Fringe Benefits Tax (FBT) in Australia is a tax imposed on employers for the various benefits they provide to their employees, as well as the employees’ family or associates. Unlike income tax, FBT is the responsibility of the employer and is calculated based on the taxable value of the fringe benefit. Originally Published on https://taxly.ai/tax-guides/how-fringe-benefit-tax-works/

1. How Fringe Benefit Tax Works –
All You Need to Know
Fringe Benefits Tax (FBT) in Australia is a tax
imposed on employers for the various benefits they
provide to their employees, as well as the
employees’ family or associates. Unlike income tax,
FBT is the responsibility of the employer and is
calculated based on the taxable value of the fringe
benefit.
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2. Fringe Benefits Tax Australia – Key Takeaways
The FBT year runs from April 1 to March 31.
The FBT rate is currently 47%. The Type 1 gross-up rate is 2.0802
and the Type 2 gross-up rate is 1.8868 (Source: ATO FBT Rate).
If an employer’s FBT liability for the last year was $3,000 or more,
they will need to pay 4 quarterly installments.
Reportable fringe benefits must be included on employees’ payment
summary or Single Touch Payroll (STP) income statement if the
benefit exceeds $2,000.
Minor benefits (less than $300 in value) incurred infrequently and
irregularly are exempt from FBT.
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3. Are you Eligible for Any FBT Deductions or GST Credits?
Employers in Australia are eligible to claim an income tax deduction and GST
credits for the cost of providing fringe benefits, provided they are eligible to
claim GST credits.
Eligible FBT Deductions:
Business-Related Expenses:
Businesses can deduct the costs associated with providing fringe benefits.
For instance, if you organize work-related training sessions for employees, the
expenses can be claimed as FBT deductions.
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4. De Minimis Benefits:
Small, infrequent benefits, known as de minimis, may not
attract FBT. This could include minor benefits like morning
teas or small birthday gifts.
Portable Electronic Devices:
Providing portable electronic devices like laptops or
smartphones to employees can be considered an eligible
deduction for FBT.
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5. GST Credits for FBT:
GST-Registered Businesses:
GST-registered businesses can claim GST credits for expenses related
to fringe benefits. This provides a means to offset some of the costs
associated with providing these benefits.
Business-Use Assets:
If a fringe benefit involves assets that are used for both business and
personal purposes, businesses may be eligible for GST credits on the
business-use portion.
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6. How to Calculate Fringe Taxable Value?
FBT is calculated on the grossed-up value of the fringe benefit. This
value includes the actual benefit amount plus the FBT payable,
equivalent to the gross income employees would need at the highest
marginal tax rate (47%, including the Medicare levy) to purchase the
benefit themselves.
What is the current FBT Rate and Liability?
The current FBT rate is 47%. Employers must self-assess their FBT
liability for the FBT year, which runs from April 1 to March 31. If they
have an FBT liability, they must lodge an FBT return and pay the owed
tax.
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7. How to Report Fringe Benefit Tax to
ATO?
Businesses providing fringe benefits must register for FBT, calculate the
FBT payable, keep comprehensive records of the benefits offered, and
lodge a return by May 21.
Step-by-Step Process:
Assess FBT Liability:
Determine if your business provided fringe benefits during the FBT year
(April 1 to March 31).
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8. Register for FBT:
Ensure your business is registered for FBT with the Australian Taxation
Office (ATO).
Calculate Taxable Value:
For each fringe benefit, calculate the taxable value, including the actual
benefit and FBT payable.
Self-Assess and Lodge FBT Return:
Self-assess your FBT liability, and if applicable, lodge the FBT return by
May 21 following the end of the FBT year.
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9. Pay FBT Owed:
Remit any FBT liability to the ATO by the specified due date.
Maintain Records:
Keep detailed records of fringe benefits, calculations, and supporting
documents for compliance and potential audits.
Claim Deductions and GST Credits:
If eligible, claim income tax deductions and GST credits for costs
related to providing fringe benefits.
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10. What About Expatriates?
Expatriates working in Australia may be subject to FBT if they receive non-
cash benefits such as housing or car allowances. The responsibility for paying
FBT rests with the employer providing these fringe benefits.
Which items are Exempt from Fringe Benefits Tax?
Work Gadgets:
Laptops, tablets, or work phones provided for job tasks are usually exempt
from FBT.
Tools of the Trade:
Equipment or tools given for work-related purposes may be exempt.
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11. Small Nice Things:
Benefits valued at $300 or less, provided occasionally, and not part of a salary
package, may be exempt.
Health Perks:
Some employer-provided health benefits, like vaccinations, may be exempt.
Moving Help:
Certain benefits for employees relocating for work might be exempt.
Special Vehicles:
Work-related vehicles with limited personal use, like taxis or certain vans,
may qualify for exemptions.
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12. Emergency Aid:
Help provided during emergencies, such as accommodation or transport,
could be exempt.
Education Support:
Costs for work-related education and training may be exempt in certain cases.
Outback Living:
Housing in remote areas for business needs might be exempt.
Living Away from Home Allowance (LAFHA):
Some LAFHAs for employees living away from home for work reasons may be
exempt.
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13. The Bottomline
Fringe Benefit Tax in Australia is a tax on non-cash benefits
provided by employers to employees and associates. Employers
must calculate, report, and pay FBT to comply with Australian tax
regulations.
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