Fringe benefits

Background

The definition of wages for payroll tax purposes, includes fringe benefits as defined in the Fringe Benefits Tax Assessment Act 1986 (FBT Act), but does not include tax exempt body entertainment fringe benefits.

Under the FBT Act, fringe benefits are categorised into two types:

1. Type 1 fringe benefits (which are grossed up by a higher Type 1 factor).
2. Type 2 fringe benefits (which are grossed up by a lower Type 2 factor).

Declaring your fringe benefits in your payroll tax returns

You have two options for declaring your fringe benefits in you payroll tax returns, the actual method and the estimated method:

1. The actual method
   1. For monthly returns, you will declare the actual value of fringe benefits provided in that month.
   2. For the Annual Reconciliation, you will declare the total actual value of fringe benefits provided in the financial year.
2. The estimated method
   1. For monthly returns, you will include one-twelfth of the total taxable value of fringe benefits in the FBT return for the year ending 31 March immediately preceding the start of each financial year.
   2. For the payroll tax Annual Reconciliation, you will include the total taxable value of fringe benefits declared in the FBT return ending 31 March immediately before the Annual Reconciliation return.

The total of your fringe benefits declared under the actual or estimated method should be grossed up using only the Type 2 factor. The following table indicates the Type 2 Factor to use for the relevant financial year.

Victorian component determination

For the Annual Reconciliation you must declare the portion of fringe benefits which relate to Victoria.

If you are using the actual method to declare fringe benefits, you must declare all fringe benefits paid or provided to Victorian employees grossed-up by using only the Type 2 factor for the relevant employing period during the financial year.

If you are unable to accurately determine the Victorian component of your fringe benefits, you can declare the amount based on the proportion of your total Victorian wages (excluding fringe benefits) to your total Australian wages (excluding fringe benefits).

For example, if your Victorian wages were half of your Australian wages, you would also declare half of the value of your fringe benefit amount grossed up by the Type 2 factor as fringe benefits subject to payroll tax in Victoria.

What if I cease to employ?

If you cease to employ and therefore cease to be liable for payroll tax, the amount of fringe benefits you declare in your final payroll tax return will be the actual taxable value of the Victorian fringe benefits paid for the period from the preceding 1 July to the date you ceased to employ.

Non-taxable fringe benefits

The following benefits are exempt from payroll tax:

• Any benefits exempt under the FBT Act.
• A tax-exempt body entertainment fringe benefit arising in respect of entertainment expenses incurred by an employer who is wholly or partially exempt from income tax or who does not derive assessable income from the activities to which the entertainment relates.
• Any benefit that is prescribed by the regulations to the Payroll Tax Act 2007 as not being a fringe benefit for the purposes of payroll tax. Currently, no benefit has been prescribed.

Any benefit with a nil taxable value for FBT also has a nil value for payroll tax.

Fringe benefit definition

A fringe benefit is a benefit provided by an employer, an associate of an employer, or by a third party under an arrangement with an employer to an employee, or an associate of an employee in relation to employment.

Fringe benefit classification

The FBT Act classifies benefits into:

• airline transport fringe benefits,
• board fringe benefits,
• car fringe benefits,
• car parking fringe benefits;
• debt waiver fringe benefits,
• expense payment fringe benefits,
• housing fringe benefits,
• living-away-from-home allowance fringe benefits,
• loan fringe benefits,
• meal entertainment fringe benefits,
• property fringe benefits,
• residual fringe benefits.

Fringe benefit enquiries

Questions specifically about the FBT Act should be directed to the Australian Taxation Office on 13 28 61.

Assistance

If you need more information on this topic, contact our payroll tax enquiry service on 13 21 61.