What are Fringe Benefit Taxes (FBT)

Fringe benefits are non-cash perks provided to employees. To make sure these benefits are taxed fairly, Fringe Benefits Tax (FBT) was introduced. Although the employer is responsible for paying FBT, the cost is usually factored in when deciding what benefits to offer and how much cash salary to provide to employees.

How Does Fringe Benefits Tax Impact Me

As an Employer, Fringe Benefits Tax (FBT) applies if you provide non-cash benefits to your employees or their associates, since you’re required to pay FBT on the grossed-up value of those benefits.

This tax can influence your business’s finances and cash flow because it represents an extra expense in addition to other payroll-related taxes. The good news is that certain fringe benefits may qualify for exemptions or concessions, which can help reduce the overall cost.

From an Employee’s perspective, fringe benefits are often offered through salary sacrifice arrangements as part of a salary packaging plan. Depending on your circumstances, these benefits could help lower your taxable income—particularly valuable if you’re a high-income earner.

That said, your salary or wages may be adjusted by your employer to cover the cost of providing these benefits and paying the associated FBT. Importantly, FBT itself does not directly affect your personal income tax obligations.

Fringe Benefits That May Be Exempt from FBT

Here are some of the most common benefits that are exempt from FBT in Australia:

Work-related items: Some work-related items are exempt from FBT, including Portable electronic devices such as laptops, tablets, and mobile phones used for work purposes, and Tools of trade required to perform job-related duties.

Minor benefits exemption: This exemption applies to low-value benefits provided to employees, where the value of each benefit is less than $300.

Taxi, ride-sharing, and public transport exemptions: Employee travel to and from the workplace by taxi or ride-share services, as well as travel on public transport provided by employers, may qualify for an FBT exemption.

Fringe Benefits Tax (FBT) Return

Businesses that are subject to FBT are required to lodge an FBT return, just like with other taxes. This return outlines the total value of fringe benefits provided during the FBT year, which runs from 1 April to 31 March.

Employers who provide fringe benefits can generally claim GST credits on those benefits, provided the business is registered for GST and the benefits are taxable. However, GST credits cannot be claimed for fringe benefits that are GST-free.

In addition, if an employee contributes financially toward a fringe benefit, GST must be paid on the amount they contribute.