Fringe Benefits Tax (Australia) - Calculation of The Tax Payable

Calculation of The Tax Payable

FBT is paid by the employer at a rate of 46.5%, which represents the highest marginal income tax rate (45%), plus the Medicare levy (1.5%). This rate is applied to the "grossed up" taxable value of all the benefits given to employees less any contribution made by the employee. However, some benefits are exempt from FBT and others are only taxed if the value exceeds some threshold amount.

Benefits exempt from FBT include:

• Remote area housing
• Living away from home allowances (partly exempt)
• Employee relocation expenses
• Superannuation (retirement/private pension contributions)
• Minor benefits (less than $300 in value) incurred infrequently and irregularly
• Work-related items:
  • protective clothing
  • tools of trade
  • briefcases
  • mobile phones
  • laptops and similar portable digital assistants, including software, portable printers, calculators, electronic diaries.

No FBT is payable on exempt benefits and an employee is not required to make any contribution to the employer for these benefits. They are also exempt from income tax in the hands of the employee. They are not included in reportable fringe benefits.

Special rules apply to employer-provided motor vehicles. Either of two methods may be used. The statutory formula method is the more popular one because it requires less record-keeping. It provides lower FBT rates as vehicle usage increases and as vehicle capital value decreases.

On 13 May 2008, the FBT exemption for laptops or other technology items was removed. Since 1995 rules had allowed high-salaried individuals to get a laptop computer almost for nothing by purchasing such equipment via salary packaging. As the equipment was exempt from FBT, the employee would buy the equipment by salary sacrifice thereby reducing their income, a saving of up to 46.5% in tax. The employee could then claim depreciation on the equipment, usually over a three-year period, on their personal tax return. If the equipment was sold as second-hand at the end of that period, it was even possible to make a profit on the deal. From May 2008, the FBT exemption was removed for laptops or other technology items under salary packaging rules. The employee also could no longer claim the depreciation.