Financial Services

Overarching Fringe Benefit Tax Policy

The principal Act dealing with fringe benefits tax (FBT) is the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

  1. Policy statement
  2. Employee contributions
  3. Instalments
  4. Payroll tax

Policy statement

FBT applies to benefits provided to an employee (or associate of the employee) in respect of employment of the employee.

It applies to employees who are:

  • residents of Australia unless their income is exempt from tax
  • non-resident employees who derive Australian-sourced income which is subject to tax in Australia
  • past, present or future employees.

This section contains the following types of fringe benefits:

The FBT year is the 12 months beginning 1 April and ending 31 March. The annual FBT return of the University must be lodged with the Australian Taxation Office by 21 May each year.

For the rates of tax applicable refer to Tax Rates.

The taxable value of fringe benefits provided by the University are grossed-up using the following formulas. The distinction between the two benefit types depends upon whether an input tax credit is available. This has arisen due to the introduction of the goods and services tax (GST) on 1 July 2000.

Type 1 benefit

Type 1 benefits are GST creditable benefits; in other words, we are entitled to an input tax credit.

Aggregate fringe benefits amount ×            FBT rate + GST rate                           
                                   (1 − FBT rate) × (1 + GST rate) × FBT rate  = 2.0647

Type 2 benefit

Type 2 benefits are all other fringe benefits that do not fall within the classification of type 1 benefits. This includes whether the supply is GST-free, input-taxed supplies and non-deductible expenses.

Aggregate fringe benefits amount ×          1        
                                      (1 − FBT rate)   =  1.8692

The FBT liability payable by the University is the grossed-up value of fringe benefits multiplied by the rate of tax. The University is paying an effective tax rate of 96 per cent on type 1 benefits and 86.92 per cent on type 2 benefits provided to employees as the University is a tax-exempt employer and is not entitled to a tax deduction for the FBT paid.

Type 1 example

The University provides type 1 fringe benefits valued at $3000 (GST inclusive) to an employee. The taxable value of the fringe benefit is calculated as:

Taxable value =  $3,000.00 × 2.0647   =  $6,194.10

The fringe benefits tax liability payable by the University is calculated as:

Taxable value ×  FBT rate of tax   =   $6,194.10 × 46.5%  =  $2,880.26

An input tax credit is available of $272.73.

Type 2 example

The University provides type 2 fringe benefits valued at $1,400 to an employee. The taxable value of the fringe benefit is calculated as:

Taxable value = $1,400.00 × 1.8692  = $2,616.88

The fringe benefits tax liability payable by the University is calculated as:

Taxable value × FBT rate of tax  =  $2,616.88 × 46.5%  =  $1,216.85

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Employee contributions

Where an employee contributes money directly to the University for a fringe benefit provided by the University, the University is required to remit 1/11th of the contribution to the Australian Taxation Office for GST. The total of the employee's contribution (GST-inclusive) will reduce the taxable value of the fringe benefit.

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Instalments

Quarterly instalments of FBT are payable by the University as follows:

  • 21 July, 25 per cent of the prior years' tax payable
  • 21 October, 25 per cent of the prior years' tax payable
  • 21 January, 25 per cent of the prior year's tax payable
  • 21 April 25, per cent of the prior year's tax payable.

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Payroll tax

Employers are required to declare in their payroll tax returns, the actual taxable value of fringe benefits provided in each return period. There is an option for employers to use an estimated amount based on the prior year return and then pay the difference between the estimate and actual at the end of the year.

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