Whether you receive fringe benefits as part of your employment contract or a salary sacrifice package, it’s important to understand how fringe benefits tax affects your tax return. Your employer must pay any tax applied to the fringe benefits you receive, but you will also need to report them on your tax return.
What are Fringe Benefits?
Fringe benefits are non-cash benefits provided by an employer to their employees or their associates (e.g. spouse, dependent children) in addition to their regular salary or wages. Employers can provide these benefits as additional perks to an employee’s salary or include them as part of a salary sacrifice arrangement.
Common fringe benefits include:
- Company cars.
- Expense payments (such health insurance, accommodation or travel expenses, school fees, child care costs and phone expenses).
- Property (including items such as a television, or real property such as land and buildings, even financial assets like shares, bonds or crypto).
Who pays FBT?
Employers must pay tax on the value of fringe benefits provided to their employees under the fringe benefits tax system.
In addition, there are several benefits that your employer won’t have to pay Fringe Benefits Tax (FBT) on at all (and neither will you). They’re called exempt benefits and include work-related items commonly provided in salary sacrifice arrangements, such as:
- a portable electronic device
- an item of computer software
- an item of protective clothing
- a briefcase
- a tool of trade.
Exempt items are usually only work-related and are limited to:
- Items used primarily for work-related use, and
- One item per FBT year for each item, unless the item is a replacement. (e.g., you can’t buy a second computer in the same year, unless it is a replacement if the first one breaks.)
What are reportable fringe benefits?
Reportable fringe benefits are fringe benefits that you as the taxpayer are required to include on your tax return. If you receive fringe benefits where the total exceeds $2,000 for the FBT year which, unlike the financial year, is 1 April to 31 March, your employer will calculate the value of those benefits and record it on your income statement. This is then reported on your tax return at the section called “reportable fringe benefits amounts.”
How do fringe benefits affect my tax return?
The reportable fringe benefits amount that you report on your tax return does contribute to your taxable income. This means you don’t pay tax on these amounts. However, these amounts are used for other income tests to assess your eligibility for other things. These include the Medicare levy surcharge, private health insurance rebate, tax offsets, and other government benefits.
How do I put these details into my Etax tax return?
It’s very simple to include your reportable fringe benefits amount on your Etax tax return. When you get to the section called Salary and Wages, follow these simple steps:
- First, check if the reportable fringe benefits are already pre-filled on your return. In most cases, Etax will get this information from your ATO file and automatically add it to your return for you.
- If your fringe benefits information is not already on your tax return, answer YES to the question “Are there any more items on your Income Statement?”
- Select that you have Reportable Fringe Benefits and include the amount listed on your income statement.
And that’s all you need to do!
Fringe benefits can be a tricky area to understand so if you’re not sure please reach out to the team on [email protected] or 1300 693 829 and we’ll be happy to talk you through it.
