• What is fringe benefits tax?

    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, was, or will be entitled, to receive salary or wages, or benefits in lieu of salary and 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.

    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.

    To simplify the explanations in this guide, we generally discuss examples 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).

    Example: benefit provided in respect of employment

    David's employer reimburses him for his home telephone rental costs.

    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.

    Example: benefit not provided in respect of employment

    Sarah, an adult daughter of a business owner, 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..

    End of example

     

      Last modified: 04 May 2017QC 17808