When the exemption applies
Training or education provided to redundant or soon to be made redundant employees may be exempt from fringe benefits tax (FBT).
The cost of retraining and reskilling provided by the employer is exempt from FBT if all of the following conditions are met:
- the retraining and reskilling is provided to a redundant, or soon to be redundant, employee
- this includes employees either being redeployed within your business or seeking employment elsewhere
- the employer has complied with all obligations under the Fair Work Act 2009External Link that relate to the employee's redundancy
- the education or training is both
- not related to the employee's current job role
- for the primary purpose of helping that employee gain new employment.
The exemption covers both
- the provision of education or training (such as reimbursing or paying the course fees or the cost of delivering training directly) and
- associated benefits such as related course materials, textbooks, travel and accommodation.
There are no limits on the number of training or education courses an employee may undertake, or on the cost of the education or training.
What 'redundant' means
For the purpose of this exemption, an employee is considered 'redundant' when either:
- their employer no longer requires, or reasonably expects to require, their job because of changes in the operational requirements of the employer’s business or undertaking. The employee's job will not be performed by anyone else in the business
- they are no longer required in one part of your business but can be redeployed to another part of your (or your associate's) business.
Employees are considered 'soon to be made redundant' when you reasonably expect the employee to be made redundant, but you have not yet acted on this.
When the exemption doesn't apply
The exemption doesn’t apply to education or training costs:
- paid under a salary sacrifice arrangement
- for which an income tax deduction is specifically denied, such as Australian Government supported places at a university or repayments of Australian Government student loans
- for a primary or secondary school course, as defined under the A New Tax System (Goods and Services Tax) Act 1999.
Non-arm's length employees
Some non-arm's-length employees are excluded from the exemption, as outlined in the table below.
The employer is |
And the employee is |
|---|---|
An individual |
|
A partnership |
|
A company (other than a widely held company within the meaning of the Income Tax Assessment Act 1997) |
|
A relative means:
- their spouse
- a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child, or a spouse of any of these.
How to apply the exemption
You can apply the exemption to retraining and reskilling benefits provided on or after 2 October 2020.
You do not include exempt retraining and reskilling benefits in your FBT return, or in your employee's reportable fringe benefits amount.
If you’ve already lodged your 2021 FBT return and paid any FBT owing, you can amend your 2021 FBT return to reduce the FBT paid for retraining and reskilling that is exempt.
You must keep a record of all training and education provided to redundant or soon to be made redundant employees if you intend to apply the exemption. Your business records should also show that you meet the requirements for applying the exemption.
Check if you can claim an FBT exemption for retraining and reskilling redundant employees, redeployment or job seeking.