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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 using the rates from 1 October 2010 onwards. If you are calculating your FBT requirements for periods prior to 1 October 2010, you will need to use the previous rates.|
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.
|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 of 49.25% or the alternate rate option of 43%).|
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.
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.
- Calculate the net cash remuneration. Use the table below to calculate the tax on gross cash remuneration.
2009-10 income tax rates Employee's gross cash
$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% -
2010-11 income tax rates Employee's gross cash
$0 to $14,000 11.5% $1,610.00 $14,001 to $48,000 19.25% $8,155.00 $48,001 to $70,000 31.5% $15,085.00 $70,001 and higher 35.5% -
2011-12 income tax rates Employee's gross cash
$0 to $14,000 10.5% $1,470.00 $14,001 to $48,000 17.5% $7,420.00 $48,001 to $70,000 30% $14,020.00 $70,001 and higher 33% -
- 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:
2009-10 alternate rates Income range Tax rate Cumulative balance $0 to $12,250 14.29% $1,750.00 $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% -
2010-11 alternate rates Income range Tax rate Cumulative balance $0 to $12,390 12.99% $1,609.00 $12,391 to $39,845 23.84% $8,154.00 $39,846 to $54,915 45.99% $15,085.00 $54,916 and higher 55.04% -
2011-12 alternate rates Income range Tax rate Cumulative balance $0 to $12,530 11.73% $1,469.00 $12,531 to $40,580 21.21% $7,419.00 $40,581 to $55,980 42.86% $14,019.00 $55,981 and higher 49.25% -
- 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.
During 2009-10 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 alternate rate calculation process:
The FBT payable on Ted's fringe benefits is $2,461.00.
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:
- 2009-2010 - 49% (or 61% for major shareholder-employees)
- 2010-2011 - 45.99% (or 55.04% for major shareholder-employees)
- 2011-2012 - 42.86% (or 49.25% for major shareholder-employees)
- make an adjustment for the fringe benefit tax assessed in quarters 1 to 3 if you are a quarterly filer.
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.