Charities may need to register for fringe benefit tax (FBT) if they provide certain benefits to employees or run a business outside their charitable purpose.
Charitable organisation exemption
Generally, charities are exempt from paying FBT on benefits provided to employees while carrying out their charitable activities. For example, if an employee uses your organisation’s car while doing charitable work, FBT does not apply to any private use benefit they receive.
When your charity may need to register for FBT
You may need to register for FBT if your charitable organisation:
- provides short-term charge facilities to your employees
- operates a business outside your charitable, benevolent, cultural or philanthropic purpose.
Short-term charge facilities
The charitable organisation exemption may not apply if you provide short-term charge facilities to employees.
A short-term charge facility allows your employees to get goods or services that have no connection to your organisation or its operations by:
- buying or hiring the goods and services
- charging the cost of the goods or services to an account
- providing consideration other than money for the goods and services.
Your organisation must also provide some or all of the payment or other consideration for the goods and services.
Some examples of these charge facilities include:
- credit cards
- petrol and store accounts.
Short-term charge facilities are an unclassified benefit. They exclude employment-related loans to employees.
Limit for short-term charge facility provided by a charity
If you provide short-term charge facilities to your employees, FBT applies to the full amount if the value of the facility is more than the smaller of these 2 amounts.
- 5% of the employee's salary or wages in a tax year.
- $1,200 per employee, in a tax year.
Charitable organisations operating a business outside their charitable purpose
When you provide benefits to an employee mainly in connection with their employment, FBT applies only to the portion of any benefits they receive connected to work done in a business activity outside your charitable, benevolent, cultural or philanthropic purposes.
The non-charitable business must register for FBT, if it provides fringe benefits to employees, such as a car as part of a salary package. FBT applies to any private benefit.
Deregistered charities
A deregistered charity is not exempt from FBT. FBT applies from the date of deregistration.
If your charity:
- is voluntarily wound-up and removed from the charities register, the FBT exemption no longer applies from the date it's removed
- does not comply with its constitution, the FBT exemption no longer applies from the date of non-compliance.
For more information about deregistration, go to the Charities and donee organisations – IR255 guide.
If your organisation is not already registered for FBT, you will need to do this if you’re providing fringe benefits for any of the following categories.
- Motor-vehicles for private use.
- Unclassified benefits and gift cards (free, subsidised and discounted goods and services).
- Subsidised transport (if your business is providing transport to the public).
- Low- interest loans.
- Employer contributions to funds, insurance and superannuation schemes.