Fringe benefits tax (FBT) – What is fringe benefits tax (FBT)
Fringe benefits tax, often abbreviated to FBT, is an Australian tax that employers pay on certain benefits they provide their employees.
When you run a small business, you’re responsible for managing your company’s taxes. Find out more about other taxes for small businesses in Australia.
FBT also applies to benefits an employer provides their employees’ families, as well as benefits that are arranged by an employer but provided by a third party.
Fringe benefit tax is calculated separately to income tax, and employers can usually claim an income tax deduction for the cost of fringe benefits and for the FBT they pay.
What counts as a fringe benefit for tax purposes?
All employers provide some sort of financial compensation to their employees, but only certain benefits are taxed, including:
- A company car
- Gym memberships provided by the employer
- Entertainment such as tickets to concerts or sporting events
- School fees paid by the employer
Fringe benefits tax exemption
On the other hand, the following are not considered to be fringe benefits, and are therefore exempt from FBT:
- Salary and wages (which are taxed separately under payroll tax
- Employer contributions to superannuation funds
- Payments made when terminating employment
Fringe benefits tax return
As with many other taxes, businesses liable for FBT are required to lodge an FBT return. FBT returns assess how much an employer has spent on fringe benefits throughout the fringe benefits tax year, which runs from April 1st to March 31st.
If you’re required to lodge an FBT return, you must do so by May 21st. You must also pay any FBT that you owe by this date.
Fringe benefits tax and GST
If you’re an employer who provides an employee with fringe benefits, you are usually entitled to claim GST credits for the benefits you’ve provided. However, this only applies to businesses that are registered for GST, and for benefits that are taxable. You therefore cannot claim GST credits for fringe benefits that are GST-free.
Furthermore, if an employee makes a financial contribution to the fringe benefit, you need to pay GST on the part they contributed. For example, you offer a company car scheme where you pay 50% of the value of a new car. An employee takes advantage of this scheme and you both contribute $10,000 towards a new $20,000 car.