2014 Federal Budget

FRINGE BENEFITS TAX AND SALARY PACKAGING

FBT rate
The FBT rate is being increased from 47% to 49% to align with the highest marginal tax rate inclusive of the Temporary Budget Repair Levy of 2%. Whilst the increased income tax rate will apply from 1 July 2014, the increased FBT rate will not apply until 1 April 2015. Further, whilst the Temporary Budget Repair Levy applies until 30 June 2017, the FBT rate is to drop again as of 1 April 2017.

Changing the FBT rate also changes the FBT gross-up rates, as follows:

2014-15 FBT year 2015-16 FBT year 2016-17 FBT year 2017-18 FBT year
FBT rate 47% 49% 49% 47%
Type 1 gross-up 2.0802 2.1463 2.1463 2.0802
Type 2 gross-up 1.8868 1.9608 1.9608 1.8868

Salary packaging
The reason for increasing the FBT rate is stated to be “To prevent high income earners from utilising fringe benefits to avoid the levy”. But you would need to salary package a lot of income to take advantage of this 2% differential. For instance, packaging $20,000 would only produce a saving of around $400.

So whilst there appears to be an opportunity in both the year ending 30 June 2015 and the year ending 30 June 2017, for high income earners to take fringe benefits in the period where the lower FBT rate applies, it would only be useful to the extent the employee earns above $180,000 and the minimal savings probably mean they are unlikely to bother.

Not-for-profit caps
In order to protect the value of fringe benefits provided in the not-for-profit sector, that otherwise diminishes with an FBT rate increase, the annual caps for concessional treatment are to be increased. Confirmation of the new amounts has not yet been provided.

FBT rebate
The FBT rebate (currently 48%) is to be aligned with the FBT rate as of 1 April 2015.

Leight Penberthy
Chief Executive Office

*Source Elizabeth Lucas – Grant Thornton Australia