Understanding FBT and Salary Sacrificing

Fringe Benefits Tax (FBT) is a tax paid on certain benefits provided to employees in place of, or in addition to, salary and wages. In the not-for-profit sector, FBT is especially relevant due to salary packaging arrangements, which allow employees to receive part of their income in benefits that can be tax-free up to a certain cap. Organisations are either classified as FBT-exempt or FBT-rebatable, with different entitlements and limits.

Common benefits include expense benefits (e.g. rent, mortgage repayments), meal entertainment, and pastoral allowances. These must be carefully tracked to ensure employees stay within their allowable grossed-up caps and to avoid unexpected FBT liabilities for the employer.

Learning Objectives

By the end of this section, you should be able to:

• Explain the purpose of FBT and its relevance in the not-for-profit sector.

• Distinguish between FBT-exempt and FBT-rebatable organisations.

• Identify the current FBT rates and grossed-up caps for common salary packaging benefits.

• Recognise allowable salary sacrifice categories such as expense benefits, meal entertainment, and pastoral allowances.

• Understand the importance of staying within the caps to avoid FBT liability for clients.