As a general rule, benefits that are taxable under the Fringe Benefits Tax Assessment Act 1986 (Cwlth) are also taxable for payroll tax purposes and must be declared as wages for payroll tax purposes. The only exception to this general rule is a tax-exempt body entertainment fringe benefit as defined in the Fringe Benefits Tax Act 1986 (Cwlth). Although tax-exempt body entertainment fringe benefits are subject to Fringe Benefit Tax (FBT), they are specifically exempt for payroll tax purposes.

If a benefit is exempt under the Fringe Benefits Tax Assessment Act 1986 (Cwlth) (for example, a laptop computer) it is also exempt from payroll tax. In addition, if a fringe benefit has a nil taxable value for Fringe Benefits Tax (FBT) purposes (for example, the taxable value is reduced to nil under the otherwise deductible rule), it also has a nil taxable value for payroll tax purposes.

Records used to substantiate Fringe Benefits Tax (FBT) claims made to the Australian Taxation Office are also acceptable for payroll tax.

Calculating the fringe benefit value

Under the Fringe Benefits Tax Act 1986 (Cwlth), fringe benefits are categorised into two types depending on the GST implications:

  • Type 1 fringe benefits for which the employer can claim a GST input tax credit; and
  • Type 2 fringe benefits for which the employer cannot claim a GST input tax credit.

The fringe benefit taxable value for payroll tax purposes is determined by grossing up all fringe benefits by using only the Type 2 factor.

Gross-up rates for fringe benefits are available on the Australian Taxation Office website.

Please note that the Australian Taxation Office requires that certain fringe benefits, referred to as the ‘reportable fringe benefits amount’, must be shown on the employee’s payment summary if the benefits amount exceeds $2,000. These reportable fringe benefits may not include the value of all fringe benefits provided to employees and is not necessarily the amount to be used for payroll tax purposes.

Declaring fringe benefit value in your monthly return

Employers can declare the fringe benefits in one of 2 ways:

An employer must not use a combination of methods.

Actual

Declare in your monthly return the actual value of fringe benefits provided in each month.

Estimate

Employers can include in each monthly payroll tax return from July to May, one-twelfth of the taxable value (for payroll tax purposes) of fringe benefits using the Fringe Benefits Tax (FBT) return, submitted to the Australian Taxation Office, for the year ending 31 March immediately preceding the start of each financial year. For example, use the fringe benefits declared for the year ending 31 March 2019 to determine the estimates for your 2019-20 payroll tax monthly returns.

Declaring fringe benefit value in your annual reconciliation

The annual reconciliation for each financial year will include the taxable value (for payroll tax purposes) of fringe benefits declared in the Fringe Benefits Tax (FBT) return, submitted to the Australian Taxation Office, for the year ending 31 March immediately before the annual reconciliation. For example, use the fringe benefits declared for the year ending 31 March 2020 in your 2019-20 payroll tax annual reconciliation.