A Fringe Benefit is a benefit provided to you or to your associate (spouse or children) because of your employment. The benefit is provided either by the employer or by an associate of the employer.

ATO defines fringe benefits as

“The term benefit is broadly defined and includes any right (including any property right), privilege, service or facility”.

Some of the examples of these benefits are:

The benefit of using a car owned or leased by an employer for private purposes is defined a fringe benefit.

Rent free accommodation or reduced rent for accommodation.

Child care fees (if child care facilities are not provided by the employer).

Car parking facilities

There a few more of these benefits and a full list can be obtained from ATO website.

The fringe benefits are non-monetary benefits (its not a cash hand out). The employee does not pay any income tax for the fringe benefits provided to him.The employer has to pay a tax on the fringe benefits provided to its employees. This tax is called the Fringe Benefits Tax.

photo credit: Thiru Murugan

Some benefits are exempt from the fringe benefits tax…These benefits are: Mobile phone or car phone used only for work purposes Laptop Electronic diary

Briefcase

Portable printer

childcare costs — if the employer has its own childcare facilities

super contributions

Again a complete list of these exempted benefits can be obtained from ATO website.

If you are an employer and if one or more of your employees are getting fringe benefits to the value of $1000 or more then you need to register as a fringe benefits tax employer with the ATO (from 2008 income tax return, the threshold increases to $2000 from $1000). Calculating FBT is usually not a straight forward exercise. There is a lot of paperwork to be maintained both by employers and employees. The amount of tax the employer has to pay is calculated on the taxable value of the fringe benefit. A rough estimation of the taxable value is the retail value of the benefit provided. Take advice from ATO and a tax professional to arrive at the exact taxable values. It depends on the type of benefit and how it has been classified by ATO.

If you are an employer and wish to avoid the tax and all the paperwork that goes with it then rather than providing your employees with fringe benefits, you can increase their salary by an amount equivalent to the benefit amount.

The grossed-up taxable value of the fringe benefit has to be shown on the income tax return of the employee. The employee does not have to pay any income tax on this amount…But this figure is used when doing a number of income tests like when calculating family tax benefit, child care benefit, medicare levy surcharge etc…

Despite the existence of FBT, a lot of monetary benefits can be obtained by packaging your salary properly. Salary Packaging is a very indepth topic and something I plan to delve more into in the future posts.

Related Posts:

• Family Tax Benefit Part A
  This benefit is paid by government to help families with the costs of raising kids. The benefit is paid for each child. The amount...
• Types Of Super Contributions
  Super is quite a complex topic. However it is a topic which we all need to understand as it has a direct impact on...
• Federal Budget - Family Tax Benefit Part B
  Family Tax Benefit Part B is paid to single parent families or to two parent families where only partner has the main income (the...
• Child Care Costs For Families - Federal Budget 2008/2009
  We have heard women with young kids complain many times that going back to work does not make financial sense - because almost everything...

Topics: Financial Planning, Taxes |

Comments

Name (required)

Mail (will not be published) (required)

Website

« Defence Housing Investment Properties | Home | Woolworths Everyday Rewards »