Type 2 – GST Free fringe benefit

Type 2 – (GST Free Expense) fringe benefits are benefits an employer provides an employee whereby the employer is not entitled to a GST credit for the provision of the benefit.

Example

Luke is employed by a Public Ambulance Service. Luke enters into salary sacrifice arrangement with his employer in which  $9,000 is paid to his Home mortgage account per FBT year.

Since the mortgage payments are GST Free Luke’s employer is not entitled to claim an input tax credit on the expense.

To see the common benefits provided to employees of non-profit organisations please see the Expense payment fringe benefit page.

Calculating the grossed up value of fringe benefits provided.

The applicable gross up rate to use for Type 2 – GST Free Expense fringe benefits is:

  • 1.8868 (for FBT Year ending 31 March 2018)

Following on from the example above.

Since Luke’s employer is a Public Ambulance Service, Luke is eligible to claim a grossed up value of fringe benefits of up to $17,000 tax free.

In determining Luke’s grossed up value of fringe benefits provided Luke’s employer would do the following calculation.

$9,000 x 1.8868 = $16,981

Since the total grossed up value of fringe benefits provided to Luke is under $17,000 there is no FBT liability for Luke’s employer.

What amount is Reported on Luke’s PAYG Payments Summary?

When reporting the Reportable Fringe Benefit Amount (RFBA) on Luke’s PAYG Payment Summary Luke’s employer should gross up the value of fringe benefits provided by the lower gross up rate of 1.8868.

Eg. $9,000 x 1.8868 = $16,981 RFBA

Therefore the Reportable Fringe Benefit Amount reported on Luke’s PAYG Payment Summary at the end of the financial year remains at $16,981.