Fringe Benefits Tax Guide
If you have a business in Australia, you will find the tax and employment laws here to be different. For example, the fringe benefits tax (FBT).
A fringe benefit is something offered to an employee by their employer on top of their salary. It can be used to incentivise and reward employees without increasing wages. Employers have to pay Fringe Benefits Tax (FBT) on some benefits they give to their employees or their employees’ family. It is important to find out whether these perks or benefits are subject to fringe benefits tax, so please check with your accountant before you provide this incentive.
Fringe benefits must be non-cash incentives paid on top of salary. Even if the benefit is provided by a third party the employer must pay FBT. Employees can exclude fringe benefits from their taxable income.
Types of fringe benefits subject to tax include:
Allowing an employee to use a work car for private purposes
Giving an employee a discounted loan
Paying an employee’s gym membership
Providing entertainment by way of free tickets to concerts
Giving benefits under a salary sacrifice arrangement with an employee*
*The following work-related items commonly provided in salary sacrifice arrangements are exempt benefits:
· a portable electronic device
· an item of computer software
· an item of protective clothing
· a briefcase
· a tool of trade
The work-related items exemption is limited to:
· items primarily for work-related use
· one item per FBT year for items that have a substantially identical function, unless the item is a replacement item.
The following are not fringe benefits:
Shares purchased under approved employee share acquisition schemes
Employer contributions to complying super funds
Employment termination payments (including for example, the gift or sale at a discount of a company car to an employee on termination)
Benefits provided to volunteers and contractors
Exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.
Employers can generally claim an income tax deduction for the cost of providing fringe benefits and for the FBT they pay. Employers can also generally claim GST credits for items provided as fringe benefits.
When dealing with employment tax requirements such as FBT, it’s always best to consult an expert. Make sure you have all the right information before you start and always consult your tax agent for any questions or queries. If you need advice on tax matters please contact us at firstname.lastname@example.org and our agent will be able to help you.