What is fringe benefits tax?


This information forms Chapter 1 of Fringe benefits tax - a guide for employers.

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1.1 What is a fringe benefit?

A fringe benefit is a 'payment' to an employee, but in a different form to salary or wages.

According to the fringe benefits tax (FBT) legislation, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. The 'employee' may even be a former or future employee.

An employee is a person who is entitled, or has been entitled, to receive salary or wages. Benefits provided in respect of someone who has died are not fringe benefits as a deceased person does not meet the definition of 'employee' in the FBT legislation.

The terms benefit and fringe benefit have broad meanings for FBT purposes. 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
  • pays an employee's gym membership
  • provides entertainment by the way of free tickets to concerts
  • reimburses an expense incurred by an employee, such as school fees
  • gives benefits under a salary sacrifice arrangement with an employee.

If you conduct your business through a company or trust, you may be an employee of the company or a trustee.

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As a guide to whether a benefit is provided in respect of employment, ask yourself whether you would have provided the benefit if the person had not been an employee.


When we refer to 'you' in this guide, we are referring to you as an employer.

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Example: benefit provided in respect of employment
David is an employee and is employed under the provisions of a particular industrial award. The award requires David's employer to reimburse David for his home telephone rental costs. David's employer reimburses him, but only because of the award provisions.

If David was not an employee, the reimbursement would not have been made. Therefore, reimbursement is a benefit provided in respect of employment and, consequently, it is a fringe benefit.

A benefit that is not provided in respect of employment is not a fringe benefit.

Example: benefit not provided in respect of employment
An adult daughter, Sarah, is employed in the family business. Her parents give her a birthday present. The gift is given because of the family relationship and would have been given even if Sarah had not been employed in the family business.

Although the recipient of the gift is an employee, the gift was not provided in respect of employment and, therefore, is not a fringe benefit.


To simplify the explanations in this guide, we generally discuss cases where the fringe benefit is provided directly by an employer to an employee. However, a fringe benefit may be provided by an associate of the employer or under an arrangement between a third party and the employer. It may also be provided to an associate of the employee (for example, a relative).

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    Last modified: 18 Jan 2012QC 17808