Fringe benefits tax (Australia)
The fringe benefits tax (FBT) is a tax applied within the Australian tax system by the Australian Taxation Office. The tax is levied on most non-cash benefits that an employer provides "in respect of employment." The tax is levied on the employer, not the employee and will be levied irrespective of whether the benefit is provided directly to the employee or to an associate of the employee.[1]
The tax was first imposed in 1986 and the operation of the tax is described by the Fringe Benefits Tax Assessment Act 1986.[2]
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[edit] Fringe benefits
A benefit is a benefit in respect of employment – a benefit provided to somebody because they are an employee. The 'employee' may be a current, former or future employee, and treatment of the benefit will be the same whether it is received directly by the employee or by associate of the employee.
There are several specific 'types' of benefits listed with the legislation, including car fringe benefits, loan fringe benefits, housing fringe benefits and others. For each fringe benefit type, one or more methods is prescribed for determining the taxable value of the benefit.[3]
[edit] Calculation of the tax payable
FBT is paid by the employer at a rate of 46.5%, which represents the highest marginal income tax rate (45%), plus the Medicare levy (1.5%). This rate is applied to the "grossed up" taxable value less any contribution by the employee.
Many employers will effectively recover their FBT payable. The ATO will approach the employer, but unless otherwise specified, it is the employee's income, so the employee must still pay the appropriate tax. If 'salary packaging' is an option to the employee, this is an effective way of receiving benefits in lieu of cash salary. If any FBT liability (current or expected) is evident, this liability can or must be packaged to cover the amount for which the employer is likely to liable.
Some benefits are specifically exempt from FBT, such as the following:
- Remote area housing;
- Living away from home allowances (partly exempt);
- Employee relocation expenses;
- Superannuation (retirement/private pension contributions);
- Minor benefits (less than $300 in value) incurred infrequently and irregularly;
- Work-related items (see below)
The list of exempt work-related items currently includes:
- protective clothing
- tools of trade
- briefcases
- mobile phones
- laptops and similar portable digital assistants (including software, portable printers, calculators, electronic diaries)
All exempt benefits are also exempt from income tax in the hands of the employee.
Special concessional rules apply to employer-provided motor vehicles. Either of two methods may be used. The statutory formula method is the more popular one because it requires less record-keeping. It provides lower FBT rates as vehicle usage increases and as vehicle capital value decreases.
[edit] Reportable fringe benefits
Although FBT is paid by the employer it must also be reported on the employee's PAYG payment summary (formerly known as group certificate). An employer is required to include the reportable fringe benefits amount on this form. While the reportable fringe benefits are shown on the PAYG payment summary, they are not subject to income tax in the employee's hands.
