What are Reportable Fringe Benefits?
Reportable fringe benefits for employees are additional perks or benefits that you receive from your employer, which may need to be reported to the government.
Whether or not these benefits need to be reported depends on their total taxable value during a specific period known as the Fringe Benefits Tax (FBT) year, which runs from April 1st to March 31st.
If the total taxable value of the fringe benefits you receive exceeds $2,000 within the FBT year, your employer is required to inform the government about this amount.
To comply with this reporting requirement, your employer can do so through Single Touch Payroll or include the information on your payment summary.
However, it’s important to note that not all types of benefits have to be reported to the government.
Benefits Subject to Reporting
All fringe benefits, except those specifically excluded by law, must have their value allocated to the relevant employees for reporting purposes.
Exemption for Specific Employees
For employees who work in or for public benevolent institutions, health promotion charities, hospitals, public ambulance services, or live-in residential care workers, you must allocate the notional taxable value of benefits that are exempt solely because of their employment in these sectors.
These benefits, known as quasi-fringe benefits, are reportable but remain exempt from Fringe Benefits Tax (FBT).
In the case of electric cars, even though employees can use them for their private purposes without incurring Fringe Benefits Tax (FBT), the benefit itself is still subject to reporting requirements.
This means that employers must calculate and report the notional taxable value of the benefits that arise from employees using these exempt electric cars for their personal use.
Hence, the value of this benefit needs to be determined and reported, even though FBT is not applicable to it.
Excluded Fringe Benefits
Certain fringe benefits are exempt from reporting requirements but are still subject to Fringe Benefits Tax (FBT).
Benefits That Are Not Reportable
The following benefits do not need to be reported:
Car Parking Fringe Benefits: When you provide car parking facilities for an employee, this benefit does not require reporting.
Expense Payment Fringe Benefit for Car Parking: If you reimburse an employee’s expense for car parking, and it qualifies as an expense payment fringe benefit, it is reportable. However, regular car parking benefits provided by the employer do not fall under this category.
Private Use of Pooled or Shared Cars: Fringe benefits related to the private use of pooled or shared cars do not need to be reported.
Meal Entertainment Benefits: Benefits related to meal entertainment, as well as related travel, accommodation, and entertainment facility leasing benefits, are not reportable if they are not provided through a salary sacrifice arrangement.
Remote Area Housing Assistance, Home Ownership Schemes, and Repurchase Schemes: These benefits are exempt from reporting.
Occasional Travel to Major Australian Population Centre: The cost of occasional travel to a major Australian population center for an employee living in a remote area is not reportable.
Emergency or Essential Health Care: Benefits related to emergency or other essential health care that an employee receives as an Australian citizen or permanent resident while working outside Australia, for which they cannot claim a Medicare benefit, do not need to be reported.
Security and Personal Safety Benefits: Benefits provided to ensure the security and personal safety of an employee due to their job do not require reporting.
If a benefit falls into one of these exempt categories, you do not include it when calculating the total value of benefits provided to an employee or when reporting the employee’s fringe benefits through STP or on their payment summary.
Pooled or Shared Cars
For a benefit to be classified as an excluded benefit related to pooled or shared cars, the following conditions must all be satisfied:
- Car Fringe Benefit or Exempt Car Benefit: The benefit provided to the employee should either fall under the category of a car fringe benefit or an exempt car benefit.
- Additional Use of the Same Car: There must be another instance during the year where the same car is used, resulting in a car fringe benefit or an exempt car benefit for a different employee.
- Employer Direction or Consent: The employer must give direction or consent for the use of the car by each respective employee.
When these conditions are met, the car is considered a ‘pooled or shared car’ for the duration of the Fringe Benefits Tax (FBT) year, and the reporting exclusion applies to the employee’s use of that particular car.
It’s important to note that the use of a car can vary from one year to the next. Therefore, the legislation requires that the conditions for the reporting exclusion regarding pooled or shared cars must be determined and met for each individual car and each FBT year separately.
Individual Fringe Benefits Amount
The “individual fringe benefits amount” refers to the total value of all benefits subject to reporting requirements provided to a specific employee during an FBT year.
Essentially, it’s the sum of the values of these reportable benefits for that particular employee.
When benefits are given to someone associated with an employee (like a family member) because of that employee’s job, these benefits are still attributed to the employee for reporting purposes.
In other words, the value of such benefits is assigned to the employee, not to the associate, when calculating the individual fringe benefits amount.
Reporting Reportable Fringe Benefits Amounts (RFBA)
Now, we’ll explore the process of reporting RFBA, which is required when the total taxable value of certain fringe benefits provided to an employee exceeds $2,000 within the Fringe Benefits Tax (FBT) year (from April 1st to March 31st).
Here’s how it works:
To determine an employee’s RFBA, you can use the following formula:
RFBA = Individual fringe benefits amount × (1 – FBT rate)
This is essentially the individual fringe benefits amount multiplied by the lower (type 2) gross-up rate.
It’s important to note that the higher gross-up rate formula is not applicable when calculating an employee’s reportable fringe benefits amount.
Reporting Options Through Single Touch Payroll (STP)
You have two options for reporting an employee’s RFBA through the Single Touch Payroll (STP) system:
Updating Year-to-Date RFBA
You can choose to update the year-to-date RFBA throughout the year as you provide fringe benefits to your employee. This allows for ongoing reporting as benefits are provided.
Annual RFBA Figure
Alternatively, you can report a single RFBA annual figure. This report is made between the end of the FBT year and the time you submit a declaration confirming the finalization of your reporting for that employee for the entire financial year.
When you report an employee’s RFBA through STP, this information will be accessible to the employee through their STP Employment income statement.
Non-STP Reporting Obligations
If you are unable or choose not to report RFBA through STP, you must provide this information to your employee on a payment summary.
Additionally, you are required to submit a PAYG payment summary annual report. It’s important to note that the payment summary should not include amounts you have already reported through STP, ensuring accurate and non-duplicate reporting.
Why Include RFBA in STP Reporting or on a Payment Summary
When a reportable fringe benefits amount (RFBA) is displayed on an online Single Touch Payroll (STP) Employment income statement or on a payment summary, it’s important to note that it doesn’t become part of the employee’s assessable income for tax purposes.
However, it serves various important functions in assessing an employee’s eligibility for certain benefits and tax-related matters. These include:
- Eligibility for Transfer Payments: RFBA is considered when determining an employee’s eligibility for transfer payments and other tax concessions. This means that certain government financial assistance programs and benefits may take the RFBA into account when assessing an employee’s eligibility.
- Liability for Levies and Surcharges: RFBA can also impact an employee’s liability for specific levies and surcharges, including:
- Medicare levy surcharge, which is imposed on individuals who do not have private health insurance.
- Private health insurance rebate, which may be affected based on an individual’s income, where a higher RFBA could result in a reduced rebate.
- Additional tax on concessional contributions (Division 293), particularly for superannuation contributions, where a higher RFBA might trigger additional tax.
- Tax offset for spouse superannuation contributions that are eligible.
- Government co-contribution for personal superannuation co-contributions made by the employee.
- Repayments related to Higher Education Loan Program (HELP), Student Financial Supplement Scheme (SFSS), Student Start-up Loan (SSL), ABSTUDY Student Start-up Loan (ABSTUDY SSL), and Trade Support Loan (TSL).
- Child support obligations, which may be influenced by an individual’s financial situation, including RFBA.
- Entitlement to certain income-tested government benefits, where a higher RFBA could affect eligibility and benefit amounts.
Therefore, we can say that while RFBA does not directly impact an employee’s taxable income, it plays a significant role in assessing eligibility for various government benefits, tax offsets, and obligations.
How To Handle Reportable Benefits When an Employee Leaves Employment
In situations where an employee concludes their employment between April 1st and June 30th of a specific year and they have received reportable benefits from April 1st of that year onwards, specific reporting procedures apply:
- You are required to display the amount of the reportable benefit in your Single Touch Payroll (STP) reporting or on a payment summary for that employee.
This reporting should be done for the income year ending on June 30th of the following year, even if you haven’t paid them salary or wages during that income year.
- When an employee leaves employment but has a reportable fringe benefits amount, you should report this amount in the same manner as if they were still employed by your organization.
It’s crucial to note that there is no requirement for you, as an employer, to submit a declaration confirming the finalization of your reporting for that employee for the financial year, nor are you obligated to provide them with a payment summary before the conclusion of the income year covered by that declaration or payment summary.
These reporting requirements ensure that the reportable benefits provided during their employment are appropriately documented, even if the employment relationship ends before the end of the income year.
Inclusion of RFBA in Reporting and Payment Summaries
For the purpose of Fringe Benefits Tax, the definition of an ’employee’ is broadened to include not just current employees but also individuals who fall into several categories.
These categories include former employees, prospective or future employees, and individuals who receive benefits related to employment-type services, even if they do not receive salary or wages.
In line with this expanded definition, it’s important to note that anyone who is provided with reportable fringe benefits, regardless of whether they receive regular salary or wages during a particular income year, must have their RFBA reported either through STP or via issuance of a payment summary.
This comprehensive approach ensures that all individuals receiving such benefits are subject to the necessary tax reporting and obligations, regardless of their current employment status or payment structure.
Correcting Previously Reported RFBA
Inadvertent Understatement: $195 or Less
If you’ve unintentionally understated an employee’s reportable fringe benefits amount (RFBA) by $195 or less, there’s typically no requirement for correction unless it is suspected deliberate understatement.
Correcting RFBA Reported Through STP
To rectify inaccurately reported RFBA via Single Touch Payroll (STP), you must submit an Update event promptly with the correct information.
In cases where you’re uncertain about the accurate details and have already finalized your reporting for that employee for the financial year:
- Submit an Update event with previous details, removing the finalization indicator.
- This alerts the employee that the information provided is not final, and they should exercise caution in their tax return.
Once you ascertain the correct information:
- Submit another Update event with accurate details.
- Declare finalization for that employee again.
You must remember that changes to STP-reported information can be made up to five years after the end of the financial year.
Correcting RFBA on Issued Payment Summaries
To correct an RFBA on a previously issued payment summary. You must complete a new payment summary and mark it as an amending payment summary.
When completing amended payment summaries:
- Include all necessary payee, payment, and payer information.
- Send the amended summaries to the relevant authorities.
- Provide a copy of the amended payment summary to the payee.
If the employee has already filed their tax return, they should request an amendment to their reportable fringe benefits amount.
For amendments affecting Fringe Benefits Tax (FBT) payable, request an amendment to your FBT return as well.
These procedures ensure the correction of inaccuracies in RFBA reporting, whether through STP or on payment summaries, and facilitate accurate tax reporting for employees.
Reducing Your Reportable Fringe Benefits Amount
Cashing Out Benefits
One way to lower your reportable fringe benefits amount (RFBA) is by arranging with your employer to convert some or all of your fringe benefits into cash salary.
This means you opt to receive cash in place of certain benefits, reducing the taxable value of those benefits and, consequently, your RFBA.
Making Employee Contributions
You can also decrease your RFBA by making employee contributions from your after-tax income toward the expenses associated with the benefits you receive.
For instance, if you have a car fringe benefit, you can choose to contribute a portion of your income to cover some of the operating costs linked to that benefit.
These contributions effectively reduce the taxable value of the benefit, thus lowering your RFBA.
Switching to Exempt Benefits
Another strategy involves changing the nature of the benefits you receive to items that are exempt from Fringe Benefits Tax (FBT). Certain work-related items provided by your employer fall under this category.
By transitioning to these exempt benefits, you can reduce your RFBA while still enjoying certain fringe benefits.
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.