What a property fringe benefit is
For fringe benefits tax (FBT) purposes, property includes:
- goods, such as items of clothing or a television
- real property, such as land and buildings
- financial assets, such as shares, bonds or crypto assets.
This doesn't include any property that is specifically included within another fringe benefit type, such as cars or food provided for entertainment purposes.
Exempt property benefits
You don't pay FBT on:
- food you provide to your employee that they consume on your business premises on a working day – exempt property benefits
- goods you provided to your employees to help them during COVID-19
- payments to worker entitlement funds if they meet specific conditions
- property that is exempt from FBT, such as some work-related items.
What to do if you provide a property fringe benefit
You need to:
- work out the taxable value of your property fringe benefit
- keep the appropriate records
- calculate how much FBT to pay
- lodge your FBT return
- pay the FBT amount
- check if you need to report the fringe benefits amount through Single Touch Payroll (or on your employee’s payment summary).
Taxable value of a property fringe benefit
How you calculate the taxable value of a property fringe benefit depends on whether it is an:
- in-house property fringe benefit – goods that are identical or similar to goods your business sells
- external property fringe benefit.
In-house property fringe benefits
In-house property fringe benefits are goods that are identical or similar to goods your business sells. The benefit must consist of goods, and not real estate, buildings or shares.
Salary-packaged benefits
If you provide a property fringe benefit to your employee under a salary packaging arrangement, the benefit's taxable value is the amount your employee could expect to pay for the property at market value.
Example: taxable value of an in-house property fringe benefit
Kane works at the ABC Meat Works abattoir. As part of his annual pay negotiations, he agrees to a reduction in his salary in exchange for a meat pack for Christmas. The meat pack is an in-house property fringe benefit.
The taxable value of the benefit provided to Kane is the market value of the meat. As Kane isn't a wholesaler, the taxable value is therefore the retail price of the meat.
End of exampleNon-salary packaged benefits
Goods you purchased for resale
If the property is goods that you purchased for resale in your business, the taxable value is the lesser of the:
- arm’s length purchase price of the goods
- market value of the goods.
Goods your business manufactured or processed
If the property you provide is goods that your business manufactured or processed for sale to:
- manufacturers, wholesalers or retailers, the taxable value is the lowest arm's length selling price at the time you provide the goods
- the general public, the taxable value is 75% of the lowest selling price you charge the public.
Employee contribution
For all of the above, the taxable value is reduced by any employee contribution.
External property fringe benefits
An external property fringe benefit is property that either:
- you don't sell in the ordinary course of your business
- is not a 'good' – for example, real estate or a financial investment.
If you paid for the property in an arm's length transaction, the benefit's taxable value is generally what it cost you, less any employee contribution.
Reductions and concessions
You can reduce the taxable value of a property fringe benefit (or eliminate it entirely) if:
- your employee could have claimed the cost of the property as an income tax deduction, had they purchased 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.
Records you need to keep
When record keeping for FBT, you must keep records that:
- show how you calculated the taxable value of the property fringe benefit
- support any exemption or concession you used.
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 property 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, if you use the otherwise deductible rule, you can choose to rely on FBT alternative record keeping for property fringe benefits as detailed in the LI 2024/6 legislative instrument and LI 2024/6 explanatory statement.