Australia’s Fringe Benefits Tax has been adjusted, with consequences for businesses across the country.

We previously released guidance on Australia’s Fringe Benefits Tax (FBT), a tax levied on the non-cash benefits that employers offer to their employees in connection to their jobs. In this context, fringe benefits may be defined as the provision of a car, private health care, a mobile phone contract, and so on. As of 2020, FBT was set at 47%.

In late 2020 however, Australian Treasurer Josh Frydenberg set out plans to update FBT and add exemptions for some businesses. The measures are being introduced as a way to address the financial damage caused by the coronavirus lockdown and to help businesses and their employees better contribute to the economic recovery.

Fringe Benefits Tax Changes

In his October 2020 Budget, Frydenberg announced that the 47% FBT would be removed for certain businesses. In more detail, from April 2021 the following changes to the FBT will come into effect:

  • Under current rules, businesses are exempt from FBT if they provide employees with training related to their jobs but are liable if that training is unrelated. Under the new rules, businesses that provide training unrelated to employees’ current roles will also be exempt from FBT.
  • Under the new rules, businesses that make between $10 million and $50 million will be exempt from FBT on certain benefits, including free parking spaces, the provision of work smartphones, and the provision of work computing equipment.

Effectively, the new FBT rules will enable employers that have been adversely affected by the lockdown restrictions to restructure and retrain workers in new roles, and so adapt and upskill their workforce for the post-Covid landscape.

Frydenberg has commented on the need for the FBT changes:

“The jobs and skills we’ll need as we come out of the crisis are not likely to be the same as those that are lost. The changes will help more Australians find work as part of our plan for economic recovery.”

The new FBT rules will not apply to employees that receive training as part of their salary arrangement or those that receive it via a federally supported place at university. The Australian government has also hinted that it will consider adjusting the tax benefit system for employees that pay for their own training.

For more information on Australia’s tax system, explore activpayroll’s Australia Global Insight Guide. Find news and updates on Covid-19 support on the activpayroll latest news page.

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