FBT year for items with a substantially identical function (unless it is a replacement item).

However, small businesses can provide employees with more than one work-related portable electronic device in an FBT year – even if they have substantially identical functions. A SMALL BUSINESS ENTITY (SBE) is a business with an aggregated turnover of less than $50M in an income year that starts or ends in the relevant FBT year.

A portable electronic device is a device that:

  • is easily portable and designed for use away from an office environment
  • is small and light
  • can operate without an external power supply
  • is designed as a complete unit.

Portable electronic devices include:

  • mobile phones
  • laptop and tablet computers
  • portable printers
  • calculators
  • portable global positioning system (GPS) navigation receivers.

Software, protective clothing, tools of trade

The following work-related items are exempt from FBT where they are mainly used for work purposes:

  • computer software
  • protective clothing
  • briefcases
  • tools of trade.

There is a limit of one item per employee in an FBT year for items that are basically the same, unless it is a replacement item.