As the Fringe Benefits Tax ("FBT") year end approaches, some subtle legislative changes are changing employee benefits practices.

In-House Benefits



From 1 April 2007, the FBT in-house reduction increased from $500 to $1,000. As a result many employers now encourage employees to salary sacrifice up to $1,000 of in-house property and residual benefits. The potential savings include; input tax credits, payroll tax, workers compensation and PAYG.

Employee Contributions

The individual highest marginal tax threshold has increased threefold over the past seven years to $150,000. As a result many employers and employees are frustrated with their legacy motor vehicle policies and novated lease arrangements that give rise to a FBT liability, yet only delivers marginal benefit to middle income earners. Many employers would like to unravel the existing arrangements.

However, the answer is often as simple as incorporating an employee contribution policy to the existing arrangement for ALL reportable benefits, not just the novated leases. The employee contribution strategy results in the best of both worlds, receiving concessional treatment and the individual is assessed at their marginal tax rate.

The adoption of an employee contribution policy provides a disproportionate benefit to middle and low income earners. An effective arrangement can be made for the 31 March 2008 year, which on average provides cash of between $500 and $1,000 per employee.

Employer Contribution To Its Employee’s Social Club

The ATO (ATO ID 2007/208) has confirmed our long held view that where an employer has made a contribution to its employees’ social club, this contribution will not be a property fringe benefit as no particular employee has been identified who will benefit from that contribution to the ‘social club’.

Common Employee Benefits

  • Reward and recognition payments
  • Laptop reimbursements
  • In-house child care facilities
  • Food and drink consumed on employees premises
  • Remote area allowance
  • In-house goods
  • Relocation
  • LAFHA
  • Interest on investment loans
  • Work related membership fees
  • Car parking
  • Motor Vehicles

A review of your employee benefits policy and programs provides an important link between Human Resources and Taxation. The objective is to ensure that your remuneration benefits (after tax) are market competitive and administratively efficient.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.