What is Fringe Benefits Tax?
Fringe Benefits Tax (FBT) is a tax payable by employers on benefits provided to employees or associates of employees, in respect of the employee's employment. The definition of employee includes former, current and future employees. FBT also applies where benefits are provided by an associate of an employer or by a third party under an arrangement with the employer.
FBT was introduced in 1986 to improve the fairness of the taxation system. It was designed to overcome deficiencies in the income tax law that allowed benefits other than salary and wages to be tax-free income.
Liability for FBT is assessed on an annual basis, with the FBT year beginning 1 April and ending 31 March. The rate of tax may vary from year to year. For the FBT year beginning 1 April 2016 the rate of FBT is 49% (equivalent to the top individual marginal tax rate plus the Medicare levy and Temporary Budget Repair Levy) of the aggregate of the grossed-up taxable values of fringe benefits provided by the employer.
What items are subject to FBT?
‘Benefits' are broadly defined in the Fringe Benefits Tax Assessment Act 1986 to include any right, privilege, service or facility. The definition of a fringe benefit specifically excludes, amongst other things, the following:
- a payment of salary or wages
- the provision of exempt benefits
- a payment of superannuation to a complying fund for an employee
- an employment termination payment.
The following are examples of benefits provided by Ministerial and Parliamentary Services (M&PS):
- Residential telephones/faxes/internet connection
- Spouse/Dependant/Nominee Domestic and Overseas Travel
- Studies Assistance (HECS - HELP payments)
Effect of receiving a Fringe Benefit
Employers are required to report the ‘grossed-up’ taxable value of fringe benefits on an employee’s annual payment summary where the total taxable value of certain fringe benefits attributable to the employee exceeds $2,000 in an FBT year. The benefit reported on the employee's payment summary is termed a ‘Reportable Fringe Benefit' and includes fringe benefits provided to both the employee and associates of the employee.
The FBT grossing up process is designed to express the value of fringe benefits in terms of the approximate amount of pre-tax (gross) income an employee would need to be paid in order to purchase the same benefit. This grossing up occurs at the rate applicable for Type 2 benefits (currently, 1.9608 for the FBT year commencing 1 April 2016).
The amount reported on the payment summary will not be included in assessable (or taxable income) nor will it affect the amount of standard Medicare levy paid. An employee’s RFBA is used for income tested government benefits and obligations and are included in the calculation of an employee’s Adjusted Taxable Income.
Action required at end of FBT year
If you receive any Reportable Fringe Benefits during the FBT year, M&PS will send you notification after the end of the FBT year (31 March). This will be in the form of a Statement of Reportable Fringe Benefits. It is important that you review the statement and inform M&PS of any changes to the information. This will affect the Reportable Benefit shown on your payment summary and the FBT liability paid by the M&PS.
The attached diagram outlines the process to follow at the end of the FBT year.
FBT Declaration Forms
- Form 161: Request to Vary Information
- Form 162: Declaration of Availability of Private-Plated Vehicle
- Form 163: Expense Payment Benefit Declaration: Residential Phone Benefits and/or Dedicated Data Line Benefits
- Form 164: Expense Payment Benefit Declaration: Travel Benefits
- Form 165: Pooled or Shared Car Certification
Frequently Asked Questions
For queries contact the FBT Help Desk.