Fringe Benefits Tax guide for Australian businesses

​As a business owner, providing extra perks to your employees like a company car, entertainment, or even discounted goods can be a great way to attract talent. However, these perks can come with additional tax obligations, specifically Fringe Benefits Tax (FBT).​

FBT is separate from income tax and can be complex if you're not familiar with the rules. In this guide, we’ll break down the essentials of FBT including what it is, when it applies, and how to stay compliant while offering benefits to your team.​

A fringe benefit is where an employee, director, trust beneficiary or their associates (like a family member) receive an extra benefit in their role, in addition to their wages or salary. It can also be a benefit in return for foregoing some of their salary under a salary sacrifice arrangement. ​

The most common non-cash benefits are:​

These benefits are subject to fringe benefits tax (FBT) which is separate to income tax and calculated on the taxable value of the fringe benefit. ​

FBT exists to prevent employers reducing the tax liability (i.e. PAYG) of employees by providing benefits not recognised as income.​

Here’s a simple example showing the difference between two employees receiving the same remuneration value ($85,000), but in different forms.​

Jane receives a gross salary of $85,000. Before it gets into her hands, the employer has deducted $18,092 PAYG and paid it directly to the ATO.​

John receives a salary of only $65,000 but has the use of a company vehicle valued at $20,000. The employer has deducted $11,567 PAYG and paid it directly to the ATO.​

The ATO thinks it's not, so Fringe Benefits Tax aims to square things up.​

Employers who provide fringe benefits are responsible for registering and paying FBT.​

The ATO provides a step-by-step guide on how to calculate FBT.​

FBT payable to ATO = Taxable Value of benefit provided x Gross Up Rate (Type 1 or Type 2) x FBT Rate of 47%.​

There are two different gross-up rates to calculate fringe benefits taxable amounts:​

For some benefits, the 'taxable value' is calculated using a statutory formula (e.g. car benefits), which doesn’t necessarily reflect the actual cost to your employer. It’s used simply to work out FBT and any reportable fringe benefit amount.​

If an employee receives a gym membership worth $1000 (including GST) from their employer, the FBT payable would be calculated as follows:​

Taxable Value = $1000​

Gross Up Rate (Type 1) = 2.0802​

FBT Rate = 47%​

FBT payable = $1,000 x 2.0802 x 47% = $977.69​

$977.69 is what the employer pays to the ATO.​

A minor benefit is a benefit provided to an employee or their associate (such as a spouse) that is infrequent or irregular, not a reward for services, and costs less than $300 (including GST) per benefit. When these conditions are met, the benefit is generally exempt from FBT.​

The ATO has clarified that to qualify as 'infrequent', the benefit should be provided less than 12 times in a year.​

Unlike the financial year (1 July – 30 June), the FBT year is 1 April – 31 March.​

An annual FBT return needs to be lodged and paid by 21 May each year. However, if you use a registered tax agent and they lodge your return electronically, the due date may be extended to 25 June.​

If your FBT liability in the previous year was $3,000 or more, you’ll need to pay quarterly instalments. These instalments are based on the amount reported in your prior year’s FBT return..​

If you provide certain fringe benefits to an individual with a total taxable value exceeding $2,000 during the FBT year, you are required to report a Reportable Fringe Benefits Amount (RFBA).​

This means you must report the grossed-up taxable value of these benefits on the employee’s income statement (formerly called a payment summary) for the corresponding income year. The RFBA is not subject to income tax, but it is used by government agencies to assess eligibility for various benefits and obligations.​

It’s important to note that not all fringe benefits are reportable. For example, minor benefits and certain items like car parking may be exempt from RFBA reporting.​

As the employer, you are responsible for calculating and reporting this amount.​

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