Fringe benefit tax (FBT): Calculating fringe benefit tax
Multi-rate calculation process
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| From 1 October 2008 personal income tax rates will change and this may affect FBT calculations. For more information see the News and Updates article. We'll update this page as soon as we can to reflect the changes. | |
The multi-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 $60,000 are not over-taxed (as they may be under the flat rate option). An alternative is the short form multi-rate option.
Note: Calculations used to complete the multi-rate options are calculated in your annual, Income year or in the fourth/final quarter returns (quarters1 to 3 should be calculated using the flat rate of either 64% or 49%).
If you want to use the multi-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 multi-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 multi-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
- Calculate the net cash remuneration. Use the table below to calculate the tax on gross cash remuneration.
Employee's gross
cash remunerationTax rate per dollar Cumulative totals $0 to $9,500 15 cents $1,425 $9501 to $38,000 21 cents $7,410 $38,001 to $60,000 33 cents $14,670 over $60,000 39 cents
- 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.
- Calculate the tax payable on the fringe benefit-inclusive cash remuneration (that is, the answer to step 2), using the rates below.
Value of fringe benefit
plus cash remunerationTax rate per dollar Cumulative totals $0 to $8,075 17.65 cents $1,425.23 $8,076 to $30,590 26.58 cents $7,409.71 $30,591 to $45,330 49.25 cents $14,669.16 Over $45,330 63.93 cents
- 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.
Example
Ted, an employee, receives a salary of $50,000, a bonus of $2,000, and fringe benefits of $5,000.
His employer follows the four steps of the multi-rate calculation process:
- Calculate the net cash remuneration.
Net remuneration = $52,000 less $12,030 (tax on gross cash remuneration) = $39,970 - Add the value of attributed fringe benefits to the net cash remuneration to get Ted's fringe benefit-inclusive cash remuneration.
Value of fringe benefits plus net remuneration = $5,000 + $39,970 = $44,970 - Calculate the tax payable on the fringe benefit-inclusive cash remuneration.
Tax payable on $44,970 = $14,491.86 - Deduct the tax calculated in step1 from the tax payable to get the FBT payable.
$14,491.86 - $12,030 = $2,461.86
Therefore the FBT payable on Ted's fringe benefits is $2,461.86.
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 flat rate of 49% (or 64% 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 multi-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 multi-rate calculation sheet, you can transfer the totals for each employee from the calculator to the FBT multi-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 a multi-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: 06 Jun 2008
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