FRINGE BENEFITS TAX

Yes, it is that time of year again,

It's not about Easter, it’s about Fringe Benefits….

It’s time to do the calculations for your staff’s Payment Summaries, but you say it’s not 30 June…..

No it’s 31st March, end of the Fringe Benefits Tax Year, which runs from 1st April to 30th March of any year.

What do we need to calculate? Well, two things: firstly -- how many pay days will there be in the upcoming year for your staff that are receiving fringe benefits?


How many payroll days? lt;/em>

  • Count how many pay days will fall in the period 1st April to 31st March in the coming year.
  • Your pay day may fall on a Monday, so there may be 52 Mondays, 52 Tuesdays, 52 Wednesdays, 53 Thursdays, and 52 Fridays,
  • So depending on what day your payroll day is, will determine how much you are able to sacrifice each pay day.
  • The best way to look at this is to grab a calendar and physically count the pay dates that are relevant to your organisation’s payroll day.

Public Benevolents Institution and the Capping Threshold

  • As an employer of a non profit organization who has obtained the status of being recognised as a Public Benevolent Institution (PBI) through the ATO (Link), and offering Salary Sacrifice opportunities to your staff, it is your responsibility to ensure that the sacrificed amount paid as a benefit remains below the capping threshold of $30,000 as outlined by the ATO (Link).
  • Remaining under the capping threshold for each of your staff, your organisation can avoid being liable for Fringe Benefits Tax
  • The capping threshold referred to being $30,000 is the grossed up value of the pay that would otherwise need to be paid post the individual income tax rates.

So this is the reason you need to do the calculations of how many pay periods there are in the upcoming FBT year -- to ensure that what you are paying your staff on a regular basis will remain under the capping threshold for the total year, to avoid any potential liability of Fringe Benefits Tax. If the amount remains under the threshold of $30,000 there are no Fringe Benefits Tax implications for your organization provided you are classified as a PBI. Check out your Tax exempt status (Link).

So here are the steps to take...

Step One: Establish how many pay periods there are in the upcoming year.

  • Weekly : 52 or 53
  • Fortnightly: 26 or 27

(If your staff are accessing the use of a Salary Benefits Card it is important to check the last pay period for the FBT year and ensure there is sufficient time to spend the money from the account as this product needs to have a zero balance at the end of the FBT year (31st March))

Step Two: Determine if your organisation pays benefits to Expense Payments* that incur GST, this does affect the calculation for reporting purposes and is important when determining if your staff s benefits remain under the capping threshold.

The grossing up factor is determined by the type of expenses that your organization allows the staff to sacrifice into, that is, Type 1 or Type 2 (Link).

  • Type 1 is for expenses that are paid on behalf of your staff that incur GST ( GST creditable benefits).
  • Type 2 is for non GST items.

The reason the ATO distinguish between Expense items that have GST and those that don’t, is that the organization is able to claim GST on the items paid on behalf of the individual that have GST included in the expense, any claim for GST by the organization has to comply with the ATO legislative requirements regarding GST , that is, tax invoice for the expense being claimed (Link).

Regardless of whether the organization claims the GST or not (due to the onerous administration collecting and recording tax invoices required by the ATO) the organization has a right to claim and therefore, the correct grossing up factor needs to be used, that is, Type 1 or Type 2.

So depending on whether you need to use Type 1 or Type 2 we can determine how much Salary Sacrifice benefit you can pay to your staff to remain under the capping threshold each pay period. See the attached spreadsheet

Secondly we need to do the calculations for FBT year ending 31st March.

*NOTE: these calculations are designed for Expense Payments only. Expense Payments arise when the employer reimburses the employee for expenses incurred or when an employer pays a third party for an expenditure incurred (ie rent or mortgage). These expense types are calculated separately from Car Expense fringe benefits which we will discuss in a future article.

Step One : Access the following spreadsheet we have prepared for you (Link to our spreadsheet tool for Expense Payments) fill out the details of your staff who are accessing Salary Sacrifice, complete the amount of ‘Salary Sacrifice’ benefits paid on behalf of each staff member listed individually, and identify what type of payments have been made on their behalf, for example, rent, school fees, mortgage repayments, health insurance payments, and whether GST is applicable on these type of payments to determine whether to use Type 1 or Type 2 grossing up factor.

It is important to note that this is not the calculation for the Payment Summaries (Group Certificates). This calculation is for reporting purposes only and provides the evidence that you have not provided Expense Payment benefits over the capping threshold of $30,000 for each individual staff member. It is for your records only, and to be available for Tax Audit purposes (Link to our spreadsheet tool).

This may seem like it is getting complex, see the spreadsheet that we have attached, to show you that it clearly isn’t scary, its just about understanding the processes that you need to follow to satisfy your reporting requirements.

Step Two: Access the spreadsheet (Link) that helps calculate the amounts that need to appear on your Payment Summaries – the grossed up amount of the benefits that you have provided to your staff over the Fringe Benefits Tax year 1st April – 31st March that will appear on the payment summary dated 30 June.

In accessing these spreadsheets to assist you in your calculations we recommend you have your Treasurer / Accountant review your situation for relevance. These two tools can be downloaded here: (FBT Payment Summaries, FBT Reporting to ATO)

We would like to wish you well on your journey in sound financial management practice…

The Team @ Community Compass