Download Printable PDF file
Fringe Benefit Tax
FBT is a tax levied on employers who provide employees with non cash benefits in addition to normal PAYG salary and wages. Prior to the introduction of FBT (in 1986) it was more common for employees (particularly executives) to receive a range of non-cash benefits that effectively escaped the taxation net altogether.
The general concept is that any non-cash benefit paid to an employee bears tax at the top personal tax rate including medicare levy (currently 46.5%). However, this tax is paid by the employer rather than the employee.
To prevent people from deliberately structuring their salary package in such a way that their income falls below certain thresholds (eg Medicare Levy Surcharge, Superannuation Surcharge or Family Tax Benefit Limits) employees are required to include the amount of fringe benefits in their income tax return. No income tax is paid on this amount, but it is taken into account when assessing the thresholds for allowances such as those mentioned above.
The most common form of fringe benefit is the provision of a motor vehicle. There are various methods of calculating the employer’s liability for FBT. Employers lodge an annual return setting out their obligations for FBT. The FBT year ends on 31 March each year.
In some cases, the provision of fringe benefits may provide a slight tax advantage, but sometimes the administration costs exceed any tax benefit!
Salary packaging by educational and benevolent institutions remains popular as these types of entities receive a range of concessions that make the payment of fringe benefits more attractive.