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p1joechan(Newbie)Newbie
7 Apr 2022

Hi,


Looks like Housing Allowance falls under FBT. Am I correct that the advantages for offering such benefits (instead of increasing the salary) to Employees is that employees do not need to pay income tax for FBT while the implication to Employer is the extra cost required for FBT (while Employer does not need to pay for FBT if employer offer a higher salary instead of FBT?)?


On the other hand, if we offer the housing allowance under salary sacrifice arrangement, seems the arrangement is just exactly the same as above - employer to pay for the FBT for the housing allowance and employee no need to pay income tax for that allowance. Employee is required to pay for income for the final salary amount after the reduction?




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1,443 views
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AriATO(Community Support)Community Support
ATO Certified Response11 Apr 2022

Hi @p1joechan


Correct. An employee doesn't pay income tax on the value of the fringe benefit. The employer pays fringe benefit tax on the gross-up value instead.


In a salary sacrifice arrangement, the employee is paying for things from their pre-tax income instead. This means their tax is worked out using the reduced amount. The employee and employer would also need to agree to the arrangement.


If the arrangement is to salary sacrifice a fringe benefit, the employer can pass the FBT liability on to the employee. It would be best for both employers and employees to get professional advice to see what works best.


Our website has more information about FBT and Salary sacrifice and calculating FBT.



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FBT - What is the tax effect to Employer and Employee for offering FBT? | ATO Community