Fringe benefit tax (FBT): Calculating fringe benefit tax

Alternate rate calculation process

Note
From 1 April 2009 personal tax rates have changed, so the higher FBT rate of 64% has reduced to 61%. The following information is using the rates from 1 April 2009 onwards. If you are calculating your FBT requirements for prior to 1 April 2009, you will need to use the previous rates. Find out more on tax rate changes.

How it works

The alternate rate calculation process allows an employee's fringe benefits to be taxed at their marginal tax rate. It ensures that fringe benefits of employees earning less than $70,000 are not over-taxed (as they may be under the single rate option). An alternative is the short form alternate rate option.

Note
Calculations used to complete the alternate rate options are calculated in your annual income year or in the fourth/final quarter returns (quarters 1 to 3 should be calculated using the single rate option (formerly the flat rate option) of either 61% or 49%).

If you want to use the alternate rate system to calculate fringe benefit tax on an employee's fringe benefits:

• ensure you have the information required
• follow the four steps required (or use the alternate rate calculator, which does the calculation for you)
• undertake other calculations required
• keep the required records.

You should be aware of some specific issues if you are calculating fringe benefit tax for shareholder-employees or employees receiving attributed income.

Information required

To complete the alternate rate calculation process, you need to know:

• cash remuneration details for each employee to whom fringe benefits have been attributed
• the taxable value of the fringe benefits that have been attributed to individual employees.

Complete the calculations for your annual return or, if you file on a quarterly basis, as part of the final quarter return.

Steps required

1. Calculate the net cash remuneration. Use the table below to calculate the tax on gross cash remuneration.

2. 2009-10 income tax rates

   Employee's gross cash remuneration	Tax rate per dollar	Cumulative balance
   $0 to $14,000	12.5%	$1,750.00
   $14,001 to $48,000	21%	$8,890.00
   $48,001 to $70,000	33%	$16,150.00
   $70,001 and higher	38%	-

2. Add the value of attributed fringe benefits to the net cash remuneration calculated in step 1. This is the employee's fringe benefit-inclusive cash remuneration.

3. Calculate the tax payable on the fringe benefit-inclusive cash remuneration (that is, the answer to step 2), using the rates below:
4. 
   

   Income range	Tax rate	Cumulative balance
   $0 to $12,250	14.29%	$1,750
   $12,251 to $39,110	26.58%	$8,890.00
   $39,111 to $53,850	49.25%	$16,150.00
   $53,851 and higher	61.29%	-

4. From the tax payable on the fringe benefit inclusive cash remuneration (that is, the answer to step 3), deduct tax calculated in step 1 on the cash remuneration. The result is the FBT payable on that employee's fringe benefits.

Other calculations required

As well as calculating the FBT payable based on the above steps, you must:

• include calculations for non-attributed benefits taxed at the single rate of 49% (or 61% for major shareholder-employees)
• make an adjustment for the fringe benefit tax assessed in quarters 1 to 3 if you are a quarterly filer.

Record keeping required

When you use the alternate rate calculation process, you must maintain records that will confirm the amount of fringe benefit tax you have calculated. The Fringe benefit tax guide (IR409) gives more information on the records you should keep.

If you are completing the FBT alternate rate calculation sheet, you can transfer the totals for each employee from the calculator to the FBT alternate rate calculation sheet for your records. The taxable value calculation sheets show the taxable value for each category of fringe benefits. For more detail on the records required for each category, see:

• motor vehicles
• low-interest loans
• free, subsidised or discounted goods and services
• employer contributions to funds, insurance, health insurance and superannuation schemes.

If you file quarterly returns and are completing an alternate rate calculation sheet for the final quarter, you need:

• FBT returns and FBT taxable value sheets for each quarter
• annual payroll data for employees who received fringe benefits during any of the four quarters.

You'll also receive a Fringe benefit tax return guide (IR425) with your final quarter FBT return.

 

 

Date published: 01 Oct 2009

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