Grossing-up means increasing the taxable value of a benefit to reflect the gross salary an employee would have to earn at the highest marginal tax rate, including Medicare levy, to purchase the benefit from after-tax dollars.
There are two separate gross-up rates:
A higher (type 1) gross-up rate of 2.0647 – This rate is used where the benefit provider is entitled to a GST credit in respect of the provision of a benefit.
A lower (type 2) gross-up rate of 1.8692 – This rate is used if the benefit provider is not entitled to GST credits.
Always use the lower gross-up rate for reporting on employees’ payment summaries.
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