What is the FBT Rebate?
The FBT (Fringe Benefits Tax) rebate is a benefit offered to certain organisations, known as rebatable employers, allowing them to receive a rebate based on a percentage of the gross FBT they are liable to pay.
This rebate is subject to a specific capping threshold, meaning there is a limit to the amount that can be claimed.
The core objective of this rebate is to ensure fairness. It aims to level the financial playing field by guaranteeing that the cost incurred by certain organisations when offering fringe benefits to their employees does not significantly differ from the expenses borne by employers who can claim an income tax deduction for their FBT payments.
Who Qualifies for the FBT Rebate?
Organisations that qualify for the FBT rebate fall into specific categories. These categories include:
1. Non-government, not-for-profit organisations that are registered charities and endorsed by relevant authorities as tax concessions charities. However, this excludes public benevolent institutions and health promotion charities.
2. Some scientific or public educational institutions meet the criteria for the FBT rebate.
3. Certain trade unions and employer associations located in Australia that are exempt from income tax are eligible for the rebate.
4. Various not-for-profit tax-exempt organisations can qualify for the FBT rebate, depending on their purposes. These purposes may include:
- activities related to music,
- community services,
- animal racing,
- art, games or sports,
- aviation or tourism development
- certain resource sectors such as agriculture, manufacturing, and industry
For registered charities to access the FBT rebate, they must be endorsed by the authorities. It’s important to note that the rebate is only available to registered charities that also function as institutions.
Entities Not Eligible for the FBT Rebate
The FBT rebate has specific exclusions. It is not accessible to:
- Registered Charities Functioning as Funds: Registered charities that primarily operate as funds do not qualify for the FBT rebate.
- Institutions Established by Government Law: Entities established under government laws, which could include public universities, public museums, and public art galleries, are not eligible for the FBT rebate.
- Public Benevolent Institutions and Health Promotion Charities: These particular types of organisations are not entitled to the FBT rebate. Instead, they are eligible for FBT exemption.
A registered charity is an entity that has obtained registration as a charity by the ACNC (Australian Charities and Not-for-profits Commission).
Not-for-profit organisations outside the mentioned exclusions can determine their eligibility for the FBT rebate through a self-assessment process, provided they meet the criteria of being a rebatable employer.
The FBT rebate grants eligible entities a refund calculated as a percentage of their gross FBT liability. However, there is a maximum limit, known as a capping threshold, on the rebate amount that can be claimed, which varies depending on specific circumstances.
FBT Rebate Percentage and Capping Threshold
The FBT rebate is calculated at a rate of 47% of the gross FBT payable, subject to a capping threshold of $30,000.
Here’s what this means:
Rebate Percentage: The rebate is determined by applying a rate of 47% to the difference between the gross tax amount (the FBT that would typically be payable) and the “aggregate non-rebatable amount.”
Capping Threshold: The capping threshold, fixed at $30,000, is the maximum amount up to which the rebate can be claimed.
In other words, if the total grossed-up taxable value of fringe benefits provided to an employee exceeds this threshold, the rebate cannot be claimed for the FBT liability on the excess amount.
The capping threshold applies regardless of whether the rebatable employer employed the employee for the entire FBT year.
For example, if an employee received benefits with a total grossed-up value of $15,000 between October and March, the rebate applies to all of the FBT payable for providing these benefits, as long as the total does not exceed the $30,000 capping threshold.
Some organisations provide entertainment benefits as part of salary packaging arrangements. In such cases, there may be a separate capping threshold that applies specifically to these entertainment benefits.
Separate Cap for Salary Packaged Entertainment Benefits
A distinct grossed-up cap of $5,000 is applicable to fringe benefits related to salary packaged meal entertainment and entertainment facility leasing expenses. This cap is applicable to employers who have access to either an FBT exemption or rebate.
A salary packaging (aka salary sacrifice or total remuneration packaging) arrangement is when an employee agrees to sacrifice a portion of their future salary or wages in exchange for the employer providing benefits of approximately equivalent value.
The cap is relevant to the following categories of salary packaged entertainment
- Entertainment Involving Food or Drink: This includes benefits related to food and beverages provided for entertainment purposes.
- Accommodation or Travel Connected to Entertainment: Fringe benefits associated with accommodation or travel that are linked to or meant to facilitate the provision of entertainment fall under this cap.
- Entertainment Facility Leasing Expenses: Expenses related to leasing entertainment facilities are also subject to this cap.
Salary packaged entertainment benefits are now considered within the capping thresholds that are relevant for FBT exemptions and rebates. However, if these thresholds are exceeded in a given year, they can be increased, but only up to the lesser of two amounts:
- $5,000, or
- The total grossed-up taxable value of benefits related to salary packaged entertainment.
This implies that employers have a unified grossed-up cap of $5,000 per employee for each FBT year regarding salary packaged entertainment benefits that maintain their eligibility for concessional FBT treatment.
The $5,000 cap remains applicable even if the employee was not employed for the entire FBT year.
The $5,000 separate cap concerning meal entertainment and entertainment facility leasing expenses represents the grossed-up amount. It is crucial to determine the appropriate gross-up rate when calculating whether the $5,000 cap has been exceeded.
Any benefits surpassing the separate grossed-up cap of $5,000 are factored in when assessing whether the total value of all benefits an employee receives during the FBT year exceeds their general FBT exemption or rebate cap.
Calculating the Aggregate Non-Rebatable Amount for FBT Rebate
The FBT rebate calculation involves an adjustment called the “aggregate non-rebatable amount” for each employee. This process consists of four steps as follows:
Calculate the individual grossed-up non-rebatable amount for every employee, which is the total of two components
Individual Grossed-Up Type 1 Non-Rebatable Amount: This is the grossed-up value, employing the type 1 gross-up formula, encompassing GST-creditable benefits and taxable values of specific excluded fringe benefits (excluding those related to meal entertainment, car parking, or entertainment facilities leasing expenses that are GST-creditable amounts).
Individual Grossed-Up Type 2 Non-Rebatable Amount: Computed using the type 2 gross-up formula, this covers benefits not considered when calculating the type 1 individual base non-rebatable amount.
Subtract $30,000 from the individual grossed-up non-rebatable amount for each employee.
Step 2a. f the outcome from Step 2 is positive for an employee, further reduce it (but not below zero) by the lesser of:
- $5,000, and
- the portion of the employee’s individual grossed-up non-rebatable amount linked to benefits covered by section 65J(2J), including salary-packaged meal entertainment and entertainment facility leasing benefits.
Sum up the results obtained from step 2A for all employees of the employer.
Multiply the total from step 3 by the FBT rate.
This final figure represents the employer’s aggregate non-rebatable amount for the year, indicating the proportion of taxable fringe benefits for which the employer is ineligible to claim a rebate.
Table: Calculation Steps and Accurate Formulas for Aggregate Non-Rebatable Amount
|1||Individual Grossed-Up Non-Rebatable Amount Calculation for Each Employee.||Type 1 Gross-Up + Type 2 Gross-Up|
|Individual Grossed-Up Type 1 Non-Rebatable Amount (GST-creditable benefits and taxable values of excluded fringe benefits).||Type 1 Gross-Up Formula|
|Individual Grossed-Up Type 2 Non-Rebatable Amount (Benefits not included in Type 1 calculation).||Type 2 Gross-Up Formula|
|2||Reduction of Individual Grossed-Up Non-Rebatable Amount.||Individual Grossed-Up Amount – $30,000|
|2A||Additional Reduction for 2017 FBT Year and Beyond.||Minimum of ($5,000, Portion linked to section 65J(2J) benefits)|
|3||Accumulation of Results for All Employees.||Sum of Results from Step 2A for All Employees|
|4||Calculation of Aggregate Non-Rebatable Amount.||Total from Step 3 x FBT Rate|
Non-profit Entities Qualification
To qualify for the rebate, non-profit societies, associations, or clubs must meet specific criteria:
- These entities should not operate for the individual profit or gain of their members.
- They must not be companies in which all shares are beneficially owned by government authorities at the Commonwealth, state, or territory level.
- They should not be companies limited by guarantee where member interests and rights are beneficially owned by government authorities at the Commonwealth, state, or territory level.
- Inclusive Associations: Associations that include both government and non-government bodies within their membership can still be considered non-profit associations.
- Government-Controlled Bodies: Entities formed and controlled by the government, performing functions on behalf of the government, do not fall under the category of “associations.”
FBT Rebate Calculation Formula
You can calculate the rebate amount by applying the following formula:
Rebate Amount = 0.47 × (Gross Tax – Aggregate Non-Rebatable Amount) × (Rebatable Days in Year / Total Days in Year)
Here’s a breakdown of the formula components:
- Gross Tax: This represents the amount of Fringe Benefits Tax (FBT) that would be payable without considering the rebate.
- Rebatable Days in Year: This is the number of full days in the tax year during which the employer qualifies for the rebate.
- Total Days in Year: It refers to the total number of days in the tax year, excluding the days when the employer did not engage in activities as an employer.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.