Tax landscape

On this page

• What is fringe benefits tax?
• What are fringe benefits concessions?
• Rebate for charitable institutions and rebatable employers
• Exemption for HPCs, PBIs and hospital and ambulance services
• Reporting obligations for a HPC or a PBI
• Reporting obligations in relation to employees

What is fringe benefits tax?

In general terms, fringe benefits tax (FBT) is a tax paid by an employer when it provides non-salary benefits to its employees (or an employee's associate, for example, a family member). This often occurs when an employee chooses to have some of their salary paid in the form of benefits (for example - having some of their salary directed to paying their rent or to paying a car lease). 

For FBT purposes, an employee includes a:

• current, future or former employee, or
• director of a company.

The fringe benefit tax rate is 47% for the FBT year 1 April 2023 to 31 March 2024. This is paid by an employer based on the value of the particular taxable fringe benefits provided to its employees. Employers normally require employees to cover the FBT they pay so that the employer is not out-of-pocket because of the salary packaging arrangement chosen by the employee. 

Not all benefits paid or provided to employees are subject to FBT and certain exemptions and concessions apply to all employers (not only not-for-profit organisations). These exemptions and concessions should be considered first.

No FBT is payable on certain work-related benefits that are used mainly in the employee's employment such as electronic devices, software or protective clothing. Some minor benefits under $300 are also exempt (for example, if an employer provides an employee with flowers on their birthday). 

What are fringe benefits concessions?

Where FBT would otherwise apply, there are specific FBT concessions for: 

• charitable institutions and rebatable employers, and 

• HPCs and PBIs 

Rebate for charitable institutions and rebatable employers

An FBT rebate (essentially a tax discount) is available to organisations that are 'rebatable employers':

Rebatable employers include: 

• certain charities registered with the ACNC and which are endorsed as exempt from income tax by the ATO and are institutions (and are not PBIs or HPCs) 
• certain scientific or public educational institutions
• certain trade unions and employer associations
• not-for-profit tax exempt organisations established for musical or community service purposes
• not-for-profit tax exempt organisations established for the encouragement of science, animal racing, art, a game or sport, literature, or music
• not-for-profit tax exempt organisations established for the purpose of promoting the development of any of aviation or tourism, Australian information and communications technology resources, or Australia's agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources 

Where they meet all relevant eligibility criteria, organisations are entitled to have their liability reduced by a rebate equal to 47% of the gross FBT otherwise payable, subject to a cap of $30,000 per employee for the 2018 FBT year and onwards. 

The benefit of this rebate is that the organisation can offer employees non-salary benefits that are subject to the discounted FBT. 

Exemption for HPCs, PBIs and hospital and ambulance services

Certain categories of organisations are exempt from FBT subject to a cap. This allows these organisations to provide salary packaging which is attractive to their employees.

Where FBT would otherwise be payable, an exemption from employers having to pay FBT on certain fringe benefits provided to employees is available to:

• public or not-for-profit hospitals (unless controlled by a society or association that is a charity) and public ambulance services without ATO endorsement being required. The exemption is currently capped at $17,000 of fringe benefits per employee under a specific formula
• registered PBIs and RPCs, provided they are ATO endorsed to access the FBT exemption. A $30,000 cap per employee currently applies under a specific formula

Any fringe benefits provided to an employee that exceed those caps and are otherwise taxable are subject to FBT and need to be reported and tax paid accordingly.

A specific exemption from FBT on eligible car parking benefits may also be available to registered charities.

This means that, subject to the limit, there is no FBT payable on eligible benefits provided to employees by a FBT exempt endorsed organisation.

Reporting obligations for a HPC or a PBI 

If the cap for an individual employee is exceeded, and FBT is payable, the organisation will need to register for FBT with the ATO, lodge an FBT return for the relevant FBT year and pay FBT by the due date.

Fringe benefit details for all employees will need to be provided.

Reporting obligations in relation to the employees 

If you provide an employee with fringe benefits with a total taxable value of more than $2,000 in an FBT year, you must report the grossed up value on their income statement or payment summary.

Employers are required to disclose whether they are exempt from FBT in the employee's payment summary.

This amount is not shown as income in the employee's tax return. Therefore, no income tax or Medicare levy is payable on it. However the amount is used in various income tests (for example, HECS repayments, child support payments, means tested government benefits, Medicare levy surcharge, and super co-contribution).

For most employees, 100% of reportable fringe benefits will be assessed when calculating eligibility for family assistance and youth income support payments. However, Services Australia will generally only consider 53% of the value of reportable fringe benefits from the following types of employers: PBIs, HPCs; and public and not-for-profit hospitals and public ambulance services.

The content on this webpage was last updated in April 2024 and is not legal advice. See full disclaimer and copyright notice.

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