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Fringe Benefits Tax – Top 5 Common Benefits

Article By Adam Hurwood | | Accounting & Tax
Fringe Benefits are most easily described as non-cash benefits provided by employers to their employees (including the business owner) or an associate of an employee. The Fringe Benefits Tax (FBT) rate for the FBT year ended 31 March 2015 is 47%.
The FBT regime covers a wide range of different types of benefits. We will touch on the 5 most common benefits below.


Entertainment expenditure is most often the provision of food, drink or other recreation activities, and any incidental costs in connection with the entertainment activity, including but not limited to, travel and accommodation costs.
Functions such as christmas parties, lunches, and cocktail parties that are paid for by an employer are some of the most common Entertainment Fringe Benefits. When it comes to calculating the FBT on entertainment, an employer has 3 options available. Each has their benefits and drawbacks, but as long as employers can satisfy the supporting documentation requirements of each method, they have the ability to elect the method that yields the best result.

Car Fringe Benefit

An employer, who makes their car available for private use by an employee or enters into an agreement with an employee to provide them with a car, is providing a Car Fringe Benefit.
Most modern passenger vehicles fall into the definition of a ‘car’, except for some vehicles designed to either carry heavy loads or nine or more passengers. Those excepted vehicles are dealt with outside of the Car Fringe Benefit provisions, but are not necessarily completely exempt from Fringe Benefits Tax.

Car Fringe Benefits are a popular choice for employers and employees as the tax savings under these arrangements can result in the total cost of ownership of the vehicle to be lower than if an employee was to directly acquire and operate the car themselves.

Car Parking Fringe Benefit

A Car Parking Fringe Benefit can arise when employers provide free or subsidised car parking to their employees. Car parking can be quite expensive, especially in and around capital cities and major airports, making free or subsidised car parking favourable among employees. A Car Parking Fringe Benefit arises when a number of requirements are met, including:
• A commercial parking station is located within a 1 kilometre radius of the car park being provided, and the parking station charges a fee for all-day parking, which is more than the car parking threshold ($8.26 per day for the 2014/15 FBT year).
• The car is parked at the provided car park for a total of more than four hours between 7.00am and 7.00pm

Expense Payment Fringe Benefits

Expense Payment Fringe Benefits include amounts paid by an employer to an employee as a reimbursement or amounts paid on their behalf. Payment of private expenses (non deductible to either the employer or employee) can result in a FBT liability for the employer.
Purchases of items such as laptop computers or mobile phones are included as expense payments for the purposes of the FBT provisions. Determining the fringe benefit for these devices, which may have a portion of business and private use, is slightly different to other Expense Payment Fringe Benefits as they are subjected to a test regarding the predominant use of the device. If the predominant use (that is, greater than 50% of the total use) of the device is business related, the purchase of that device can be exempt from FBT.

Living Away From Home Allowance

A Living Away From Home Allowance (LAFHA) can be paid to compensate an employee for additional expenses incurred when they are require to live somewhere other than their usual home. The rules for LAHFA changed in October 2012, limiting the length of the arrangement to 12 months for each location. If paid in accordance with the legislation, most (if not all) of the allowance is specifically exempt from Fringe Benefits Tax.

If you have any questions on the benefits your business has provided to employees, the amount of your FBT liability, how to report benefits on an employee’s payment summary or if the minor benefits exemption would apply to you, please contact our office.