Fringe benefits tax

Contributed by AnnetteMorgan and current to 27 July 2018

Fringe benefits are non-cash benefits provided by employers as a reward to employees or their associates. These benefits include providing interest-free loans, low-cost accommodation, motor vehicles for employees’ private use, payment of golf-club membership fees, etc. It will also generally cover any “arrangement” which also involves an interposed third party.

You are liable to pay fringe benefits tax (FBT) if you are an employer who provides employees with a fringe benefit. As with most areas involving tax, the operation of the FBT system contains several complexities and exceptions. However, you will most likely be required to pay FBT at a rate of 47 per cent on the value of the benefit provided. Because you pay the tax, the value of the benefit is not taxable in the hands of your employees, although the cost is often treated as part of the employee’s remuneration package.

The introduction of FBT has not stamped out the use of fringe benefits as a reward for employees, as in many situations the total tax paid has been less than had the benefit been paid directly as wages. You are required to report the value of fringe benefits provided to individual employees and record their value on the employee’s PAYG Payment Summary (previously known as a group certificate). The amount of “reportable fringe benefits” is used to determine an employee’s entitlement/liability in relation to specific income-tested concessions or surcharges (including Medicare levy surcharges and HELP-HECS debts).

You can obtain more information on FBT through ATO website or from the ATO’s Business Tax Enquiries line on 13 28 66.