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Fringe Benefits Tax (FBT) Exemptions

If your business engages employees then you probably know that any extra benefit you make or pay to an employee is treated as a fringe benefit and subject to fringe benefits tax (FBT).   In other words, If you provide a  benefit to a person because of their employment, then it is probably a Fringe Benefit.

This means that addition to receiving salary and wages, there are additional benefits provided to an employee which have a dollar value.  Thus, if you make a payment in the form of a gift card, event tickets or karate lessons, this may be treated as a fringe benefit

Fringe Benefits Tax is calculated on a different year to Income Tax.  Thus, the Fringe Benefits Tax year runs separately to the financial year, which is from the 1 April to 31 March.

Common Fringe Benefit Exemptions

There are a number of FBT exemptions, particularly in relation to “minor” benefits.

Minor Benefits (Five Factor test) –

  • Generally, the benefit must be under $300 in notional taxable value.
  • How frequently and regularly you are providing benefits to employees that are alike. This means if you are regularly providing $50 golf vouchers every other month and the value exceeds $450 within the FBT year this will not likely be considered a minor benefit and will therefore not be exempt.
  • As above, the total value of the minor benefit and similar benefits. If you are providing employees with similar benefits on a regular basis then these benefits will be valued rather than individually and are not likely to be exempt. Similar benefits would include gift cards, restaurants outings, or golfing activities for example.
  • Total value of associated benefits (travel to work event). That is, higher the cost or reimbursement of the employee travel the less likely the minor benefit will be accepted as exempt.
  • If it is difficult to calculate the value of the minor benefit, then it is likely to an exempt minor benefit. Following on from this, the more difficult it is for records to be kept, the more likely that the benefit will be exempt.
  • Lastly, if the circumstances arise where the benefit or associated benefits were provided because of an unexpected event then it is likely to be exempt. However, if the benefit is given as reward, then it is less likely to be exempt.

Motor Vehicles

A commercial vehicle such as a taxi, van or utility vehicle is exempt from Fringe Benefits Tax, if their private use is limited to travel between home and work, incidental travel in the course of employment or non-work-related use that is minor ie infrequent and irregular.

 Work Related Items

Portable electronic devices, Personal protective clothing and Tools of trade are exempt from FBT provides that the items are limited to primary use of employment and is limited to one item per FBT year per employee.

Taxi and Ride-sharing

Employee travel for single trip beginning or ending at their nominated place of work is exempt.

 

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Recognition

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