Fringe benefit tax on specific categories of benefits: Free, subsidised or discounted goods and services
Free, subsidised or discounted goods
Which goods are subject to fringe benefit tax?
Goods are subject to fringe benefit tax if an employer (or someone on the employer's behalf) provides them to an employee at less than the cost to the employer. The "cost to the employer":
- is usually the price paid to buy those goods, or
- if the employer manufactured, produced or processed the goods, is the lowest price at which the employer sells identical goods to other customers (wholesale or retail).
Goods not subject to FBT
FBT is not charged if the sale price of the goods to the employee is more than the cost to the employer.
If an item that usually retails for $200 or less and is on special to the public is sold at discount to an employee at the normal staff discount rate, it is not considered to be a fringe benefit. This applies only if the price paid by the employee is more than the lesser of:
- 95% of the cost price to the employer, or
- 95% of the selling price to the public, if a reasonable quantity of identical goods are available on special to the public.
There is another exemption for goods not on special that are sold to employees at less than cost price. This applies when:
- the goods are sold as part of the employer's normal business, and
- the normal retail price of the goods is $200 or less, and
- the discount is the usual staff discount, and the staff discount is not more than 5% of the sale price to the public.
Private use of employer owned or leased business tools will be exempt from FBT where the tools are primarily provided for business purposes. The cost of each tool must not exceed $5,000.
Benefits arising from health and safety initiatives such as health checks and flu vaccinations are exempt from FBT regardless of whether they are undertaken on or off site.
Discounted goods or the provision of services to employees will not be liable to FBT providing the following occurs:
- the price paid is no less than those offered to comparable sized groups, and
- discount is undertaken on an arms length basis
Benefits provided on the premises has been extended to include not only the premises in which the employee works but also a company that is in the same group of companies. Companies deemed to be in the same group must have a 66% or greater common ownership with the employer company.
If these conditions are met, the goods are not subject to FBT.
Exemption from FBT for employer-paid family travel
In certain circumstances an employer can pay the travel costs of an employee's partner and/or family to enable them to visit an employee who is required to work out of town and no FBT will apply. To qualify for the exemption, the value of the travel must not exceed the amount that would have been provided as a tax-free allowance to the employee had the employee travelled home instead.
Clothing exemptions
No fringe benefit tax applies to distinctive work clothing that the employer provides. This exemption covers any item of clothing that forms part of a uniform that can be identified with the employer because of its particular logo, pattern, colour scheme or style. Safety and protective clothing are also exempt from FBT.
Date published: 30 Mar 2006
Back to top
