A fringe benefits tax (FBT) is a tax applied to various non-cash benefits or perquisites employees receive in addition to their cash salary.
Taxable Benefits:
- Employer-provided housing, vehicles, low-interest loans etc. that employees receive or are provided funds for by employers are taxable benefits.
- Certain health insurance, childcare, recreational allowances or other services paid for by employers are also taxed under FBT.
Tax Bases:
- The taxable value is typically calculated using the gross-up method that accounts for both the benefit value and any income tax the employee avoids due to a benefit’s provision.
- FBT rates parallel personal income tax rates and are payable by the employer providing benefits.
Purpose:
FBT aims to prevent salary packages from being unfairly structured to avoid payroll taxes through non-cash remuneration. Fairness and revenue depend on FBT.