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TRAINING

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The one-kilometre distance is measured not by radius but by the shortest practicable direct route (by whatever means this route is travelled, for example, by foot, car or boat). The distance is not a straight line or “as the crow flies”, but a practicable route that can easily be accessible at all times.

Importantly the distance is not measured from the employers street address.

The distance begins at the entry point where the employer provides the car parking, and ends at the entry point to the commercial car parking station. Any route mapped, must have permanent access way and cannot be closed off after working hours or business hours.

Where an employer provides parking at multiple facilities at any one location, then it is necessary to measure from the entry point of each of those parking facilities.

It is important to remember that the measuring is generally most important on:

  1. The first day of the FBT year, to determine if a FBT liability exists;
  2. The first day of the FBT year, to determine the lowest daily rate, if using average cost method;
  3. The last day of the FBT year, to determine the lowest daily rate, if using average cost method;

Records must be maintained to support the measurements and assessment of whether a FBT liability exists. If a FBT liability does exist, then records must be maintained to support the measurements and assessment of the lowest daily rate at beginning and end of the FBT year.


Motor vehicles often comprises a significant percentage of an organisations FBT liability, hence the desire to reduce the FBT liability. The FBT technical rules in relation to Motor vehicles are complex, and often practically difficult, when seeking to reduce the taxable value, whether by:

  • One third reduction
  • Employee contribution
  • Claiming days unavailable
  • Logbook records; or
  • Claiming exemption

When reducing the taxable value (for any benefit category) the reduction must be fully supported and documented.

More recently the ATO have released concessional Practical Compliance Guidelines (PCG) in relation to Logbook and claiming exemption for Tool of Trade and Work related vehicles. These PCG’s themselves contain a level of complexity and strict requirements to avail the concession and associated reductions.

Motor vehicles remain a key focus area by the ATO through scrutiny of claiming Motor Vehicle expenses, double dipping on Novated Lease car expenses, GST & Depreciation on luxury cars, Logbooks, claiming Exemption, correct Valuation choice or correctly reporting Employee Contributions for FBT, GST and Income Tax purposes.


A fringe benefit is a ‘payment’ to an employee, but in a different form to salary or wages.

According to the FBT legislation, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. The employee may even be a former or future employee.

An employee is a person who is, was, or will be entitled, to receive salary or wages, or benefits in lieu of salary and wages. Benefits provided in respect of someone who has died are not fringe benefits as a deceased person does not meet the definition of ’employee’ in the FBT legislation.

The terms ‘benefit’ and ‘fringe benefit’ have broad meanings for FBT purposes. Benefits include rights, privileges or services.

As a guide to whether a benefit is provided in respect of employment, ask yourself whether you would have provided the benefit if the person had not been an employee. When we refer to ‘you’ in this Guide, we are referring to you as an employer.

To simplify the explanations in this Guide, we generally discuss examples where the fringe benefit is provided directly by an employer to an employee. However, a fringe benefit may be provided by an associate of the employer or under an arrangement between a third party and the employer. It may also be provided to an associate of the employee (for example, a relative).

The following checklist will help you work out if you are already providing a fringe benefit to your employees. If any of the following apply, you may have an FBT liability.

  • Do you hold any cars or other vehicles that are available to employees for their private use, including a car garaged at the employees’ place of residence?
  • Do you provide loans at reduced interest rates to employees?
  • Have you released an employee from a debt?
  • Have you paid for, or reimbursed, an employee’s non-business expense?
  • Do you provide a house or other accommodation to your employees?
  • Do you provide employees with living-away-from-home allowances?
  • Do you provide entertainment including food, drink or recreation to your employees?
  • Do any of your employees have a salary package arrangement in place?
  • Have you provided your employees with goods at a lower price than they are normally sold to the public?

Fringe benefits have been categorised into 13 different types so that specific valuation rules can be used. These benefits are dealt with separately in their respective chapters in this Guide.

A number of benefits are exempt from FBT. These include certain benefits provided by religious institutions and benefits provided by some international organisations and public benevolent institutions. In addition, there are some specific types of benefits that are exempt from FBT.

There are also a range of concessions available. Some of these concessions reduce the taxable value of a fringe benefit to nil, whereas others provide only a partial reduction. The concessions relevant to each type of benefit are listed in the respective chapters of this guide.


Salary Packaging as a Remuneration Solution is also considered as a salary sacrifice arrangement. It is a formal arrangement between an employer and an employee, if the employee agrees to receive a lower amount of pay each payday in return for the employer providing them with benefits of a similar value to the reduction in pay.

Effective salary sacrifice

The requirements for an effective salary sacrifice arrangement are:

  • The arrangement should be entered into before you perform the work.
  • There should be an agreement between you and your employer – the contract is usually in writing, but may be a verbal one.
  • There should be no access to the sacrificed salary – the sacrificed salary must be permanently forgone for the period of the arrangement.

If a fringe benefit that has not been provided is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is treated as salary and is taxed as normal income.

Salary and wages, leave entitlements, bonuses or commissions that accrued before the arrangement was entered into cannot be part of an effective salary sacrifice arrangement.

You cannot include payments you have direct debited from your pay, such as health insurance premiums, loan repayments, union fees or credit card repayments. These payments are made from after-tax or net amounts of salary.

There is no restriction on the types of benefits that can be sacrificed. The important thing is that the benefits form part of your remuneration, replacing what would otherwise be paid as salary.

Salary sacrifice may affect super and some government benefits

It’s important to understand the potential implications of entering into a salary sacrifice arrangement with your employer. The following may apply to you:

  • You pay a lesser amount of income tax on the reduced amount of salary or wages you receive.
  • Your employer is liable to pay fringe benefits tax (FBT) on the non-cash benefits provided.
  • Your salary-sacrificed super contributions are classified by your super fund as employer contributions rather than your own.
  • From 1 January 2020, your employer can’t use your salary-sacrificed super contributions to
    • reduce the earnings amount your super guarantee entitlement is calculated on, or
    • satisfy all or part of their super guarantee contribution obligations.
  • Your employer is required to report certain benefits on your payment summary. The value of these reported benefits is taken into account in assessing your eligibility for
    • the Medicare levy surcharge
    • some tax offsets
    • child support payments
    • some government benefits.

The Fair Work Commission regulates employment agreements and conditions. To check your conditions contact the Fair Work Commission.


A salary sacrifice arrangement is also commonly referred to as salary packaging or total remuneration packaging. It is an arrangement between an employer and an employee, where the employee agrees to forgo part of their future entitlement to salary or wages. This is in return for the employer providing them with benefits of a similar value.

Importantly, the fringe benefits tax (FBT) rules be carefully considered when assessing salary packaging arrangements. Employers and employees should ensure they are fully informed of the requirements for salary packaging and the FBT rules. Employees in particular need to understand how the salary packaging arrangement may affect them personally.

Requirements for an effective salary sacrifice arrangement

You need to set up a salary sacrifice arrangement with your employer before you start the work. If your arrangement is not put into place until after you have performed the work, it may be ineffective.

Agreement between you and your employer

It is advisable that you and your employer clearly state and agree on all the terms of any salary sacrifice arrangement. We recommend that this is achieved through employer written policies and a contract in writing. If you enter into an undocumented salary sacrifice arrangement, you may have difficulty establishing the facts of your agreement.

Subject to the terms of any contract of employment or industrial agreement, employees can renegotiate a salary sacrifice arrangement at any time. Where you have a renewable contract, you can renegotiate amounts of salary or wages to be sacrificed before the start of each renewal.

The contract of employment includes details of your remuneration, with any salary sacrifice arrangement. Your contract can be varied by agreement between you and your employer.

Note: From 1 January 2020, your salary sacrificed contributions will no longer be considered super guarantee contributions from your employer. For example, if you elect to salary sacrifice 5% into your super, your employer will still be required to pay 9.5% or more of your ordinary time earnings base, including the salary sacrifice amount, into your super to avoid the super guarantee charge.

No access to sacrificed salary

You must permanently forego the sacrificed salary for the period of your arrangement. If a fringe benefit has not been provided and is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is salary and is taxed as normal income.

Similarly, if you direct your employer to make payments to a third party from salary you have earned (for example, to pay your health insurance premiums, loan repayments, union fees or credit card repayments), these do not constitute an effective salary sacrifice arrangement. These third-party payments are made from your after-tax or net amounts of salary.

Any salary and wages, leave entitlements, bonuses or commissions that accrued before you entered into the arrangement can’t be part of an effective salary sacrifice arrangement.

Types of benefits that can be included

There is no restriction on the types of benefits you can sacrifice. The important thing is that these benefits form part of your remuneration. They replace what otherwise could have been paid as salary.

The types of benefits generally provided in salary sacrifice arrangements by employers include fringe benefits, exempt benefits and superannuation.

Fringe benefits

Common fringe benefits include:

  • Cars
  • Car parking
  • Relocation Expenses
  • Portable Electronic Devices
  • Airline Lounge Memberships
  • Expense Payments (such as the payment of your loan repayments, school fees, child care costs and home phone costs).

Exempt benefits

A number of benefits are exempt from fringe benefits tax (FBT).

The following work-related items commonly provided in salary sacrifice arrangements are exempt benefits:

  • A portable electronic device
  • An item of computer software
  • An item of protective clothing
  • A briefcase
  • A tool of trade.

The work-related items exemption is limited to:

  • Items primarily for work-related use
  • One item per FBT year for items that have a substantially identical function, unless the item is a replacement item.

Super

Salary sacrificed super contributions under an effective salary sacrifice arrangement are considered to be employer contributions. These are not fringe benefits when paid for an employee to a complying super fund.

However, super contributions made for the benefit of an associate, such as your spouse, are a fringe benefit. Similarly, contributions paid to a non-complying super fund will be a fringe benefit.

Implications of entering into an arrangement

As an employee, you need to be aware of how entering into a salary sacrifice arrangement with your employer will affect you. For instance:

  • You pay income tax on the reduced salary or wages.
  • Your employer may be liable to pay FBT on the non-cash benefits provided.
  • Your employer may be required to report certain benefits on your income statement or payment summary.
  • Your salary sacrificed super contributions are taxed in the super fund and are classified as employer super contributions, rather than employee contributions.
  • Your salary sacrificed super contributions cannot be used to reduce the minimum amount of SG your employer needs to pay for you (from 1 January 2020).

Super guarantee

Your salary sacrifice contribution is counted towards your employer contributions.

Therefore, salary sacrificed super contributions are generally taxed concessionally at 15% in the super fund.

From 1 January 2020, salary sacrificed super contributions will not:

  • Reduce the ordinary time earnings that your employer is required to calculate your super entitlement on
  • Count towards the amount of super guarantee contributions that your employer is required to make for them to avoid the super guarantee charge.

Prior to 1 January 2020, your employer could use salary sacrificed super contributions to reduce both the earnings amount your super guarantee entitlement is calculated on as well as satisfying all or part of their compulsory super guarantee contributions for you.

It is advisable that you and your employer clearly state and agree on all the terms of any salary sacrifice arrangement.

Assessable income

You only pay income tax on your reduced salary, but you receive the reduced salary plus the benefits. You can make employee contributions out of your after-tax income. These can be towards the cost of the benefits and reduce any reportable fringe benefits amount.

Under an effective arrangement, your income tax liability should be less than it would have been without an arrangement. However, before entering into a salary sacrifice arrangement you should consider the associated costs. This includes the amount to be sacrificed and any surcharges or obligations from having the benefits reported on your income statement or payment summary.

Salary sacrificing a deductible expense

If your employer pays for an expense, as part of your salary package, which you would normally get a tax deduction for, they will not have to pay FBT on this expense. This is known as the ‘otherwise deductible rule’. If this occurs you will not be able to claim an income tax deduction for this expense in your personal income tax return. This is because the ‘deductible element’ of the expense has been taken into account when your employer calculates the taxable value of the benefit provided to you for FBT purposes.

Fringe benefits tax

If there is any FBT payable on the benefits you received, your employer is liable to pay that tax. Your salary may be reduced by the amount of FBT paid by your employer as part of your salary sacrifice agreement.

Certain employers, such as public benevolent institutions, health promotion charities and public hospitals, will not be liable to pay FBT. That is unless the amount of benefits provided to an individual employee exceeds the relevant threshold.

Reportable fringe benefits

If the total taxable value of certain fringe benefits received by you in an FBT year (1 April to 31 March) exceeds $2,000, the grossed-up taxable value of those benefits will be recorded on your income statement or payment summary for the corresponding income year (1 July to 30 June). Some fringe benefits, called excluded benefits, don’t have to be reported on your income statement or payment summary, although your employer still has to pay FBT on these benefits.

Grossing up reflects the gross salary that you would have to earn to purchase the benefit from after-tax dollars. This is calculated at the highest marginal tax rate, including the Medicare levy. That is, your employer multiplies the taxable value of the benefit by 1.8868.

The value of fringe benefits reported on your income statement or payment summary is known as your reportable fringe benefits amount. You will need to show this amount (or the total of the reportable fringe benefits amounts if you receive more than one payment summary during the year) on your tax return.

This amount is shown on your tax return, but will not be included in your assessable (or taxable) income or affect the amount of basic Medicare levy payable. However, the total will be used to calculate:

  • The Medicare levy surcharge
  • Deductions for personal super contributions
  • The super co-contribution
  • Certain tax offsets
  • The private health insurance rebate
  • Higher Education Loan Program (HELP), Student Financial Supplement Scheme (SFSS), Student Start-up Loan (SSL), ABSTUDY Student Start-up Loan (ABSTUDY SSL) or Trade Support Loan (TSL) repayments
  • Your child support obligations
  • Your entitlement to certain income-tested government benefits.