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Fringe Benefits Tax: Definition and Exemption

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The tax which an employer pays for the benefits to be offered to the employees or its organization or association such as its family member in place of the wages or salaries is known as fringe benefits tax. The tax is calculated on the taxable value of the fringe benefits to be provided and also it is separate from the income tax.

Paying fringe benefits is important for any organization because it can pave the way for qualified staff for it increasing the company’s profits. For a company, knowing the taxation obligations which is into paying the fringe benefits tax is vital. Talking about the Fringe Benefits Tax in Australia, the Australian Taxation Office (ATO) handles everything and recommends the employers who are providing fringe benefits to register for FBT.

Check if you can apply for FBT-

  1. New Business- If you are a new business and are starting in partnership, joint venture, sole trader, or have started with the help of superannuated funds then you are open to the Business Registration Service. for this, you need to have ABN, business name or company registration.
  2. Existing Business- If you are into an existing business, then AUSkey login or ABN is your eligibility terms for applying.

Advantages of offering fringe benefits to employees

Quality staff, the best workers, is not easy to retain in a company unless they get some benefits. Securing them is important for any business and if you really want to save time as well as energy on going through the recruitment process and training the freshers time and over again, then offering fringe benefits to your employees would be your call. You will be enticing them with non-income related benefits.

What are the basic examples of the benefits or accessories which fall under FBT?

Out of all the benefits, most of the workers look for low-interest loans and payment of private expenses. These are the two majors. Rest can be car and free car parking.

If a thought is striking your mind that it might be an illegal step to take either by the employer to offer these benefits, or on the part of the employees receiving them, then you need to give a second thought. It is completely legal, and most of the businesses use this common form of indemnification.

But there are exceptional industries which are exempted from FBT. Not-for-profit organizations may be relieved if the following conditions are met-

  1. It is a public or non-profit hospital
  2. It is a registered health promotion charity, and ATO has endorsed it
  3. If your non-profit organization provides public ambulance service
  4. It is a registered public benevolent institution, or any hospital and ATO has endorsed it

What is the eligibility for being exempted from FBT?

There are certain non- exempted benefits, the grossed-up the value of which in the FBT year given to each employee is either less than or equal to the capping inception.

For the public benevolent institution (PBIs) or health promotion charities (HPCs), the capping threshold is $30k per employee as per ATO. It is $17k per employee for Public and not-for-profit hospitals and Public Ambulance Service providers.