FBT is a tax paid by employers on certain benefits provided to their employees, their families, or other associates.
An employee can include current, future, or past employees, and directors of a company. Sole traders and partners in a partnership are not considered employees, and benefits provided to you are not subject to FBT. It’s separate from income tax and is calculated based on the taxable value of the fringe benefit. As an employer, you self-assess your FBT liability for the FBT year (which runs from 1 April to 31 March). If you have an FBT liability, you must lodge an FBT return and pay the FBT owed.
What counts as a Fringe Benefit?
A fringe benefit is like a payment to an employee but takes a different form than salary or wages. Here are some examples of fringe benefits:
- Allowing an employee to use a car owned by the employer or salary packaged by the employee (e.g. under a novated lease) for private purposes.
- Providing employees with food and drink benefits (e.g. business dinner, Christmas party or other workplace functions) – subject to available concessions / exemptions.
- Providing car parking (subject to certain exemptions).
- Paying an employee’s gym membership or private health insurance.
- Offering entertainment through free concert tickets or sporting events.
- Reimbursing an employee’s expenses (e.g., school fees, private travel costs).
- Giving discounted loans, including salary overpayments that are subject to a repayment schedule.
- Benefits under salary sacrifice arrangements.
However, certain items are not considered fringe benefits, including:
- salary and wages
- employer contributions to complying super funds, and
- shares provided under certain employee share schemes.
How much FBT do employers pay?
To calculate FBT, employers “gross up” the taxable value of the benefits provided. This means in effect determining the gross income employees would need to earn (assuming the highest marginal tax rate, including the Medicare levy) to pay for those benefits themselves. The actual FBT paid is 47% of this “grossed-up” value of the fringe benefits.
Example: FBT on a Gym Membership
Jenni, who runs a small consulting firm, provides her employee, Anton, with a gym membership costing $1,100 (including $100 GST).
The FBT payable would be calculated based on the grossed-up value of this benefit. This is calculated as follows: $1,100 (taxable value) x 2.0802 (Type 1 gross-up rate) = $2,288.22 (grossed-up taxable value). FBT payable = $2,288.22 x 47% (FBT rate) = $1,075.46.
