Fringe benefits tax - Tax basics for non-profit organisations

Note: This document forms part of our publication Tax basics for non-profit organisations. To view the full publication, click here.

What is FBT?

Fringe benefits tax (FBT) is a tax payable by employers who provide fringe benefits to their employees or to associates of their employees. This is the case whether or not the employer is the actual supplier of the benefit (for example, where the benefit is provided by an associate or under an arrangement with a third party).

If your organisation provides a fringe benefit to its employees or to associates of its employees (typically family members), your organisation may have an FBT liability. This is separate from income tax and is calculated on the taxable value of the fringe benefits provided. Even if your organisation is exempt from income tax, it may still have to pay FBT. There are, however, certain FBT concessions that can reduce your organisation’s liability.

What is a fringe benefit?

A fringe benefit is a ‘payment’ to an employee, but in a different form to salary and wages. Benefits include rights, privileges or services. For example, a fringe benefit may be provided when an employer:

allows an employee to use a work car for private purposes
gives an employee a cheap loan, or
pays an employee’s private health insurance costs.

Some employers, including charities, will need to distinguish between employees, volunteers and independent contractors. For the purposes of FBT, an employee is a person who receives (or is entitled to receive) salary or wages, or a benefit that has been provided in respect of their employment. A volunteer is not paid for work. Reimbursing a volunteer for out-of-pocket expenses does not cause them to become an employee. Generally benefits provided to volunteers do not attract FBT.

If an organisation provides non-cash benefits to workers in lieu of salary and wages, FBT can apply.

For more information refer to

Fringe benefits tax for non-profit organisations (NAT 14947)

Volunteers and tax (NAT 4612).

To obtain these publications, see More information.

Common fringe benefits

One of the most common fringe benefits is a car, which generally becomes a fringe benefit when it is owned or leased by an employer and made available for the private use of an employee. If the employer’s car is garaged at an employee’s house, it is treated as having been made available for private use.

Other common fringe benefits include:

expense payments
loans
meals/entertainment, and
housing.

Common exempt benefits

A number of benefits are exempt from FBT. These include:

a mobile phone or a car phone primarily used in employment
a notebook computer, a laptop computer or a similar portable computer (limited to the purchase or reimbursement of one computer for each employee per FBT year)
some taxi travel
in-house health care facilities, and
most minor benefits where the value of the benefit is less than $300 and it would be unreasonable to treat it as a fringe benefit.

Registering for FBT

We recommend you register your organisation once you have established that it has to pay FBT.

Your organisation can register for FBT using the Application for registration – fringe benefits tax (NAT 1055).

To obtain this publication, see More information.

Once you are registered, we will send you return form stationery and additional information to help you lodge your return. Your FBT number is the same as your tax file number.

FBT returns and payments

Employers must assess their own liability for FBT annually. A return covering the FBT year, from 1 April to 31 March, should be lodged by 21 May or first business day after this date.

If your organisation has not previously paid FBT, or if the amount of FBT it had to pay for the previous year was less than $3,000 it is required to pay the tax once a year when it lodges its annual FBT return.

If your organisation had to pay FBT of $3,000 or more for the previous year, it must pay the tax quarterly with its activity statement in the subsequent year. A balancing payment (if any) should be made when it lodges its FBT return by 21 May (or the first business day after), unless other arrangements have been made with the Tax Office.

To calculate a fringe benefits tax liability, the taxable value of fringe benefits provided must be grossed-up.

What is grossing up?

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.

Reportable fringe benefits

You must keep records that show the taxable value of certain fringe benefits provided to your organisation’s employees, regardless of your organisation type.

If the total taxable value of reportable fringe benefits you provide to an employee in an FBT year (1 April to 31 March) is more than $2,000, you must record the grossed-up taxable value of those benefits on your employee’s payment summary for the corresponding income year (1 July to 30 June).

This requirement applies even if your organisation is not liable to pay FBT.

Benefits that are exempt from FBT may still need to be reported on payment summaries.

The notional taxable value of a benefit must be allocated to the relevant employee where a benefit is exempt from FBT due to:

capping thresholds that apply to public benevolent institutions, health promotion charities, hospitals and public ambulance services, and/or
concessions that apply to religious institutions and non-profit companies in relation to live-in residential care workers.

While the above employers are required to report these amounts on payment summaries where they exceed the reporting threshold, the benefits will continue to be exempt from FBT.

The reportable fringe benefits amount shown on the payment summary is not included in the employee’s assessable income. It is, however, included in a number of income tests relating to certain government benefits and obligations.

For more information on reportable fringe benefits, refer to Reportable fringe benefits – facts for employees (NAT 2836).

To obtain this publication, see More information.

FBT concessions

Few tax concessions apply to all organisations in the non-profit sector – they tend to apply to particular types of non-profit organisations.

The following sections discuss FBT concessions and the types of non-profit organisations that can access them. The section covers:

FBT exemption
FBT rebate, and
certain benefits provided by religious institutions and non-profit companies.

FBT exemption

FBT exemption is an exemption from paying FBT.

If your organisation is eligible for FBT exemption, benefits it provides to its employees are exempt from FBT where the total grossed-up value of certain benefits for each employee during the FBT year is equal to, or less than, the capping threshold. If the total grossed-up value of fringe benefits provided to an employee is more than the capping threshold, the organisation will be liable for FBT on the excess.

The table below outlines the types of organisations that are eligible for FBT exemption, the capping thresholds that apply and whether the organisation needs to be endorsed by the Tax Office to access FBT exemption.

What types of organisations are eligible for FBT exemption? (see note 1)

What capping threshold applies? (see note 2)

Does the organisation need to be endorsed by the Tax Office to access FBT exemption? (see note 3)

Public benevolent institutions (other than hospitals).

See Public benevolent institution.

$30,000 per employee

Yes

Health promotion charities

See Health promotion charity.

$30,000 per employee

Yes

Public and non-profit hospitals

$17,000 per employee

No

Public ambulance services

$17,000 per employee

No

It is important to check the notes to the table, as your organisation may need to meet certain requirements before it can access a concession.

Notes to table

A range of benefits are exempt from FBT. They include certain benefits provided by religious institutions and non-profit companies. For more information, see Religious institutions and Non-profit companies and live-in residential carers.
If an organisation is a public benevolent institution (PBI) and a hospital, the $17,000 capping threshold applies. The organisation cannot choose the PBI exemption cap.
For more information see Endorsement requirements for charities and income tax exempt funds.

FBT rebate

FBT rebate is an entitlement to a rebate equal to 48% of the gross FBT payable, subject to a capping threshold.

Organisations that qualify for an FBT rebate are referred to as ‘rebatable employers’.

Rebatable employers are entitled to have their liability reduced by a rebate equal to 48% of the gross FBT payable (subject to a $30,000 capping threshold). If the total grossed-up taxable value of fringe benefits provided to an employee is more than $30,000 a rebate cannot be claimed for the FBT liability on the excess amount.

Charities must be endorsed by the Tax Office in order to access the FBT rebate. For more information, see Endorsement requirements for charities and income tax exempt funds. Other non-profit organisations can self-assess their entitlement.

Rebatable employers are certain non-government, non-profit organisations. Organisations that qualify for the FBT rebate include:

certain religious, educational, charitable, scientific or public educational institutions
trade unions and employer associations
non-profit organisations established to encourage music, art, literature or science
non-profit organisations established to encourage or promote a game, sport or animal races
non-profit organisations established for community service purposes
non-profit organisations established to promote the development of aviation or tourism
non-profit organisations established to promote the development of Australian information and communications technology resources, and
non-profit organisations established to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.

Religious institutions

Religious institutions are eligible for the FBT rebate (subject to a capping threshold of $30,000). If a religious institution is a charity it must be endorsed by the Tax Office in order to access the FBT rebate. If a religious institution is not a charity it can self assess its entitlement. For more information see FBT rebate.

Religious institutions may also be eligible for FBT concessions in relation to benefits they provide to:

religious practitioners
live-in carers, and
domestic employees.

Religious institutions and religious practitioners

Subject to certain requirements, benefits provided by religious institutions to religious practitioners are exempt if they relate principally to the practitioners’ pastoral duties or other duties relating to the practice, study, teaching or propagation of religious beliefs.

Religious institutions and live-in residential carers

If a religious institution’s activities include caring for elderly or disadvantaged people, certain benefits it provides to its employees are exempt.

The exemption relates to live-in carers where the carer resides with the elderly or disadvantaged person in residential accommodation you provide. The benefits that may be exempt include the employees’ live-in accommodation, residential fuel, meals or other food and drink.

Religious institutions and domestic employees

Benefits religious institutions provide to live-in and non-live-in domestic workers are exempt in certain circumstances.

For a live-in employee, the employee’s duties must principally involve domestic or personal services for religious practitioners and the practitioners’ relatives residing with them. The benefits that may be exempt include the employees’ live-in accommodation, residential fuel, meals or other food and drink.

For a non-live-in employee, the employee’s duties must also principally involve domestic services for religious practitioners and the practitioners’ relatives residing with them. The exempt benefits are limited to food and drink consumed by the employee while carrying out employment-related duties.

Non-profit companies and live-in residential carers

If a non-profit company’s activities include caring for elderly or disadvantaged people, it can provide exempt benefits to live-in carers.

The condition for exemption is the same as for religious institutions. See religious institutions and live in residential carers.

For an organisation to be a non-profit company:

it must be a company that is not carried on for the purposes of profit or gain to its individual members, and
its constituent documents must prohibit it from making any distribution, whether in money, property or otherwise, to its members.

For more information on FBT and how it applies to organisations in the non-profit sector, refer to Fringe benefits tax for non-profit organisations (NAT 14947).

To obtain this publication, see More information.

Last Modified: Monday, 15 October 2007

Relying on our information - our commitment to you

We are committed to providing you with advice and guidance you can rely on, so we make every effort to ensure that what we give you is correct.

If you follow our advice or guidance and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the advice and guidance on this website applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

If you feel that our advice and guidance does not fully cover your circumstances, or you are unsure how it applies to you, contact us or seek professional advice.

Copyright

� Commonwealth of Australia

This work is copyright. You may download, display, print and reproduce this material in unaltered form only (retaining this notice) for your personal, non-commercial use or use within your organisation. Apart from any use as permitted under the Copyright Act 1968, all other rights are reserved.

Requests for further authorisation should be directed to the Commonwealth Copyright Administration, Copyright Law Branch, Attorney-General�s Department, Robert Garran Offices, National Circuit, BARTON ACT 2600 or posted at http://www.ag.gov.au/cca.