Fringe benefits tax (FBT) is a Commonwealth tax levied on non-salary type benefits provided by employers to employees. FBT is paid by the employer not the employee.
The rate of FBT is based on highest individual marginal tax rate. For the year that commenced 1st April 2010, the FBT rate is 46.5%.
A fringe benefit is a 'payment' to an employee, but in a different form to salary or wages.
According to the fringe benefits tax (FBT) legislation, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. The 'employee' may even be a former or future employee.
An employee is a person who is entitled, or has been entitled, to receive salary or wages. Benefits provided in respect of someone who has died are not fringe benefits as a deceased person does not meet the definition of ‘employee’ in the FBT legislation.
The terms benefit and fringe benefit have broad meanings for FBT purposes. Benefits include rights, privileges or services. For example, a fringe benefit may be provided when an employer:
- allows an employee to use a work car for private purposes
- gives an employee a cheap loan
- pays an employee’s gym membership
- provides entertainment by the way of free tickets to concerts
- reimburses an expense incurred by an employee, such as school fees
- gives benefits under a salary sacrifice arrangement with an employee.
Note: If you conduct your business through a company or trust, you may be an employee of the company or a trustee.
At HHH Partners, we can provide specialist FBT advice and discuss with you ways to minimise fringe benefit tax. We can also help you structure tax effective salary packages and advise on salary sacrificing arrangements.