• Gross-up rate

    There are two gross-up rates, the type 1 gross-up rate (2.0647) and the type 2 gross-up rate (1.8692). The gross-up rate applicable to fringe benefits depends on whether the provider of the benefit, or a member of the same GST group as the provider, is entitled to input tax credits (ITCs) for providing the benefit, or for the acquisition or importation of an item that results in the provision of a fringe benefit.

    Attention

    Before the FBT year commencing 1 April 2006, the type 1 gross-up rate was 2.1292 and the type 2 gross-up rate was 1.9417.

    End of attention

    An entity may not be entitled to claim ITCs if:

    • the item is not subject to GST because it is out of scope (for example, expenses incurred overseas)
    • the item is not subject to GST because it is specifically legislated as being GST-free (for example, medical services or fresh food)
    • the entity is not entitled to claim ITCs in respect of the benefit because it is an input-taxed supply (for example, the supply of a housing fringe benefit).

    The type 1 rate (2.0647) applies where the provider of the fringe benefit was entitled to claim ITCs in respect of the item.

    The type 2 rate (1.8692) applies where the provider of the fringe benefit was not entitled to claim ITCs in respect of the item.

    The gross-up rate is determined by whether or not the provider had an entitlement to claim ITCs in respect of the item, not whether the provider actually claimed the ITCs.

    The gross-up rate applicable to each benefit type is as follows:

    Benefit type

    Gross-up rate

    Comments

    Car fringe benefit

    Depends on whether GST was paid on the purchase/lease of the car.

    *Refer below for more detail.

    Tax-exempt body entertainment and meal entertainment fringe benefits

    Depends on whether the provider was entitled to claim an ITC.

    Where a purchase is a mixed supply (for example, food purchased from a grocery store for a social event that includes GST-free food as well as food that is subject to GST), the gross-up rate is the type 1 gross-up rate (2.0647).

    Expense payment, property and residual fringe benefits

    Depends on whether the provider was entitled to claim an ITC.

     

    Car parking fringe benefit

    Depends on whether an entitlement to claim an ITC arises from acquiring the right to provide the benefit.

    If the car parking is included as part of a building lease that is subject to GST, the gross-up rate is the type 1 gross-up rate (2.0647).

    LAFHA, LAFH benefits and benefits provided as a result of relocation

    LAFHA: type 2 (1.8692).

    LAFH benefits and benefits provided as a result of relocation: depends on whether the provider was entitled to claim an ITC.

    LAFHA will always be grossed-up at the type 2 gross-up rate (1.8692) because there is no GST on these allowances.

    Housing and board fringe benefits

    Housing: will generally be grossed-up at the type 2 rate (1.8692).

    Board: type 2 (1.8692).

    Housing fringe benefits will generally be a type 2 benefit because the provision of residential premises is generally input taxed. Board fringe benefits will always be grossed-up at the type 2 gross-up rate (1.8692) because the statutory values are unaffected by GST.

    Loan and debt waiver fringe benefits

    Type 2 (1.8692).

    Grossed-up at the type 2 gross-up rate (1.8692) because these items are considered financial supplies and are input taxed.

    *

    The gross-up rate applicable to car fringe benefits is based on whether ITCs are available for GST paid on the purchase of the car or, in the case of a leased car, whether GST is included in the lease payments.

    The gross-up rate will also depend on whether the car was purchased or hire purchased:

    • pre 1 July 2000
    • between 1 July 2000 and 22 May 2001
    • after 22 May 2001.

    Cars purchased and used overseas are likely to be the main circumstance under which the type 2 gross-up rate (1.8692) will apply to cars held by Australian Government entities, because there will be no Australian GST paid on their purchase.

    Cars purchased or hired in Australia will generally be subject to GST and, therefore, the type 1 gross-up rate (2.0647) will apply.

    Attention

    An Australian embassy located in a foreign country is taken to be 'Australia' for FBT and GST purposes. This should not impact on the FBT gross-up rate because supplies will not generally be carrying on business within the embassy and, therefore, will not be required to charge Australian GST.

    End of attention
    Further Information

    For more on the gross-up rate applicable to each of the fringe benefit types, refer to Fringe benefits tax - a guide for employers.

    Further details on the application gross-up rates can be found in Taxation Rulings GSTR 2001/3 and TR 2001/2.

    End of further information
      Last modified: 17 Jul 2012QC 21998