Introduction

When employers provide non-cash benefits to an employee, fringe benefits tax (FBT) issues arise.

FBT is a tax on employers which applies to most non-cash benefits provided to employees in respect of their employment. The common law tests apply to determine whether a person is an employee.

Providing fringe benefits

There are a number of categories of fringe benefits. Each category contains prescriptive rules to determine when a particular kind of fringe benefit has been provided and how to value the benefit.

See Providing fringe benefits.

Paying FBT

FBT is levied on the employer at a rate of 46.5% of the aggregate sum of the grossed up taxable values of the employer’s fringe benefits for the year (47% for years of tax beginning on 1 April 2014 and later years of tax). The intention is to provide for a similar overall tax outcome as if the employee received salary on which they paid the highest marginal rate of tax plus Medicare levy and then the employee spent the after-tax amount on paying for the benefit themselves. FBT generally is paid in four instalments, but it is assessed on an annual basis for each year ending 31 March.

Failure to pay FBT means that the employer is subject to the imposition of penalties and interest charges in addition to the primary tax.

Employers that have obligations under the FBT system also have record keeping obligations, and obligations to provide prescribed information to the Commissioner of Taxation and the employee.

See Paying fringe benefits tax.

Administrative Obligations

An employer that has a fringe benefits tax liability must furnish the Commissioner with an annual return.

An employer must also keep records that record and explain all transactions and other acts engaged in by the employer or any other persons that are relevant for ascertaining the employer’s FBT liabilities.

See Administrative obligations.