Understanding Australian Payroll Legislation – Part II

FBT: Legislative Details

Fringe Benefits are benefits that an employee receives from their employer in place of salary or wages. Fringe Benefits Tax (FBT) is tax that is payable by the employer for non-salary benefits provided to the employee.

FBT reporting requirements

The FBT reporting requirements apply to all employers who provide fringe benefits to an employee with a total grossed up value of more than $2000 for a FBT year. The grossed up taxable value of the benefits must be included on the employee's payment summary for the financial year.

What does grossed up value mean?

The fringe benefits value to be reported on each payment summary will factor in the income tax that would have been paid in cash salary rather than in fringe benefits – this is the 'grossed up' value.

Calendar year for FBT

The FBT year start on 1 April and ends on 31 March the following year.

How does the difference between the PAYG calendar and the FBT calendar affect reporting?

With the grossed up value of the FBT allowance now appearing on payment summaries, the FBT balance needs to be held after the collection of the following year's FBT figures.

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Some other terminologies are explained below - 

Higher Education Loan Programme (HELP)

HELP deduction is payable by employees who have an accumulated HELP debt. HELP is payable in addition to PAYG tax. Employees who are entitled to a Medicare Levy Variation or Exemption are exempt from making HELP repayments for that year.

Student Financial Supplement Scheme (SFSS)

The Commonwealth Government provides some tertiary students with financial assistance in the form of an SFSS loan. Repayment of this SFSS loan is payable in addition to PAYG and HELP.

Rebates and Family Tax Assistance

Rebate amounts being claimed are entered on the Employment Declaration window. Rebate amounts claimed are calculated according to the standards set out by the ATO and are deducted from the PAYG tax installments depending on the type of pay received - for example, weekly, fortnightly or monthly income.

Medicare Levy

The Medicare Levy is payable on the taxable income of all residents of Australia. Generally, the levy is automatically paid as part of tax installments deducted from salary or wages by a person's employer.

Who is entitled to Medicare Levy adjustments?

If a person has applied for a levy adjustment then they will have specified whether they have a spouse and the number of children they have. A person only on tax scales 2, 6 or 7 may have a levy adjustment - that is, they have claimed the tax-free threshold.