Fringe Benefit Tax

This chapter is designed to provide a general analysis of FBT. It covers:

• The levels of the FBT pyramid
• The FBT equation
• Fringe Benefits Tax Assessment Act 1986
• FBT tax calculations
• Determining a fringe benefit
• Specifying a category
• Checking for exemptions and reductions
• Calculating taxable value
• Calculate FBT liability
• Administration

These basics will provide the necessary background for a sound understanding of FBT.

Fringe benefits tax (FBT) was introduced on 1 July 1986 to overcome the shortcomings (with compliance and valuation) of s 26(e) ITAA 1936. It shifts the liability for the tax from the employee to the employer, and is a separate tax to income tax. It essentially captures the taxable value of certain benefits the employer provides to the employee (or their associate) in respect of employment, over and above salary. This makes it a fairer system as, rather than escaping tax, those benefits are taxed through the employer. Generally the cost of providing the benefits and also the FBT paid are tax deductible to the employer. The most common fringe benefits are:

• cars
• car parking
• expense payments
• loans
• meals and entertainment.

Common exempt benefits include:

• portable electronic devices primarily used in employee’s employment
• minor benefits valued at less than $300
• certain taxi travel
• in-house health care facilities.