Fringe benefits

Fringe Benefits Tax (Australia)

Fringe Benefits Tax (FBT) is the tax applied by the Australian Taxation Office (ATO) to most, although not all, fringe benefits, which are generally non-cash benefits. Most fringe benefits are also reported on employee payment summaries for inclusion on personal income tax returns that must be lodged annually.

The rationale behind FBT is that it helps restore equity and fairness to those employees who do not receive such benefits. FBT is paid by the employer at a rate of 46.5% which represents the highest marginal income tax rate (45%) plus the Medicare Levy (1.5%). Many employers will effectively recover the tax from employees by reducing gross salary/wages by an equivalent amount. Thus employees must 'salary sacrifice' to receive the benefits.

Some benefits are exempt from FBT, including:

  • Remote area housing;
  • Living Away From Home Allowances (partly exempt);
  • Employee relocation expenses;
  • Laptop computers, PDAs and portable printers;
  • Mobile phones;
  • Superannuation (retirement/private pension contributions);
  • Work-related items
  • Minor benefits (less than $300 in value) incurred infrequently and irregularly.

Special concessional rules apply to employer-provided motor vehicles. Lower FBT rates apply if the vehicle is driven more under the statutory formula method.

The ATO has many useful guides to FBT in Australia.

The list of eligible work-related items currently includes:

  • laptops or similar portable computers
  • briefcases
  • calculators
  • mobile phones
  • tools of trade
  • protective clothing
  • computer software
  • electronic diaries
  • personal digital assistants or similar items, and
  • certain portable printers

(taken from "TaxTalk: Electronic Bulletin of Australian Tax Developments" - Federal Budget special edition: 14 May 2008)

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