Fringe Benefits Tax Rate Changes From April 1, 2014

The Federal Government’s changes to the Fringe Benefits Tax (FBT) take effect from April 1, 2014, and this will affect salary packaging.

What’s changing?

• FBT rate will increase from 46.5% to 47%.
• From 1 July 2014 the Medicare levy will increase from the current rate of 1.5% to 2% of taxable income.
• The Type 1 gross-up rate (employer entitled to an input tax credit) will increase to 2.0802; and
• The Type 2 gross-up rate (employer not entitled to an input tax credit) will increase to 1.8868.

Gross-Up Rate Changes

· In line with the increase in the FBT rate to 47% from 1 April 2014, the Type 1 (employer entitled to an input tax credit) and Type 2 (employer not entitled to an input tax credit) gross-up rates will also be amended:

Gross-Up Rate Changes
FBT Year	Type 1 Rate	Type 2 Rate
2013-2014	2.0647	1.8692
2014-2015	2.0802	1.8868

         

Based on the change in Gross-Up Rates, the revised annual fringe benefit dollar limits based on whether an employee is salary packaging Type 1 or Type 2 benefits are outlined below:

Annual Fringe Benefit Dollar Limit – $30,000 Threshold FBT Year Type 1 Benefits Type 2 Benefits 2013-2014 $14,529.96 $16,049.65 2014-2015 $14,421.69 $15,899.94

Annual Fringe Benefit Dollar Limit – $17,000 Threshold FBT Year Type 1 Benefits Type 2 Benefits 2013-2014 $8,233.64 $9,094.80 2014-2015 $8,172.29 $9,009.96

· This means all salary packaging arrangements will need to be re-evaluated with employees before 1 April 2014 and weekly / fortnightly / monthly payroll deductions will need to be adjusted to account for the change in the salary packaging gross up rates.