What a residual fringe benefit is
A residual fringe benefit may arise if you provide your employee with any benefit (including a right, privilege, service or facility) that doesn't fall into one of the specific types of fringe benefits.
For example, it may be a residual fringe benefit if you provide your employee with:
- use of your (the employer's) property, such as a video camera or television
- a service, such as advice given by a solicitor
- insurance cover, such as a group policy for health insurance
- private use of a motor vehicle that isn't a 'car' for fringe benefits tax (FBT) purposes, such as a one-tonne utility.
Exempt residual benefits
You don't pay FBT if the residual benefit is an exempt benefit, such as a minor benefit, or a portable electronic device provided to allow the employee to work from home.
You may be entitled to an exemption for benefits provided because of COVID-19.
Exempt benefits differ from reductions and concessions you may be able to apply to the taxable value of a residual fringe benefit. If the benefit is exempt, you don't need to calculate its taxable value.
What to do if you provide a residual fringe benefit
You need to:
- work out the taxable value of the residual fringe benefit
- keep the appropriate records
- calculate how much FBT to pay
- lodge your FBT return
- pay the FBT amount
- check if you should report the fringe benefit through Single Touch Payroll (or on your employee’s payment summary).
Taxable value of a residual fringe benefit
Generally, the taxable value of a residual fringe benefit is the GST-inclusive value of the benefit, less any employee contribution.
If the benefit is similar to rights, services or facilities you provide to the public in the ordinary course of business, it is valued as an 'in-house' residual fringe benefit.
Salary packaging arrangement
For in-house residual fringe benefits that are provided through a salary packaging arrangement, the taxable value is:
- the amount the employee could reasonably be expected to pay for the benefit under an arm's length transaction
- less any employee contribution
Not a salary packaging arrangement
For in-house residual fringe benefits that aren't provided through a salary packaging arrangement, the taxable value is:
- 75% of the lowest arm's length price charged to the public for identical benefits
- less any employee contribution.
Reductions and concessions
You can reduce the taxable value of a residual fringe benefit (or eliminate it entirely) if either:
- your employee could have claimed the benefit as an income tax deduction, had they paid for it themselves
- this is called the otherwise deductible rule and can reduce your FBT liability
- there are certain records you need to keep
- the benefit is eligible for an exemption or concession, such as for temporary accommodation when relocating an employee.
Records you need to keep
When record keeping for FBT, you must keep records that:
- show how you calculated the taxable value of the residual fringe benefit
- support any exemption or concession you used.
Records and the otherwise deductible rule
If you use the otherwise deductible rule, you must have certain documents to demonstrate the extent to which the purchase price of the residual benefit would be deductible to the employee. This is a substantiation requirement. They may include a travel diary kept by the employee or an employee declaration.
Or, you can choose to rely on FBT alternative record keeping for residual fringe benefits as detailed in the LI 2024/6 legislative instrument and LI 2024/6 explanatory statement.