Understanding your NFP's Fringe Benefits Tax status: Exempt, rebatable, or non-concessional?
Understanding your NFP's Fringe Benefits Tax status: Exempt, rebatable, or non-concessional?
As a Not-For-Profit (NFP) organisation, your mission is to serve your community and make a positive impact. However, while financial resources are often stretched thin, offering attractive employee benefits remains crucial for attracting and retaining top talent. Fringe benefits tax (FBT) is a tax employers pay on certain benefits provided to their employees, employees’ families or other associates.
Navigating the world of FBT can be complex for NFPs, but understanding your organisation's specific FBT status is the first step towards offering competitive benefits while ensuring compliance.
We focus on the three main categories - exempt, rebatable, and non-concessional - and guide you in determining your NFP's FBT position. This enables you to structure employee benefits strategically and confidently navigate FBT regulations, allowing you to continue focusing on your core mission.
FBT concessions for Not-For-Profit organisations apply as follows:
Exemption and Rebate Thresholds
|
Employer Type |
2023-24 FBT year |
2024-25 FBT year |
|
Public benevolent institutions (PBIs) and Health promotion charities (HPCs) |
|
As for 2023-24 year |
|
Public hospitals, Not-for-profit private hospitals and public ambulance services |
|
As for 2023-24 year |
|
Rebatable employers – certain registered charities, non-government and not-for-profit organisations |
|
As for 2023-24 year |
We note that where your NFP does not fall into either the FBT exemptions categories or the FBT rebatable category, it will effectively be a non-concessional category for FBT purposes. In that situation the NFP is generally treated similarly to for-profit employers. Accordingly, we use the category ‘non-concessional’ to help demonstrate this impact.
Fringe Benefits for Religious Practitioners: Understanding Potential Exemptions
Certain benefits offered to their employees, known as religious practitioners, can be exempt from FBT in specific situations. This can offer significant cost savings for the institution and its dedicated staff. We delve into the details of these exemptions, helping you understand if your religious institution qualifies and what benefits may be exempt from FBT.
Conditions include:
- Employer is a registered religious institution (broadly being an ACNC registered charity with a subtype 'advancing religion'); and
- Employee is a religious practitioner; and
- Benefit provided to the employee; or to the spouse or child of the employee; and
- Benefit provided principally in respect of pastoral duties; or any other duties or activities directly related to the practice, study, teaching or propagation of religious beliefs.
For further information:
- Taxation Ruling TR 2019/3 Fringe benefits tax: This ruling provides a detailed breakdown of FBT exemptions for benefits provided to religious practitioners.
- ATO website: The Australian Taxation Office (ATO) offers a dedicated section on FBT and religious institutions, including information on exemptions for religious practitioners, live-in carers, and domestic employees.
What's topical for NFPs in the area of FBT?
Let’s look at some key current topics that NFPs should be aware of, helping you make informed decisions regarding employee benefits and FBT compliance.
FBT-exempt organisations such as public benevolent institutions (PBI) and health promotion charities (HPC) need to take care that fringe benefits provided to employees above the capping thresholds do not arise in the FBT year where possible, because FBT will apply to the excess amounts. For example:
- Where employees already utilise the $30,000 grossed-up cap in an FBT year via salary packaging arrangements.
- Employees are then provided with further fringe benefits by their employer.
- For example, allowed to drive the work car home overnight.
- A fringe benefit will arise for that fringe benefit, since in excess of the capping thresholds, and therefore FBT will apply.
Stage 3 tax cuts, scheduled for July 1, 2024, may impact NFP salary packaging strategies:
- Particularly for rebatable employers, employees may no longer be better off or not as better off by salary packaging.
- This is due to the changes in marginal tax rates and noting that the FBT rate is at the top marginal tax rate (less FBT rebate).
- Be mindful of the tax cut changes arising and be prepared to adjust employee salary packaging arrangements, where applicable.
Beyond understanding your core FBT status, staying informed about additional considerations is crucial for NFPs. This includes understanding that the FBT concessions may not apply to your NFP organisation like they do to for-profit organisations. For example, the minor benefit exemption for low-value benefits has very limited application to entertainment provided by NFPs (noting a tax-exempt body entertainment category applies for NFPs). This has particular relevance for recreational entertainment provided by FBT exempt organisations and all entertainment provided by rebatable and non-concessional NFPs.
Contact us
If you have any questions regarding this article or would like more information on employment taxes, please contact a BDO employment tax specialist.