What is fringe benefits tax in Australia?
Fringe Benefits Tax (FBT) in Australia is a tax paid by employers on certain non-cash benefits provided to employees or their associates in connection with their employment, separate from salary and wages.
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How it works in practice
Understanding Fringe Benefits Tax (FBT)
Fringe Benefits Tax (FBT) is a tax levied on employers for benefits provided to their employees or their employees' associates (like family members) in respect of their employment. These benefits are typically non-cash in nature and are in addition to an employee's salary or wages. The employer, not the employee, is responsible for paying FBT to the Australian Taxation Office (ATO).
Benefits Subject to FBT
FBT applies to a wide range of benefits. Common examples include providing an employee with a company car for private use, paying for an employee's private health insurance, offering discounted loans, paying for entertainment expenses, or reimbursing private expenses. The value of these benefits is subject to FBT, which is designed to ensure that all forms of remuneration, cash or non-cash, are subject to tax.
Purpose of FBT
The primary purpose of FBT is to ensure fairness and equity in the tax system. Without FBT, employers could provide a significant portion of an employee's remuneration in non-cash benefits, which would otherwise escape income tax. It prevents tax avoidance by ensuring that the value of these benefits is taxed at a rate equivalent to the top marginal income tax rate.
Important exceptions
Some benefits are exempt from FBT. These can include minor benefits (those provided infrequently and irregularly with a value less than $300), certain work-related items (e.g., portable electronic devices, tools of trade), some car parking benefits, and taxi travel in specific circumstances. Payments to employee share schemes also have specific FBT rules. Always check specific conditions for exemptions.
FBT does not apply to salary or wages, superannuation contributions, or payments directly to employees that are already subject to income tax.
What you should do now
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Identify all non-cash benefits provided to employees and their associates during the FBT year (1 April to 31 March).
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Determine if any of these benefits are exempt from FBT or qualify for concessions.
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Calculate the taxable value of each fringe benefit according to ATO rules and methodologies.
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Lodge an annual FBT return with the ATO by 21 May (or 25 June if lodged by a registered tax agent).
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Pay the FBT liability by the due date to avoid penalties and interest charges.
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