Fringe Benefits Tax (FBT)
Fringe Benefits Tax is a tax paid on certain benefits employers provide to their employees. FBT is separate from income tax and is based on the taxable value (cost) of the various fringe benefits provided.
A fringe benefit is regarded as any form of employee remuneration other than salary or wages which would otherwise be subject to income tax.
FBT arises where a benefit is provided in respect of the employment of an employee. The term ‘benefit’ is broadly defined and includes any rights, privileges, or services. For example, a fringe benefit is when:
- Allow an employee to use a University owned vehicle for private purposes
- The University reimburses an expense incurred by an employee, such as personal telephone costs
- Provide entertainment by way of food, drink or recreation
- A benefit that is not provided in respect of employment is not a fringe benefit
Fringe Benefits Tax – General Information
FBT Year and Tax Rate
FBT is an annual tax which runs 1 April to the 31 March of the following year. The current FBT tax rate is 46.5%.
Taxable Value (cost) of Fringe Benefits
The taxable value is the cost of the benefit provided to an employee grossed-up by one of two rates.
If the University is entitled to claim GST paid on the goods and services acquired in the benefit provided, a gross-up rate of 2.1292 applies. Where there is no entitlement to claim GST, a lower gross-up rate of 1.9417 applies. Grossing-up the taxable value of benefits reflects the gross salary employees would have to earn if they had to buy the benefits after paying tax.
Reducing FBT Liability
The FBT liability can be reduced by providing benefits that are tax deductible, exempt or by obtaining a payment from an employee towards the cost of a fringe benefit.
Tax Deductible Benefits (Otherwise Deductible Rule)
This rule determines that the taxable value of a benefit may be reduced by the amount of the personal income tax deduction available to the employee if the employee had met the expense personally and had not been reimbursed by the University.
Certain benefits are classed as exempt benefits, meaning they are not subject to FBT. The benefits usually relate to the provision of work related items such as mobile phones/ electronic organisers, laptop/notebook computers.
Where an employee contributes from their after tax income to the cost of the benefit provided by the University, this contribution reduces the taxable value of the benefit.
Payment of Tax
The University self-assesses and pays the FBT liability, which is subsequently costed back to faculty of the staff member who was provided the taxable benefit.
A salary sacrifice arrangement is an arrangement where a staff member can chose to forgo part of their future salary or wages in return for approved benefits. The University has appointed Prosperity Salary Packaging as administrator of the Flexi Salary Packaging Scheme. More information is available on the Human Resources website.
Reportable Fringe Benefits
The University is required to include the grossed-up taxable value of all fringe benefits provided with a taxable value of more than $2,000 to an employee on their payment summary.
The reportable fringe benefit amount is not included in an individual’s assessable income, it is however included in income tests for:
- Higher Education Loan Programme (HELP) repayments
- Student Financial Supplement Scheme (SFSS) repayments
- Medicare levy surcharge
- Super co-contribution
Types of Fringe Benefits
The fringe benefits provided to University staff and reported in the annual return FBT Return are as follows:
- Motor Vehicle Fringe Benefits
- Housing Fringe Benefits
- Expense Payment Fringe Benefits
- Entertainment / Meal Fringe Benefits
- Living Away From Home Allowance
- Residual Fringe Benefits