Employee Bonuses and Fringe Benefits Tax

Posted 23 Jul '15

Giving your employees bonuses to reward their work is a great incentive for boosting team morale, showing your appreciation and creating a positive work place. However, you should be aware that providing gifts instead of increasing their salary may make you subject to Fringe Benefit Tax (FBT).

Fringe Benefit Tax is a tax that employers pay on certain non-cash benefits they provide to their employees, their employee’s family and/or other associates, that may be included as part of their total remuneration package.

It is important to understand there are benefits that will attract FBT and benefits that are exempt from FBT. Gifts and small incentives for employees under $300 in value that are not frequently provided will generally be classed as a minor benefit by the ATO. Minor benefits are exempt from the FBT. Keep in mind, those GST credits cannot be claimed for these purchases nor included as a tax deductible expense.

Minor benefit gift/small incentive examples

• A Christmas or Birthday gift lower than the value of $300
• Stationary that an employee is permitted to use for private purposes
• Gift basket not exceeding $300
• The occasional use of one of your vehicles by an employee (ie for rubbish removal, travel to and from work during a transport strike etc)
• Meals provided at an ad hoc basis to an employee 3 times a year, occasional value $75
• Tolls provided through an e-tag 20 times during the year, each to the value of $7
• A short term advance to assist an employee in paying an unexpected debt

Gift/Small Incentive not classed as a minor benefit and subject to FBT

• Redeemable vouchers awarded to employees on a regular basis as an ongoing incentive scheme
• A work car provided that can be used for private use
• Discounted loan
• Paying for an employee’s gym membership
• Reimbursing an employee’s expense – ie school fees, training etc
• Benefits under salary sacrifice arrangement
• Providing entertainment ie concert tickets, food & drink, recreation

If you are providing your employees with additional benefits you can learn how to calculate your FBT via the ATO website here.

If you are not sure if you are paying your employees fringe benefits and wish to discuss this with us, please contact Empire Accountants on 3117 3736 or www.empireaccountants.com.au