Fringe Benefits Tax

FBT is a tax on employers, for taxable benefits provided to employees or their associates, by the employer or associates. Typical kinds of benefit are the provision of a car, loans and the payment of expenses. To be taxable, the essential components of a fringe benefit are:

  • there is an employment relationship
  • a benefit has been provided
  • it is not an excluded benefit

FBT Checklists      New for 2018-19     New for 2019-20

FBT Rates

Fringe Benefits Tax is applied annually on the calculated grossed up net value of benefits provided, at a rate equivalent to the top marginal rate of income tax including medicare levy.

FBT Year endingFBT rateType 1 Gross-up RateType 2 Gross-up Rate
31 March 202047%2.08021.8868
31 March 201947%2.08021.8868
31 March 201847%2.08021.8868
31 March 201749%2.14631.9608
31 March 201649%2.14631.9608
31 March 201547%2.08021.8868
31 March 201446.5%2.06471.8692

* A 2017 budget measure providing for an increase in the basic medicare levy by 0.5% and the consequent Fringe Benefits Tax rate change (up 0.5% to 47.5%) to take effect from 1 April 2019 has been abandoned. For a gross-up rate spreadsheet calculator see here.

FBT: What’s new in 2019-20

FBT: What’s new in 2018-19

FBT: What’s new in 2017-18

The following updated rates and thresholds for the 2017-18 FBT year (i.e. from 1 April 2017) have been published:

  • FBT rate drops to 47% from 1 April 2017. Gross-up rates are Type 1 – 2.0802 and Type 2  – 1.8868.
  • FBT cents per kilometre for vehicle other than a car rates uplifted – see here
  • indexation factors for valuing non-remote housing – updated here
  • the FBT benchmark interest rate for 2017-18 is 5.25% per annum – see FBT benchmark interest rates
  • Living away from home – reasonable food and drink amounts increased – Commissioner’s determinations
  • FBT record-keeping exemption threshold uplifted to $8,393 – see Exemption Thresholds
  • Car parking daily fee thresholds – adjusted annually – see Car Parking FBT
  • Reasonable food and drink – see Commissioner’s determination for 2017-18
  • Draft Guidelines – minor use of a provided work vehicle. The Tax Office has released a draft practical guideline on the private use of ‘eligible’ vehicles by employees. See PCG 2017/D14

 

FBT: What’s new in 2016-17

The following updated rates and thresholds for the 2016-17 FBT year have been published:

Other FBT changes for 2016-17

The following changes apply from apply from 1 April 2016

  • Liberalisation of the exemption for portable electronic devices
  • $5,000 cap on entertainment expenses
  • A changed definition for adjusted fringe benefits: The meaning of ‘adjusted fringe benefits total’ is modified so that the gross value rather than adjusted net value of reportable fringe benefits is used, except for PBIs, hospitals and charities. The measures take effect from 1 January 2017 for family assistance payments and for income tax tests from 1 July 2017. See more here: Adjusted Taxable Income

Note also that 31 March 2017 marks the end of the temporary rate increase to 49%. The rate reverts to 47% from 1 April 2017.

FBT: What’s new in 2015-16

A brief summary of updates affecting the 2015-16 FBT year ending on 31 March 2016

  • there’s a new FBT rate of 49% and an adjustment of the gross-up rates to 2.1463 (type 1) and 1.9608 (type 2)
  • car parking fringe benefits threshold increased to $8.37 – see further car parking fringe benefits
  • FBT cents per kilometre for vehicle other than a car – see here
  • indexation factors for valuing non-remote housing – updated here
  • the FBT benchmark interest rate for 2015-16 is 5.65% per annum – see FBT benchmark interest rates
  • Living away from home – reasonable food and drink – Commissioner’s determinations
  • FBT record-keeping exemption threshold – increased to $8,164 for 2015-16 – see Exemption Thresholds
  • Concession and rebate caps have been adjusted for  2015-16 in line with the FBT tax rate adjustments:
Concession typecap/rate
Public benevolent institution (other than public hospitals) and health promotion charities$31,177
Public hospitals, non-profit hospitals and public  ambulance services$17,667
Rebatable employers – certain non-government and
non-profit organisations
rebate 49% capped at $31,177

Type 1 and Type 2 FBT Gross Up Rates Formulae

Type 1 gross-up rate is used where there is a GST credit entitlement applicable to the benefit. The formula:

type1-fbt-gross-up-formula

Type 2 gross-up rate is used where there is no GST credit entitlement applicable to the benefit. The formula:

type2-fbt-gross-up-formula

For a formularised spreadsheet view of the gross-up calculations see here.

See also: Taxation Ruling TR 2001/2 Fringe benefits tax: the operation of the new fringe benefits tax gross-up formula to apply from 1 April 2000

FBT rate 2015-16 and 2016-17

The 2014 Budget contained a proposal for a 3-year Temporary Budget Repair Levy to apply from 1 July 2014 until 30 June 2017 at a rate of 2% on personal incomes over $180,000 per annum. The FBT rate was changed to 49% from 1 April 2015 until 31 March 2017.

The expense gross-up rates changed accordingly.

FBT rate 2014-15

The Fringe Benefits Tax rate increases to 47% from 1 April 2014.

The expense gross-up rates will also change:

  • Type 1 (10% gst credit)  2.0802
  • Type 2 (no gst claim) 1.8868

Example FBT calculation 2014-15

The basic FBT calculation method grosses up the GST-inclusive benefit, upon which the tax rate of 47% is payable. The benefit and FBT are tax deductible.

Type 1 expenses are those with an Input Tax Credit (“ITC”) available – the gross-up factor is 2.0802

Type 2 expenses are those for which ITC is not available (whether the payment actually includes GST or not) – the gross-up factor is 1.8868.

Example: Taxable value of benefit $5,000

Type 1 benefit (GST creditable) $5,000 x 2.0802 x 47% = FBT of $4,888.47

Type 2 benefit (no GST credit) $5,000 x 1.8868 x 47% = FBT of $4,433.98

FBT rate 2013-14

The Fringe Benefits Tax rate until 31 March 2014 is 46.5%

Gross-up rates:

  • Type 1 (10% gst credit)  2.0647
  • Type 2 (no gst claim) 1.8692

Earlier years’ FBT rates

Year endingFBT rateType 1Type 2
31 March 201346.5%2.06471.8692
31 March 201246.5%2.06471.8692
31 March 201146.5%2.06471.8692
31 March 200746.5%2.06471.8692
31 March 200148.5%2.12921.1917

 

The FBT Year of Assessment

The FBT year of assessment and return is from 1 April to 31 March.   

Tax Deductible FBT

Fringe Benefits Tax is itself normally tax deductible on an accrued basis, provided there is the necessary connection with the earning of assessable income (thus excluding not-for-profit organisations)  (Ruling TR95/24)

Categories of FBT

What’s Caught: Categories of Taxable Fringe Benefit

The Fringe Benefits Assessment Act (FBTAA 1986) separately deals with the following benefits. Each category of benefit has rules which determine the value of the benefit for FBT purposes.

Exemptions

Exemption from FBT can be a consequence of the nature of the benefit, or the characteristics of the employer, or some combination of both.

Fringe Benefits Tax – Exemptions and Concessions Checklist

For a comprehensive checklist of items which attract exemption or reduced FBT exposure with links and references – see here:  Exemptions and Concessions Searchable Checklist

Taxi travel

The Tax Office position has been that the FBT exemption is limited to travel in a vehicle licensed by the relevant State or Territory to operate as a taxi, and thus not extending to ride-sourcing services (e.g. Uber), even though for GST purposes such services are treated as taxi travel. Legislation has been introduced to remove this anomaly, with taxi travel for FBT purposes defined as having the same meaning as for GST. See: I win my taxi war with the Commissioner.

Budget 2015: The small business (aggregated turnover less than $2 million) FBT exemption for portable electronic devices for work purposes is expanded to include more than one device performing a similar function from 1 April 2016.  This exemption refers to devices such as laptop computers, tablets and phablets. Before the change, there is an exemption limit of one portable electronic device per FBT year performing a similar function. This measure has now been passed into law. See also:  Small Business concessions

Visa application – non-resident employee

If an employer pays the costs of a visa application for a non-resident employee to remain in Australia,  the benefit is not provided in respect of relocation transport and is therefore not an exempt benefit under section 58F of the FBTAA because the employee is already living in Australia. (ATO ID 2013/35).

Fitness class provided by the employer on the employer’s premises 

Subsection 47(2) provides an FBT exemption for an employee’s use of a recreational facility which is on the employer’s premises. However, a fitness class conducted in a room within the recreational facilities is not considered to be exempt, because the relevant benefit is the participation in a fitness class, rather than the provision, or use, of a recreational facility. (ATO ID 2015/25)

Minor Benefits – Under $300 (s58P)

Section 58P of the FBTAA provides an FBT exemption for fringe benefits which have a notional taxable value of less than $300. The $300 amount is not a deductible; once the threshold has been exceeded the full amount is subject to FBT. There are exclusions, and qualifying conditions – for more information, see FBT Minor Benefits Exemption.

Reductions of Taxable Value

Reductions: Benefits are Reduced for Tax Purposes

The Fringe Benefits Assessment Act sets out a number of reductions of taxable value in Division 14 and there is more information here: Reductions in fringe benefit taxable value

In-House Property and Residual Benefits – concession withdrawal 22 October 2012 – and salary sacrifice arrangements

In-house fringe benefits are goods or services received by employees which are the same as those provided to customers. In-house goods and services are concessionally valued.

Until 22 October 2012, the concessions provided that

  • the taxable value is 75% of the lowest selling price to the public or the cost of the benefit to the employer; and
  • The first $1,000 of in-house goods and services provided to employees is exempt from FBT.

Under amendments foreshadowed in the 2012 MYEFO, these concessions were removed, subject to transitional arrangements, which provide that pre-existing salary sacrifice arrangements implemented before 22 October 2012 are excluded from the new rules until 1 April 2014.

See Sec 62 Reduction of aggregate value and Tax free threshold

‘Otherwise Deductible’ Rule

This is the rule under which the FBT tax value of a benefit is reduced by the amount that an employee would have been entitled to claim as an income tax deduction in their personal tax return if the benefit hadn’t been given the employer.

An explanation of the calculation method for an expense payment otherwise deductible amount is here.

Special rules apply to the calculation of otherwise deductible car expenses – discussed here

FBT for PBIs and Not For Profit Organisations

Non-profits

Subject to registration requirements, non-profits may be wholly or partially exempt, rebatable or fully taxable. Partially exempt employers are subject to exemptions caps, with the excess fully taxed.

For more detail of the qualifying pre-conditions for tax exempt status refer to

Caps are calculated by reference to the grossed-up benefit value, not the value of the benefit.

Cap on entertainment*: Budget 2015-16: From 1 April 2016 – a separate grossed-up cap of $5,000 will apply for salary-sacrificed meal entertainment benefits, with the excess to be counted in calculating the existing FBT exemption or rebate cap. Meal entertainment benefits reportable. See Entertainment FBTTax-exempt Body Entertainment Fringe Benefits

See also: Fringe benefits tax: When are the duties of the employment of an employee of an employer who is a government body exclusively performed in, or in connection with, a public hospital or a hospital carried on by a society or association that is a rebatable employer? TD 2015/12

Legislation enacted from the Federal Budget 2014-15 provides for the FBT rate to move to 49% for two years from 1 April 2015. For non-profits, this means the exemption and rebate caps are adjusted accordingly. See also Thomson Geer Lawyers – Charities Alert May 2014

FBT Concessional Caps

Type of EmployerFBT Concession Cap
FBT Tax Yearto 31 March 2015years ending
31 March 2016
31 March 2017 *
years ending
31 March 2018,
2019 and 2020
Public benevolent institution (other than public hospitals) and health promotion charities$30,000$31,177$30,000
Public hospitals, non-profit
hospitals and public ambulance
services
$17,000$17,667$17,000
Rebatable employers – certain
non-government and non-profit organisations
rebate 48% capped at $30,000rebate 49% capped at $31,177rebate 47% capped at $30,000

FBT Year to 31 March 2015

With the change in the FBT rate to 47% for the FBT year ending on 31 March 2015, the tax gross-up rates and underlying maximum expense values also change.

CapType 1 Gross-Up
2.0802
Type 2 Gross-up
1.8868
$30,000$14,422$15,900
$17,000$8,172$9,010

FBT Year to 31 March 2014

CapType 1 Before Gross-Up
2.0647
Type 2 Before Gross-up
1.8692
$30,000$14,530$16,049
$17,000$8,234$9,095

FBT Rebate

Eligible ATO-endorsed employers are entitled to a tax rebate (tax reduction) of 48% (moving to 49% from 1 April 2015 and to 47% from 1 April 2017) of the FBT up to the grossed-up benefit cap amount.  Endorsed organisations are referred to as “rebatable employers”. See FBT rebate and Endorsement to access charity tax concessions.

“In respect of employment..”

For a taxable benefit to arise, the benefit must be provided “in respect of” employment. The Tax Office’s view is that certain benefits provided within a “family setting” – such as that of a birthday gift to a child employed within a family small business – are not caught. An explanation and examples are provided in ruling MT 2016. The position of shareholder/directors is dealt with in ruling MT 2019.  The “in respect of employment” connection is sufficient to exclude volunteers, who are not considered to be employees in this context.

Record Keeping Exemption

The general record-keeping requirements for FBT are fairly detailed and specific, and potentially onerous. See also Section 135C of FBTAA.

Subject to conditions, an employer may elect not to keep full FBT records.

The overall idea is that

  • you keep full records for the first year (called ‘the base year’) but may elect not to in subsequent years provided the total benefits don’t increase by more than 20% or $100.
  • the base year total benefits must be within the exemption limit which is set for that year (see table below).  

Other points to keep in mind which may potentially limit the use of the exemption include:

  • you still need to record the value of fringe benefits on employees’ payment summaries to satisfy the Reportable Fringe Benefits requirements.
  • The Tax Office can at any time request you to start keeping full records
  • your FBT return for the base year must have been lodged on time
  • notwithstanding the exemption, sufficient records must be available to show that the 20% limit has not been exceeded, and as supporting evidence for the income tax position
  • where car benefits are involved, each exemption year must show that business kilometres or business use percentage (as applicable to the FBT calculation method being used) are within 80% of the base year levels
  • the qualifying conditions must be met for all years between the base year and the current year.

Recordkeeping Exemption Thresholds

FBT Year
Ending
Exemption
Threshold
31 March 2020$8,714
31 March 2019$8,552
31 March 2018$8,393
31 March 2017$8,286
31 March 2016$8,164
31 March 2015$7,965
31 March 2014$7,779
31 March 2013$7,642
31 March 2012$7,391

Threshold values for earlier years are here.

 

FBT Returns – lodgment

The FBT year runs from 1 April to 31 March, with returns required to be lodged by 21 May unless covered by a Tax Agents extension.  For the agent extension to be available, an agent must be appointed by 21 May.

In general, when a lodgment day falls on a weekend or public holiday, lodgment or payment can be made on the next business day.

2019 return

  • 2019 returns are required to be lodged by 21 May 2019, unless tax agent or other arrangements are in place.
  • Returns lodged via the practitioner lodgement service are due by 25 June 2019, with any associated payment due by 28 May 2019.
  • See further and instalment information here.

2018 return

  • 2018 returns are required to be lodged by 21 May 2018 (unless tax agent or other arrangements are in place). See further here.

2017 return

  • 2017 returns are required to be lodged by 21 May 2017 (unless tax agent or other arrangements are in place
  • The tax agent electronic lodgment due date is 25 June 2017, with payments due by 28 May 2017. See further here.

2016 return

  • 2016 FBT returns are required to be lodged by Monday, 23 May 2016.

2015 return

  • 2015 FBT returns lodged electronically by tax agents the latest due date is 25 June 2015
  • 2015 FBT paper returns are required to be lodged by 21 May 2015.
  • The due date for payment in respect of all returns is 28 May 2015

The Fringe Benefits Tax return forms can be downloaded (PDF format):

If a return is not required a particular year, to head off unnecessary ATO correspondence lodge a Fringe benefits tax – notice of non-lodgment.

Declarations – Substantiation

There are a number of declarations which are a necessary component of the substantiation of various FBT categories, reductions and exemptions.

Whilst declarations are generally NOT required to be submitted to the Tax Office, unless specifically requested, the Tax Office can make a request to see a declaration in the course of reviewing, assessing or validating an FBT claim.

When required, declarations must be obtained no later than the due date for return lodgment, or if no return is required, by 21st May following FBT year end. The ATO list of declaration templates is here.

FBT resources and checklists

2019

2018

2017

earlier/other

Further information

Understanding Fringe Benefits Tax

 

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This page was last modified 2019-09-07