Fringe Benefits Tax (FBT):

Broadly speaking, a Fringe Benefit is a payment that is made to an employee, however the payment is made in a form that is different to salary or wages. The fringe benefits tax (FBT) legislation sets out that a fringe benefit is provided to a person in respect of their employment. In general terms, this means that the fringe benefit is provided to a person because they are an employee.  The definition of ‘employee’ may also include a former or future employee.

The types of benefits that can be included as a fringe benefit are relatively broad under the FBT legislation. Some common examples of fringe benefits that are provided to employees include:

• An employee is allowed to use a company car for personal or private purposes;
• an employee receives a cheap loan from their employer;
• a gym membership (or other membership) is provided to an employee;
• an employee is provided entertainment by way of free tickets to a concert or movies;
• the employee is reimbursed for non-work related expenses (for example, school fees); and
• Certain salary sacrifice arrangements.

A general guide to whether a benefit is a ‘fringe benefit’ for taxation purposes is whether the benefit would have been made if the person was not an employee. If the benefit was provided to the person as a result of their employment, then the benefit will most likely be classed as a fringe benefit.

Fringe benefits tax is a separate to income tax and is based upon the value of the benefit that is provided to the employee. The fringe benefits tax year runs from 1 April to 31 March, differing from the standard financial year.

As an employer, you will be liable to pay any fringe benefits tax on benefits that are provided to your employees. The fringe benefits tax legislation can be complex with there being exceptions and qualifications as to when the FBT is payable. However, broadly speaking, as an employer you will most likely be required to pay FBT at the top tax rate of 45% plus the Medicare levy on the value of any benefit that is provided to an employee. Generally, as you (the employer), pays the fringe benefits tax, the cost of the benefit and the applicable tax is often included as part of your employee's total remuneration package.

The fringe benefits tax legislation can be complex in nature, particularly where multiple benefits may be involved. FBT is a significant part of the taxation system, and if you are unsure how the FBT legislation applies to your situation, we recommend that you seek legal advice from an experienced and professional tax law firm. At Navado, our qualified team of tax lawyers can assist you in navigating the requirements of the FBT taxation system and assist you in meeting all of your obligations. 

If you are seeking tax legal advice in relation to any area of the fringe benefits tax legislation, we encourage you to contact one of our tax lawyers to discuss your circumstances. Book a consultation by calling (02) 9233 4048 or send an email to info@navado.com.au. 

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