What is Fringe Benefits Tax And How Is It Calculated?

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What is Fringe Benefits Tax?

Fringe Benefits Tax (“FBT”) is a tax that is separate from income tax that may be payable on certain benefits provided to employees or their associates from their employer. FBT is still shown on your annual tax return, but the FBT year is between 1st April and 31st March.

What is a Fringe Benefit?

A fringe benefit is a benefit provided to an employee in relation to their employment. This is important to understand how the employer’s workers are classed, as volunteers or contractors benefits would not be classed as a fringe benefit.

How Is It Calculated for a Novated Lease?

Currently the fringe benefits tax is calculated dependent on the amount of kilometres you do in your car throughout the year. This amount is being phased into a flat rate of 20% from April 1, 2014, as the Government wanted to not reward people who drove more by reducing their FBT liability, which was occurring under the old system. Below is a table of the current statutory rates and future statutory rates.

 

Contracts entered into from April 1 2012

 

Contracts entered into from April 1 2013

 

Contracts entered into from April 1 2013

Annual Kilometers

FBT Rate

 

Annual Kilometers

FBT Rate

 

Annual Kilometers

FBT Rate

Less than 15000

20%

 

Less than 15000

20%

 

Less than 15000

20%

15000-24999

20%

 

15000-24999

20%

 

15000-24999

20%

25000-40000

17%

 

25000-40000

20%

 

25000-40000

20%

More than 40000

13%

 

More than 40000

17%

 

More than 40000

17%

Contracts entered into from April 1 2012

Annual Kilometers

FBT Rate

Less than 15000

20%

15000-24999

20%

25000-40000

17%

More than 40000

13%

Contracts entered into from April 1 2013

Annual Kilometers

FBT Rate

Less than 15000

20%

15000-24999

20%

25000-40000

20%

More than 40000

17%

Contracts entered into from April 1 2013

Annual Kilometers

FBT Rate

Less than 15000

20%

15000-24999

20%

25000-40000

20%

More than 40000

17%

 

The percentage is based on the Capital Value of the car, multiplied by the applicable statutory rate based on annual kilometres, which would also be worked out on how many days of the year the car was available.

filling up gas

The FBT amount can be reduced by the actual running costs of the car which are required to be paid from the employees post tax income to reduce the fringe benefits tax liability. The employee can claim up to the statutory rate, plus 10% for GST, which could mitigate the liability altogether.