Fringe benefits
A fringe benefit is an extra benefit supplementing an employee's monetary wage or salary. For example: A company car, private health care, fitness club membership, phone or internet service reimbursement, etc. In Australia, a fringe benefit is a payment to an employee that is not considered part of the employee's income. Fringe benefits can be given to current, former, or future employees or a member of their family, a trustee, or a director. [3] The tax is paid by the employer only, and is not expected to be paid by the employee.
There are several specific 'types' of benefits listed in the legislation, including car fringe benefits, loan fringe benefits, housing fringe benefits and others. For each fringe benefit type, one or more methods is prescribed for determining the taxable value of the benefit. [4]
Calculation of the tax payable
FBT Tax Rates [5] | Year Ending | |
| Mar 2014 | 46.5% | |
| Mar 2015 | 47% | |
| Mar 2016 | 49% | |
| Mar 2017 | 49% | |
| Mar 2018 | 47% | |
| Mar 2019 | 47% | |
| Mar 2020 | 47% | |
| Mar 2021 | 47% | |
| Mar 2022 | 47% | |
| Mar 2023 | 47% | |
|
For the FBT year ending 31 March 2015, Fringe Benefits Tax will be payable by the employer at a rate of 47%, which represents the highest marginal income tax rate (45%), plus the Medicare levy as increased on 1 July 2014 (2%). This rate is applied to the "grossed up" taxable value of all the benefits given to employees less any contribution made by the employee. However, some benefits are exempt from FBT and others are only taxed if the value exceeds the threshold amount.
Benefits exempt from FBT include:
- Salary and wages (Allowance)
- Remote area housing
- Living away from home allowances (partly exempt)
- Employee relocation expenses
- Superannuation (retirement/private pension contributions)
- Minor benefits (less than $300 in value) incurred infrequently and irregularly; [6]
- Work-related items:
- protective clothing
- tools of trade
- briefcases
- mobile phones
- laptops and similar portable digital assistants, including software, portable printers, calculators, electronic diaries.
- Certain benefits not normally exempt can be so if provided by a public benevolent institution (e.g. charities and public/non-profit hospitals), up to a certain value.
No FBT is payable on exempt benefits and an employee is not required to make any contribution to the employer for these benefits. They are also exempt from income tax in the hands of the employee. They are not included in reportable fringe benefits.
- Note: When a benefit is exempt, it does not mean it is not a FBT, instead, it is interpreted as there is 0% FBT liability.
Special rules apply to employer-provided motor vehicles. Either of two methods may be used. The statutory formula method is the more popular one because it requires less record-keeping. It provides lower FBT rates as vehicle usage increases and as vehicle capital value decreases.
- Note: Fringe Benefit on motor vehicles only arises when the motor vehicle is provided to an employee, to the extent that is used for private purpose(e.g: holiday car). However, apportionment rule may apply when an employee uses the motor vehicle for dual purposes, such as work related activity and private use, the FBT liability on the employer will therefore be the portion that is for private use.
On 13 May 2008, the FBT exemption for laptops or other technology items was removed. Since 1995 rules had allowed high-salaried individuals to get a laptop computer almost for nothing by purchasing such equipment via salary packaging. As the equipment was exempt from FBT, the employee would buy the equipment by salary sacrifice thereby reducing their income, a saving of up to 46.5% in tax. The employee could then claim depreciation on the equipment, usually over a three-year period, on their personal tax return. If the equipment was sold as second-hand at the end of that period, it was even possible to make a profit on the deal. From May 2008, the FBT exemption was removed for laptops or other technology items under salary packaging rules. The employee also could no longer claim the depreciation.
A pay-as-you-earn tax (PAYE), or pay-as-you-go (PAYG) in Australia, is a withholding of taxes on income payments to employees. Amounts withheld are treated as advance payments of income tax due. They are refundable to the extent they exceed tax as determined on tax returns. PAYE may include withholding the employee portion of insurance contributions or similar social benefit taxes. In most countries, they are determined by employers but subject to government review. PAYE is deducted from each paycheck by the employer and must be remitted promptly to the government. Most countries refer to income tax withholding by other terms, including pay-as-you-go tax.
Payroll taxes are taxes imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their employees. By law, some payroll taxes are the responsibility of the employee and others fall on the employer, but almost all economists agree that the true economic incidence of a payroll tax is unaffected by this distinction, and falls largely or entirely on workers in the form of lower wages. Because payroll taxes fall exclusively on wages and not on returns to financial or physical investments, payroll taxes may contribute to underinvestment in human capital, such as higher education.
Employee benefits and benefits in kind include various types of non-wage compensation provided to employees in addition to their normal wages or salaries. Instances where an employee exchanges (cash) wages for some other form of benefit is generally referred to as a "salary packaging" or "salary exchange" arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree. Examples of these benefits include: housing furnished or not, with or without free utilities; group insurance ; disability income protection; retirement benefits; daycare; tuition reimbursement; sick leave; vacation ; social security; profit sharing; employer student loan contributions; conveyancing; long service leave; domestic help (servants); and other specialized benefits.
Taxation in Ireland in 2017 came from Personal Income taxes, and Consumption taxes, being VAT and Excise and Customs duties. Corporation taxes represents most of the balance, but Ireland's Corporate Tax System (CT) is a central part of Ireland's economic model. Ireland summarises its taxation policy using the OECD's Hierarchy of Taxes pyramid, which emphasises high corporate tax rates as the most harmful types of taxes where economic growth is the objective. The balance of Ireland's taxes are Property taxes and Capital taxes.
Tax withholding, also known as tax retention, Pay-As-You-Go/Pay-As-You-Earn, tax deduction at source or a Prélèvement à la source, is income tax paid to the government by the payer of the income rather than by the recipient of the income. The tax is thus withheld or deducted from the income due to the recipient. In most jurisdictions, tax withholding applies to employment income. Many jurisdictions also require withholding taxes on payments of interest or dividends. In most jurisdictions, there are additional tax withholding obligations if the recipient of the income is resident in a different jurisdiction, and in those circumstances withholding tax sometimes applies to royalties, rent or even the sale of real estate. Governments use tax withholding as a means to combat tax evasion, and sometimes impose additional tax withholding requirements if the recipient has been delinquent in filing tax returns, or in industries where tax evasion is perceived to be common.
The constitutional basis of taxation in Australia is predominantly found in sections 51(ii), 90, 53, 55, and 96, of the Constitution of Australia. Their interpretation by the High Court of Australia has been integral to the functioning and evolution of federalism in Australia.
Income tax in Australia is imposed by the federal government on the taxable income of individuals and corporations. State governments have not imposed income taxes since World War II. On individuals, income tax is levied at progressive rates, and at one of two rates for corporations. The income of partnerships and trusts is not taxed directly, but is taxed on its distribution to the partners or beneficiaries. Income tax is the most important source of revenue for government within the Australian taxation system. Income tax is collected on behalf of the federal government by the Australian Taxation Office.
Taxes in New Zealand are collected at a national level by the Inland Revenue Department (IRD) on behalf of the Government of New Zealand. National taxes are levied on personal and business income, and on the supply of goods and services. Capital gains tax applies in limited situations, such as the sale of some rental properties within 10 years of purchase. Some "gains" such as profits on the sale of patent rights are deemed to be income – income tax does apply to property transactions in certain circumstances, particularly speculation. There are currently no land taxes, but local property taxes (rates) are managed and collected by local authorities. Some goods and services carry a specific tax, referred to as an excise or a duty, such as alcohol excise or gaming duty. These are collected by a range of government agencies such as the New Zealand Customs Service. There is no social security (payroll) tax.
A novated lease is a motor vehicle lease which has been novated, that is, the obligations in the contract have been transferred from one party to another.
Income taxes are the most significant form of taxation in Australia, and collected by the federal government through the Australian Taxation Office. Australian GST revenue is collected by the Federal government, and then paid to the states under a distribution formula determined by the Commonwealth Grants Commission.
Fringe benefits tax (FBT) within the system of taxation in New Zealand is the tax applied to most, although not all, fringe benefits ("perks"), including the ones provided through someone other than an employer. FBT is paid to Inland Revenue by the employer and is calculated with reference to the taxable value of the benefit provided to the employee or associate.
Salary packaging is the inclusion of employee benefits in an employee remuneration package in exchange for giving up part of monetary salary. Such arrangements are entered into most commonly if there are tax or other benefits to be derived by the employer or employee from the arrangement.
An employer in the United States may provide transportation benefits to their employees that are tax free up to a certain limit. Under the U.S. Internal Revenue Code section 132(a), the qualified transportation benefits are one of the eight types of statutory employee benefits that are excluded from gross income in calculating federal income tax. The qualified transportation benefits are transit passes, vanpooling, bicycling, and parking associated with these things.
Defined benefit (DB) pension plan is a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum, or combination thereof on retirement that depends on an employee's earnings history, tenure of service and age, rather than depending directly on individual investment returns. Traditionally, many governmental and public entities, as well as a large number of corporations, provide defined benefit plans, sometimes as a means of compensating workers in lieu of increased pay.
Taxation in Finland is mainly carried out through the Finnish Tax Administration, an agency of the Ministry of Finance. Finnish Customs and the Finnish Transport and Communications Agency Traficom, also collect taxes. Taxes collected are distributed to the Government, municipalities, church, and the Social Insurance Institution, Kela.
Taxes in Germany are levied by the federal government, the states (Länder) as well as the municipalities (Städte/Gemeinden). Many direct and indirect taxes exist in Germany; income tax and VAT are the most significant.
Taxation may involve payments to a minimum of two different levels of government: central government through SARS or to local government. Prior to 2001 the South African tax system was "source-based", where in income is taxed in the country where it originates. Since January 2001, the tax system was changed to "residence-based" wherein taxpayers residing in South Africa are taxed on their income irrespective of its source. Non residents are only subject to domestic taxes.
Taxation in Estonia consists of state and local taxes. A relatively high proportion of government revenue comes from consumption taxes whilst revenue from capital taxes is one of the lowest in the European Union.
Czech Republic's current tax system was put into administration on 1 January 1993. Since then, an updated VAT act was introduced on 1 May 2004 when Czech Republic joined the EU and the act had to correspond to EU law. In 2008, the administration also introduced Energy Taxation. Changes to tax laws are quite frequent and common in the Czech Republic due to a dynamic economy. The highest levels of revenue are generated from income tax, social security contributions, value-added tax and corporate tax. In 2015, total revenue stood at CZK 670.216 billion which was 36.3% of GDP. The tax quota of the Czech Republic is lower than the EU average. Compared to the averages of the OECD countries, revenues generated from taxes on social security contributions, corporate income and gains and value added taxes account for higher proportions of total taxation revenue. Personal income tax lies on the other end of the spectrum where the revenue is proportionally much lower than the OECD average. Taxes on property also account for lower levels of revenue.
Taxes has an important part in the Moroccan economy. The taxes are levied by the government and the organization responsible for tax policy on Morocco is called the “General Management of Taxes”.
