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

Examples include:

  • Allowing an employee to use a work car for private purposes
    Generally, there are exemptions and reductions for this stuff
  • Giving an employee a discounted loan
  • Paying an employee’s gym membership
  • Providing entertainment by way of free tickets to concerts
  • Reimbursing an expense incurred by an employee, such as school fees
  • Giving benefits under salary sacrifice arrangement with an employee.
    There are certain salary sacrifice things that you have to pay fringe benefits on, but there’s a lot that you don’t as well,


If they aren’t exempt fringe benefits and you end up paying fringe benefits tax, it’s the equivalent to paying the highest marginal tax rate on the expenses anyway before you give the benefit to the employee.

Imagine you had a situation where you’ve got a good employee, and you want to give them, not a cash bonus, but to say thanks in a different way. And you end up buying them a Lamborghini – then that could be a fringe benefit.

If they didn’t have these rules to stop that, you could give that fringe benefit to them. Because they’re an employee, you could kind of argue that it was to do with their employment at work so you should be able to claim a tax deduction for it. Since it’s not salary and wages, why should they get taxed on the Lambo?

So what they’ve said is, If you’re going to do and structure that sort of arrangement, we’ve got this thing called FBT or fringe benefits tax. It’s going to tax you on the value of that asset or whatever you’re giving to your employees.

 

Watch the webinar replay, ‘Christmas Parties & Tax – How wine is tax deductible’ on our Facebook Page 

 
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