Fringe benefit tax (FBT): Calculating fringe benefit tax
From 1 October 2010 personal tax rates have changed so the higher FBT rate of 61% has reduced to 49.25%. The following information is based on the rates from 1 October 2010 onwards. If you are calculating your FBT requirements for the 2011 annual income year or alternate rate calculations for the March quarter, you must use the 2011 annual rates.
Find out more about using the 2011 annual rates.
This page covers how to calculate FBT payable for:
- shareholder-employees (shareholders who are also employees of a company which has fewer than 25 shareholders), and
- employees receiving attributed income.
You use the single rate or the alternate rate option calculation process.
Tax payable at the single rate option
You can choose to pay fringe benefit tax at a single rate option of 49.25% (quarterly filers) or 55.04% (2010-11 annual and income year filers) on all benefits you provide to employees, including shareholder-employees.
However, if an employee who receives a fringe benefit earns under $70,000, the 49.25% (55.04%) FBT rate effectively over-taxes their fringe benefits. To deal with this situation, we also have an alternate rate option calculation process for fringe benefit tax.
If you have chosen to pay fringe benefit tax at the single rate option, apply the rate of 49.25% (55.04% for 2010-11 annual or income year filers) to all benefits provided during the year, including benefits to shareholder-employees and employees receiving attributed income.
Tax payable with the alternate rate option calculation process
You must follow the standard alternate rate option calculation process if:
- you have chosen the alternate rate option calculation process, and
- you know all remuneration information relating to shareholder-employees and employees receiving attributed income when you are completing the FBT return.
In some cases, you may not have all the remuneration details available when you are completing the FBT return. You have two possible options.
Option 1: Apply the rate of 42.86% (45.99% for 2010-11) against the taxable value of the attributed benefits provided to shareholder-employees or employees with attributed income for the year. When completing next year's return, use the alternate rate option calculation process to square-up the FBT payable from this year with the actual remuneration received.
If you use this 42.86% (45.99%) rate, keep the following information for next year's calculation:
- total attributed benefits provided for the year
- the amount of FBT payable for the year on the taxable value of those attributed benefits.
Option 2: Apply a rate of 49.25% (55.04% for 2010-11) against the taxable value of the benefits provided. This is a full and final calculation of attributed benefits to the shareholder-employee or employees receiving attributed income for the year. Use this option where the total cash remuneration of shareholder-employees is highly likely to exceed a $70,000 equivalent or you wish to avoid additional calculations the following year.
An example using the 42.86% single rate option calculation
Niki is the one employee in Acme Industries who has been receiving attributed income. Acme Industries is filing the final quarter return, but does not yet know Niki's remuneration details. Acme Industries decides to use the single rate option of 42.86%, and use the alternate rate option calculation process next year to square-up the FBT payable.
|Total attributed benefits provided to Niki||$9,145.00|
|FBT paid in quarters 1 to 3||$3,223.60|
In the current year, where remuneration details are unknown, Acme Industries uses the FBT alternate rate option calculation sheet (provided with its FBT return) to determine:
|Total FBT payable (column 11) using 42.86%||$3,919.54|
|FBT paid in quarters 1 to 3||$3,223.60|
|FBT to pay||$695.94|
In its return next year Acme Industries will make an FBT adjustment as follows:
|Niki's total income for the previous year||$65,000.00|
|Total FBT payable on the benefits provided in the previous year||$4,279.76|
|Less FBT assessed in the previous year||$3,919.54|
|FBT adjustment required for current year||$360.22|
An extra $360.22 is added to the current year's fringe benefit tax to pay.
An example using the 49.25% single rate option calculation
Acme Industries has three shareholder-employees. The company is filing its final quarter return, but does not yet know the remuneration details for these shareholder-employees.
The company decides to use the single rate option of 49.25%, as it is likely that the cash remuneration for all three shareholder-employees will exceed $70,000 this year.
The total taxable value of the benefits received was $23,140. Applying the rate of 49.25% to these benefits gives FBT payable of $11,396.45.
Date published: 29 Sep 2010