Fringe benefit tax for Not For Profits

Fringe Benefits Tax (FBT) affects the financial operations of Not-for-Profit (NFP) organisations. While NFPs often enjoy tax concessions, FBT compliance remains a critical area that can affect budgets, planning, and resource allocation. Understanding how FBT applies to employee benefits and the available exemptions is essential for NFPs to avoid unexpected tax liabilities and ensure compliance.

FBT is a tax levied on employers for certain benefits provided to employees (or their associates) outside of their regular salary or wages. These benefits can include items like:

Company cars.
Entertainment expenses (meals, events).
Housing or Living Away From Home Allowances (LAFHA).
Reimbursements for personal expenses.

For NFPs, these benefits may still attract FBT, depending on how they are structured and whether they qualify for specific exemptions under the ATO’s rules.

While NFP organisations can access concessions such as FBT exemptions or rebates, they must carefully manage their benefits policies to remain compliant and cost-effective. One of the most common is salary packaging. Many NFPs offer salary packaging to attract and retain talent. Salary packaging arrangements may include benefits like additional superannuation, motor vehicles, or personal expense payments. While these arrangements can reduce employees’ taxable income, FBT may apply unless the benefits fall within exempt or concessionally taxed categories.

NFPs classified as Public Benevolent Institutions (PBIs) or Health Promotion Charities (HPCs) may be eligible for FBT exemptions on benefits up to a specific cap per employee. For example:

• Exempt employers: Certain benefits provided to employees, such as salary-packaged meals and entertainment, may not attract FBT if they fall within the capped exemption.
• Rebateable employers: Some NFPs that do not qualify for full exemptions may still be eligible for an FBT rebate, reducing their overall liability.

Fringe benefits can, and often are, offered to employees’ associates and should be tracked to ensure compliance with FBT rules. Associates are commonly the employees’ partners, children, or relatives and can be complex and far-reaching.

With the holiday season approaching, it is important to consider the FBT implications for end-of-year celebrations. The ATO has published a relevant statement, which you can access here.

Planning events, such as holiday celebrations or staff dinners, requires careful consideration. The ATO considers most entertainment-related expenses as fringe benefits, which may be subject to FBT unless they qualify for minor benefit exemptions (e.g., under $300 per employee). When planning events, it is important to account for:

• The cost per attendee.
• Whether attendees include non-employees such as partners or clients.
• The type and value of gifts provided.

Private use of company property

Providing company cars for employees or their associates to use is another area where FBT applies. For NFPs, opting for vehicles with lower taxable values or encouraging limited personal use can help manage FBT liabilities.

FBT compliance requires a proactive approach, particularly for NFPs that need to balance limited resources with complex tax obligations. To minimise the risks the organisation should conduct regular reviews to ensure all benefits provided align with current FBT rules and concession caps.

Document policies clearly and maintain records detailing how benefits are provided, their purpose, and any associated FBT exemptions.

Most importantly seek professional advice. Engaging experts familiar with NFP taxation can help identify opportunities to optimise benefits while reducing FBT exposure.

One of the most efficient and cost-effective things an NFP can do is engage a third-party salary packaging provider to help manage this aspect of the operation. A simple Google search will bring up several options.

Contact us for a free consultation if your organisation needs expert financial guidance. Let us handle your accounting needs so you can focus on what matters most—serving your community and driving positive change.