22 March 2024
Fringe benefits add value to your employment package, offering perks beyond your salary. Here’s all you need to know about Fringe Benefits Tax (FBT) in Australia.
In today’s competitive job market, employers use fringe benefits to attract and retain top talent. These benefits range from leased vehicles and health memberships to childcare assistance and more. Understanding how fringe benefits work and their implications can help you make informed decisions regarding your employment package and taxation.
Fringe benefits are additional perks provided by employers in addition to your salary. They can be for you, your spouse, or your children and are not typically paid in cash. Instead, they come in various forms such as discounted gym memberships, company cars for personal use, entertainment expenses, and more.
Employers offer fringe benefits to enhance employee satisfaction, boost morale, and create a positive work environment. By providing these perks, employers aim to differentiate themselves in the job market and attract top talent.
Fringe benefits can impact your tax liability, especially if they are provided through salary sacrifice arrangements. These arrangements may lower your taxable income, potentially pushing you into a lower tax bracket and reducing your overall tax burden.
Common fringe benefits include leased vehicles, personal use of company cars, discounted loans, gym memberships, and entertainment expenses. While some benefits are tax-free, others are subject to Fringe Benefits Tax (FBT), which is paid by the employer.
Fringe benefits are often offered through salary sacrifice arrangements, potentially lowering your taxable income. Depending on your situation, this could shift you into a lower tax bracket, particularly advantageous for high earners.
Fringe benefits encompass various perks, including leased vehicles for personal use, company cars, discounted loans, gym memberships, and entertainment expenses. Additionally, items like private health insurance, living-away-from-home allowances, real property, and childcare costs are considered fringe benefits.
Expenses essential for your job, such as mobile phones and specialized clothing provided by your employer, typically aren’t taxed as fringe benefits. However, if you cover these costs yourself, you may be eligible for a tax deduction. Notably, you can’t claim a deduction if your employer later reimburses you for these expenses.
Moreover, concessional contributions to your super are exempt from fringe benefits tax, offering a tax-efficient method to bolster your retirement savings.
Employers are responsible for any applicable Fringe Benefits Tax (FBT) on the fringe benefits they offer to employees and their families. FBT is distinct from income tax and is calculated based on the taxable value of the fringe benefit provided. Typically, this value corresponds to the cost incurred by the employer in providing the benefit. However, for certain benefits like car provisions, a statutory formula is used for valuation, which may not reflect the actual cost to the employer. The FBT year runs from April 1st to March 31st, differing from the standard financial tax year.
If the total taxable value of fringe benefits provided to an individual and their family exceeds $2,000 in an FBT year, a Reportable Fringe Benefits Amount (RFBA) will appear on their end-of-year income statement. Not all fringe benefits contribute to this total; for example, meals, entertainment, and employer-provided car parking are excluded. While the RFBA itself isn’t taxable income, it plays a crucial role in determining eligibility for various benefits and obligations. These include Family Tax Benefits, Medicare levy surcharge, private health insurance rebate, child support payments, superannuation co-contributions, Higher Education Loan Program (HELP), tax offsets, and Financial Supplement repayments.
Discover further details about how your Reportable Fringe Benefits Amount is utilized on the ATO website. Explore now on Retinue.com.au!
*Retinue’s (ABN 66 658 618 449) payroll service includes the processing of hours and wages rates provided by you. We do not determine award rates for your employees or provide advice on the correct employment status of your employees. It is your responsibility to ensure that your employees are paid correctly and we recommend obtaining advice from specialised employment relations experts.
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