Fringe Benefit Tax (FBT) and Salary Packaging
The ATO investigate this area as it has a high level of non-compliance. We can ensure that your business remains FBT compliant and utilises the FBT concessions to the full.
Explain The Basics:
What Is Salary Packaging?
Salary packaging is also known as salary sacrifice. It is an arrangement between the employer and the employee for some items or service to be paid straight from the employees pre-tax salary. Salary packaging can include computers, cars, childcare and super to name a few. This can reduce the employees taxable income and put money in their pocket.
There is no restriction on what can be packaged but the benefits fall into three categories: fringe benefits, exempt benefits and super.
What is Fringe Benefits Tax?
The employer has to pay Fringe Benefits Tax (FBT) on the benefits provided to the employee. Fringe benefits can include cars, health insurance, loans (usually for a car), school fees, childcare fees, other personal expenses.
What is Exempt Benefits?
Exempt fringe benefits are benefits the employee receives that will not be included in the payment summary. The employer does not have to pay Fringe Benefits Tax on these, for example:
- Portable electronic devices
- Computer software
- Protective clothing
- Tools of the trade
What About Superannuation?
Redirecting some of your pre-tax income into super has benefits for the employee and employer. These salary sacrificed contributions will be taxed by the super fund at 15%, the same as the employers contributions. The employer is not required to pay fringe benefits tax on super.
NB: there are special rules for not-for-profits