Fringe benefits tax - a guide for employers

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Chapter 2 - How to calculate your FBT

How to calculate your FBT

You must self-assess your fringe benefits tax (FBT) payable when you lodge your FBT return at the end of each FBT year (beginning 1 April and ending 31 March).

When working out your FBT liability you must gross-up the taxable value of benefits you provide, to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax.

There are two separate gross-up rates used to calculate fringe benefits taxable amounts:

• higher gross-up rate (type 1) is used where you (or other benefit providers) are entitled to a GST credit for GST paid on benefits provided to an employee. These benefits are known as GST-creditable benefits.
• lower gross-up rate (type 2) is used where there is no entitlement to a GST credit. .

The tax payable is the fringe benefits taxable amount multiplied by the FBT rate .

Where you provide taxable fringe benefits to employees, there are some distinct steps involved in calculating your FBT liability. Use the following steps to calculate how much FBT you have to pay:

Step 1	Work out the taxable value of each fringe benefit you provide to each employee. The rules for calculating the taxable value of a fringe benefit vary according to the type of benefit.
Step 2	Work out the total taxable value of all the fringe benefits you provide for which you can claim a GST credit (including excluded fringe benefits).
Step 3	Work out the grossed-up taxable value of these benefits by multiplying the total taxable value of all the fringe benefits you can claim a GST credit for (from step 2) by the type 1 gross up rate .
Step 4	Work out the total taxable value of all those benefits for which you can't claim a GST credit (for example, supplies you made that were either GST-free or input taxed).
Step 5	Work out the grossed-up taxable value by multiplying the total taxable value of all the fringe benefits you can't claim a GST credit for (from step 4) by the type 2 gross up rate .
Step 6	Add the grossed-up amounts from steps 3 and 5. This is your total fringe benefits taxable amount.
Step 7	Multiply the total fringe benefits taxable amount (from step 6) by the FBT rate . This is the total FBT amount you are liable to pay.

Next steps:

• How to report, lodge and pay FBT

See also:

• Types of fringe benefits
• Reducing your FBT liability

ATO references:
NO Fringe benefits tax - a guide for employers