• 1.7 What are the income tax consequences of providing benefits?

    The cost you incur when providing a fringe benefit or exempt benefit is usually an allowable income tax deduction. However certain expenses that are prevented by the income tax legislation from being deductible, for example, entertainment expenses, become allowable deductions when subject to FBT. For more information about entertainment and tax deductibility, refer to section 14.15 of Fringe benefits tax and entertainment.

    You must include any employee contributions paid directly to you in your assessable income, including those contributions received by way of an offset against an amount payable to the employee. Employee contributions paid to a third party who is not an associate (for example, for fuel) are not assessable to you.

    The amount of FBT you have paid is generally an allowable income tax deduction. If an employee reimburses you for the FBT paid, the reimbursement is included in your assessable income. However, it is not an allowable deduction for the employee.

    A fringe benefit is exempt income for income tax purposes in the hands of the recipient.

    Where a GST credit is available in respect of a fringe benefit, the income tax deduction is the GST-exclusive value of the fringe benefit. If no GST credit is available, the income tax deduction is the full amount paid or incurred on the relevant acquisition, including GST where applicable.

    Where the benefit provided is a GST taxable supply, and you receive an employee contribution, you include the GST-exclusive value of the contribution in your assessable income.

      Last modified: 04 May 2017QC 17808