Understanding Reportable Fringe Benefits for Employees

What are Reportable Fringe Benefits?

If you receive fringe benefits with a total taxable value of above $2,000 in a fringe benefits tax (FBT) year (1 April to 31 March), your employer will report this amount to the ATO. Some benefits don’t have to be reported to the ATO.

Reportable Fringe Benefits Amount

Your Reportable Fringe Benefits Amount (RFBA) is increased (“grossed-up”) to show what you would have needed to earn before tax—at the highest tax rate (including the Medicare levy)—to pay for those benefits out of your own pocket. You are not taxed on your RFBA. It is included in income tests for some obligations and government benefits. Your RFBA will be shown on either your:

• payment summary
• income statement in ATO online services through myGov.

Completing Your Tax Return

If you file your tax return by getting help from a tax return accountant or online through myTax, you don’t need to do anything. Your pre-filled tax return must include any RFBA.

Reducing Your Reportable Fringe Benefits Amount

You can minimise your reportable fringe benefits by:

• Cashing out benefits – arranging with your employer to replace your fringe benefits with a cash salary.
• Making employee contributions out of your after-tax income towards the benefits cost – for instance, you can make an employee contribution towards a car fringe benefit by making payments for some of the operating costs.
• Changing the benefits you get to things that are exempt from FBT, such as work-related items.

Many of you may not be aware of the conditions and rules for reportable fringe benefits, so it’s advisable to seek help from the best accountant Melbourne and ask them what fringe benefits you need to report.

Employment Finished between 1 April and 30 June

If you finish employment between 1 April and 30 June, and receive fringe benefits during this time, your employer will report RFBA for the income tax year ending on 30 June in the following year.

What are the Consequences of Having a Reportable Fringe Benefits Amount?

Your reportable fringe benefits amount is the grossed-up value of fringe benefits you obtained from your employer. You are not taxed on your RFBA. However, it is used to determine:

• your liability for the Medicare levy surcharge
• your child’s adjusted taxable income that affects whether they are a dependent for Medicare levy purposes
• whether you are liable for the private health insurance rebate
• whether you are subject to Division 293 tax for superannuation contributions
• your eligibility for the government co-contribution based on the personal super contributions you have made
• your eligibility for the low-income super tax offset on concessional (pre-tax) super contributions made by you or your employer
• whether you can apply your business loss to offset other income (non-commercial losses)
• whether you are eligible to reduce your employee share scheme discount
• the amount you are required to repay against your debt for
  1. Higher Education Loan Program (HELP)
  2. VET Student Loans (VSL)
  3. Student Financial Supplement Scheme (SFSS)
  4. Student Start-up Loan (SSL)
  5. ABSTUDY Student Start-up Loan (ABSTUDY SSL)
  6. Australian Apprenticeship Support Loans (AASL)
• your entitlement to a tax offset for
  1. contributions you made to your spouse’s super
  2. invalid and invalid carer
  3. zone or overseas forces
  4. Medicare levy surcharge (lump sum payment in arrears)
  5. seniors and pensioners
• your liability for family assistance payments, including
  1. Family Tax Benefit Part A and Part B
  2. Child Care Subsidy (from 2 July 2018)
  3. Child Care Benefit for approved care (prior to 2 July 2018)
  4. Parental Leave Pay
  5. Dad and Partner Pay (prior to 30 June 2024)
• your child support obligations.

FBT Records to Keep

For FBT record-keeping purposes, you can reach out to a small business bookkeeper. You need to keep the following records for 5 years:

• Worksheets
• Calculations
• Declarations
• Elections
• Supporting details
• alternative records you use instead of travel diaries or employee declarations for some benefits
• any employee declarations and records of fringe benefits offered by associates.

Conclusion

It’s essential to understand reportable fringe benefits. If you find it difficult to adhere to government obligations and rules for reportable fringe benefits, you can reach out to Reliable Melbourne Accountants.