Fringe Benefits Tax Exemptions

‍What is a fringe benefit?

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A fringe benefit is a form of non-monetary compensation an employer provides to an employee and their families or other associates. Fringe benefits are in addition to an employee's regular salary or wages and can take various forms. For example, employee’s health insurance, car, education support, and meal & entertainment expenses. 

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Note that bonuses paid by cash and salary sacrifice to super contributions are NOT fringe benefits.

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If the benefits strongly relate to undertaking duties of the job, it is less likely to be considered a fringe benefit. For example, the following table shows whether to consider food or drink provided as a fringe benefit.

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How does fringe benefits tax work?

The employer who provides fringe benefits to employees has to pay the fringe benefits tax (FBT). 

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The FBT you pay is 47% of the 'grossed-up' value of the fringe benefits. The gross-up rate depends on whether the fringe benefit includes GST or not. The fringe benefit of a car is calculated differently; refer to FBT car calculator. 

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Example: FBT on a gym membership

Jenni runs a small consulting firm. She provides her employee, Anton, with a gym membership that costs $1,100 (including $100 GST).

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This is a fringe benefit. Jenni works out the FBT as follows:

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Taxable value of the benefit ($1,100)

× the gross-up rate (for a GST-inclusive fringe benefits the rate is 2.0802)

× the FBT rate (47%)

= FBT of $1,075.46.

Jenni must prepare and lodge an annual FBT return, and pay her FBT liability.

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She may also need to calculate and report Anton's reportable fringe benefits amount in his end-of-year payment information.

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As the gym membership is subject to FBT, Jenni can claim:

• an income tax deduction and GST credit for the cost of the gym membership (So long as she is registered for GST)
• an income tax deduction for the FBT paid.

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Exemptions, concessions and other ways to reduce FBT

Here are some major items exempt from FBT.

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1. Work-related items‍

• Portable electronic devices (one item per FBT year*)
• computer software-protective clothing
• briefcases
• tools of trade

*FBT year: 1 April to 31 March (small businesses can provide employees with more than one portable electronic device)

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2. Minor benefits exemption

• If the item is less than $300 and it is unreasonable for it to be treated as a fringe benefit, it is exempted from FBT. 
• If minor benefits happen frequently or cannot be distinctly separated from other related benefits, and their cumulative value exceeds $300, they become subject to FBT. 
• For example, when a meal (a minor benefit) is provided in connection with a night’s accommodation and taxi travel, the assembled total values must be considered in determining if it is unreasonable to treat the benefit as a fringe benefit.

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3. Travel in taxis and ride-sourcing vehicles

• If you pay for your employee to travel by a taxi or ride-sourcing vehicle (but not a limousine), the travel is exempt from FBT if it is a single trip that begins or ends at the employee's place of work.
• Also, travel provided to an employee due to sickness or injury, whether to their residence or another suitable location resulting from the sickness or injury, is exempt from FBT.

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4. Emergency assistance

• FBT exemptions for emergency assistance include first aid, emergency supplies, and temporary repairs.

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5. Small business car parking exemption

• Small businesses with a gross total income of less than $10 million or an aggregated turnover of less than $50 million may qualify for an FBT exemption when providing employees with car parking benefits.

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FBT can be reduced through apportionment based on the percentage of usage for business and personal purposes. For example, if an employer covers an employee's home internet expenses and the employee uses the internet 60% for work-from-home and 40% for personal purposes, only 40% of the total internet expense is subject to FBT.

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Not for profit organisations, health-related charities, and medical institutions are often exempt from FBT. Refer to FBT concessions to not for profit organisations.  

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CTK Accounting is a full-scope accounting firm based in Wollongong, servicing clients nationally.

For advice on Tax, BAS, GST, Bookkeeping, and Payroll issues visit us at ctkaccounting.com.au