A fringe benefit is a payment to an employee, but in a different form to salary or wages, that is provided because they are an employee (or a former or future employee). Benefits may include rights, privileges or services. For example, a fringe benefit may be provided when an employer:
– allows an employee to use a work car for private purposes
– gives an employee a cheap loan
– pays an employee’s private health insurance costs.
Some employers, including charities, will need to distinguish between employees, volunteers and independent contractors. For the purposes of FBT, an employee is a person who receives (or is entitled to receive) salary or wages, or a benefit that has been provided in respect of their employment. A volunteer is not paid for work. Reimbursing a volunteer for out-of-pocket expenses does not cause them to become an employee. Generally, benefits provided to volunteers do not attract FBT. If an organisation provides non-cash benefits to employees in lieu of salary or wages, FBT can apply.
If your organisation provides a fringe benefit to its employees or to associates of its employees (typically family members) in respect of the employee’s employment, your organisation may have an FBT liability. This is separate from income tax and is calculated on the taxable value of the fringe benefits provided. Even if your organisation is exempt from income tax, it may still have to pay FBT. However, certain FBT concessions can reduce your organisation’s liability.