Fringe Benefits Tax And Staff Rewards: The Questions To Take To Your Accountant
We are a rewards platform, not a tax practice, and this is not tax advice. What we can tell you is which questions come up every single time, and what your accountant will ask you for.
Fringe benefits tax is the reason a rewards implementation that everyone agreed on in March sometimes stalls in April. It is usually not because the answer is bad. It is because nobody asked the question early enough, and the finance team found out at the same time as the auditor.
Ask it in week one instead.
Why It Comes Up At All
Fringe benefits tax in Australia applies to certain non-cash benefits an employer provides to employees or their associates. A gift card redeemed by an employee out of an employer-funded points balance is a non-cash benefit, so the question is live by default.
Whether tax is actually payable, and how much, depends on the specifics: what the benefit is, what it is worth, how often it is provided, and how the arrangement is structured. Those are determinations for your tax adviser working from your circumstances, not something a platform vendor can tell you from a web page.
Any vendor who tells you their program is definitively FBT-free without seeing your structure is telling you something they cannot know.
The Seven Questions
Take these to your accountant. They are the ones that determine the answer.
- Does the minor benefits exemption apply to any part of this? There is an exemption in the legislation for benefits that are of low value and provided infrequently and irregularly. Whether a given program qualifies turns on the value per benefit and the pattern of provision.
- Does the value threshold apply per redemption or per person per year? The answer changes how you configure the maximum single reward, and it is easier to set that before launch than after.
- Does frequency work against us? Regular, predictable benefits look different from occasional ones. A program designed for high frequency may be better off with lower per-event values.
- Is any of this really salary? If points are tied to output, hours or sales volume, the characterisation may be different again. This is the question that matters most and the one people skip.
- What about contractors and labour-hire workers? Different treatment, different records, worth separating in the platform from day one.
- Do we need to report anything on individual payment summaries? Reportable fringe benefits amounts have thresholds and consequences for the employee, not just the employer.
- What records do we need to keep, and for how long? Answer this before the first redemption, because retrofitting a record is much harder than exporting one.
What Your Accountant Will Ask You For
Every one of these is exportable from a competent platform. If yours cannot produce them, that is a finding in itself.
| Record | Why it is needed |
|---|---|
| Redemptions per employee, per FBT year | Establishes value provided per person |
| Value and date of each redemption | Goes to both value and frequency |
| Reward type per redemption | Different categories can be treated differently |
| Points issued but not redeemed | A liability, not yet a benefit provided |
| Employment type per participant | Employees, contractors and associates differ |
| The earning rules in force each period | Shows what the points were for |
Three Design Choices That Affect The Answer
These are decisions you make when configuring the program, and they are much cheaper to make at the start.
- Maximum single reward value. Setting a ceiling is trivial before launch and awkward afterwards.
- Whether points can be earned for output. Keeping the program strictly to recognition, milestones and training keeps the characterisation question simple.
- Whether contractors sit in the same group as employees. Separating them costs nothing and makes the year-end reporting far less painful.
What We Will And Will Not Do
We will give you the exports, keep the records for the retention period you specify, and separate participant groups however your adviser recommends. We will explain how other clients have structured theirs.
We will not tell you whether your program attracts FBT, at what rate, or whether an exemption applies. That is a question about your organisation's circumstances and it belongs with a registered tax practitioner who has seen them.
The point of this article is that the question is cheap to answer in week one and expensive to answer in month nine.
Need the export format before you commit?
We will send a sample file so your accountant can check it covers what they need.