Appendix - Currently taxed benefits
Employee benefits that are subject to FBT are listed in the Income Tax Act 2007, along with valuation rules for a number of the benefits, most notably motor vehicles. The five main types of benefits are:
- motor vehicles;
- low-interest loans other than low-interest loans provided by life insurance companies to policyholders;
- free, subsidised or discounted goods and services, including subsidised transport for employees in the public transport business;
- employer contributions to sick, accident or death benefit funds, superannuation schemes and specified insurance policies;
- a catch-all category – “unclassified benefits” received by an employee in connection with his or her employment.
The catch-all provision can include any benefit of any kind received by an employee, including employment-related gifts and prizes and free, subsidised or discounted goods. A de minimis exemption may apply to fringe benefits provided in this category.
In the case of unclassified benefits, minimum value thresholds apply to remove low-value benefits from any FBT impost. If the value of the unclassified benefits provided to an employee is no more than $300 in the quarter (if FBT is returned quarterly) or $1,200 (if FBT is returned annually) and total unclassified benefits provided by the employer to all employees in the year is no more than $22,500, then FBT does not apply. If the value of the benefits exceeds the thresholds, then FBT will be payable on the total value of the benefits, including any amount below the threshold.
Attributed versus pooled benefits
Initially there was a single rate of FBT but since April 2000 a range of rates (commonly referred to as multi-rates) has applied. Employers elect the rate of FBT to use depending on the type of return they file, the classification of the fringe benefits they provide and the marginal tax rates of the relevant employees. Applying the marginal tax rate equivalent is designed to replicate the outcome as if the benefits had been taxed directly in the hands of the employee. To achieve this most benefits are required to be attributed to an employee.
In general, a fringe benefit does not need to be attributed to an employee when:
- the value of the benefits falls below the threshold relevant to that type of benefit (there are no minimum value thresholds for employer-provided motor vehicles and low-interest loans); or
- are required to be pooled because the benefit is shared by a number of employees and the employer cannot determine which employee mainly uses or receives the benefit.