At this time of year most individuals are getting their tax return done and may see an item on their payment summary called Reportable Fringe Benefits.
Many employees might also be having their annual salary review at this time, and the discussion may involve the provision of fringe benefits as part of the employment package.
So, it’s important to understand what a Fringe Benefit is & what taxation consequences they have.
What a fringe benefit is
A fringe benefit is a benefit either you or an associate, such as your spouse or children, receive because of your employment. You can be a current, former or future employee.
A benefit could be:
- the use of something, such as a car, house or equipment
- ownership of something, such as items of clothing
- enjoyment of a privilege or facility, such as staying at a holiday home.
Benefits are provided by either your employer, your employer’s associate or a third party acting under an arrangement with your employer.
For example, you could receive a benefit when your employer gives you:
- a work car for private purposes
- a cheap loan
- free private health insurance
- home cleaning services.
You could also receive a benefit if you enter into a salary sacrifice arrangement.
Exempt work-related items
an FBT exemption applies for the following work-related items:
- a portable electronic device
- an item of computer software
- an item of protective clothing
- a briefcase
- a tool of trade.
The exemption is limited to:
- items mainly for work-related use
- one item per FBT year (1 April to 31 March) for items that have a mostly identical function, unless the item is a replacement item.
Who pays FBT
Your employer pays FBT on the value of the fringe benefits they provide to you.
Reporting fringe benefits on your payment summary
If the value of certain fringe benefits (other than excluded fringe benefits) you receive is more than $2,000 in an FBT year, your employer must record that amount on your payment summary for the income year you receive them in.
How reportable fringe benefits affect you
Even though a reportable fringe benefits amount is included on your payment summary and is shown on your tax return, it is not included in your assessable income.
However, it is included in a number of income tests for:
- Medicare levy surcharge
- deductions for personal super contributions
- super co-contribution
- tax offset for contributions to your spouse’s super
- mature age worker tax offset
- Higher Education Loan Program (HELP) and Financial Supplement repayments
- dependent tax offsets, including
- dependent spouse
- parent, spouse’s parent or invalid relative
- housekeeper tax offset
- senior Australians tax offset
- pensioner tax offset
- your child support obligations
- your entitlement to certain income-tested government benefits – e.g. Family Tax Benefit