Fringe benefits tax (Australia)

Australian tax system

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. The tax was first imposed in 1986 and the operation of the tax is described by the Fringe Benefits Tax Assessment Act 1986. The tax is paid by the employer only, and is not expected to be paid by the employee. There are several specific 'types' of benefits listed in 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.

The Federal Government delivered its 2015 16 Budget on 12 May 2015. The Budget included proposed changes to the Meal Entertainment and Holiday Accommodation/Venue Hire benefits with an introduction of an annual Capped amount. Therefore, the proposed changes apply to employees of Public Hospitals and not for profit FBT exempt employers. Proposed changes are to be effective from 1 April 2016, where these salary packaging exempt benefits will be capped at $2,550 per FBT year ($5,000 grossed up cap divided by the type 2 gross up rate of 1.9608).

Some employers offer to provide their employees fringe benefits in place of part of their salary in an arrangement called salary packaging. Such arrangements, if available, can be an effective way of reducing the employee's income tax by reducing salary. Though the employer is the party liable to pay FBT, many employers will recover the FBT liability from the employee, usually as part of the packaging arrangement.

Although FBT is paid by the employer, the benefits received by the employee must also be reported by the employer on the employee's PAYG payment summary (formerly known as group certificate) as reportable fringe benefits if the benefit exceeds $2,000. While the reportable fringe benefits are shown on the PAYG payment summary and on the employee's tax return, they are not counted in the employee's income subject to income tax. They are however included in means (income) testing. The amount reported is the "grossed up" taxable value of benefits received by the employee or an employee's associate (e. g., a relative) in the FBT year which ends on 31 March of each year.