Residual fringe benefits

What is a residual fringe benefit?

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 is not 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:

1. work out the taxable value of the residual fringe benefit
2. calculate how much FBT to pay
3. lodge your FBT return
4. pay the FBT amount
5. 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.

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 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.
   

For more information about calculating the taxable value of residual fringe benefits, see FBT guide: 18 Residual fringe benefits.

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'
• the benefit is eligible for a concession, such as for temporary accommodation when relocating an employee.

You must get an employee declaration as evidence of these reductions.

Check if you provide residual fringe benefits to your employees, and calculate the taxable value of the benefits.