What Are Fringe Benefits? Australia Guide
Written by Bindi Gethen
It’s disheartening to see how easily the essential needs and wellbeing of employees can be overlooked by employers. The hustle culture has led to a widespread undervaluing of the very backbone of any company: their workforce. As businesses focus intently on profit margins and efficiencies, the importance of providing employees with meaningful benefits often falls by the wayside.
So what are fringe benefits? Fringe benefits are additional perks offered by employers to their employees, beyond the standard salary or wages. These can include health insurance, retirement plans, paid time off, flexible working hours, remote work options, wellness programs, and other non-cash benefits that improve employees’ quality of life and job satisfaction.
What are fringe benefits?
Fringe benefits are a crucial part of an employee’s total remuneration package. Beyond just the basic salary, these benefits can significantly impact an employee’s life, offering support in various areas such as health, financial security, and personal growth. They reflect an employer’s recognition of the employee’s value and contribution to the company, going beyond monetary compensation to include aspects of care and support.
In Australia, the concept of fringe benefits is intertwined with the Fringe Benefits Tax (FBT), a tax employers must pay on certain benefits they provide to their employees or their employees’ associates (such as family members).
The Australian Taxation Office (ATO) administers this tax, which was introduced to ensure that these forms of non-cash compensation are subject to tax, similar to cash income. FBT is calculated on the taxable value of the fringe benefits provided and is separate from income tax. The FBT year runs from April 1 to March 31.
FBT covers a wide range of benefits, including but not limited to the use of a company car, private health insurance coverage, loans at reduced rates, and even covering an employee’s children’s school fees. Not all benefits are subject to FBT, and certain exemptions and concessions apply, such as benefits that are considered “minor benefits” (those with a value less than $300) and certain work-related items like laptops or mobile phones.
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Types of fringe benefits provided by employers in Australia
1. Car Benefits
Often, employers provide company cars or car allowances for personal use by employees. This is one of the most valued fringe benefits, offering significant convenience and savings for employees.
2. Health Insurance
Employers may cover private health insurance premiums for employees. This benefit is particularly appreciated, as it offers peace of mind and access to private healthcare services, reducing wait times and improving healthcare quality.
3. Housing Benefits
Some employers provide housing benefits or allowances, especially if relocation is necessary for the job.
Pro tip
Housing benefits can significantly ease the financial burden associated with renting or buying a home close to work.
4. Loan Benefits
Low or no-interest loans provided by employers to their employees for various purposes, such as purchasing a home or a car, can be a substantial financial advantage.
5. Education and Training
Covering the cost of education and professional development courses is a benefit that supports employees’ career growth and skill development, showing the employer’s investment in their future.
6. Childcare
Assistance with childcare costs or providing on-site childcare facilities is an invaluable benefit for working parents, helping them balance family and work responsibilities.
7. Entertainment Benefits
Expenses for entertainment, such as dining out, event tickets, or memberships to clubs, can also be covered, adding an element of leisure and enjoyment to employees’ lives.
8. Travel and Accommodation
For roles requiring travel, employers might cover travel and accommodation expenses, making work-related travel less of a financial burden and more of an enjoyable experience.
9. Work-related Items
Providing work-related items such as mobile phones, laptops, or tools necessary for the job, tax-free, under certain conditions, supports employees in performing their duties effectively.
10. Parking Benefits
Offering free or subsidised parking spaces, especially in urban areas where parking can be costly and scarce, is a practical and highly valued benefit.
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Why fringe benefits can be advantageous for both employers and employees
For employers
Attract and retain talent
Think about it: If you’re deciding between two jobs and one offers some perks like health insurance, a gym membership, or even childcare support, it’s a no-brainer. These kinds of benefits make a company stand out and can keep employees around longer because they feel valued.
Boost morale and productivity
When employees feel taken care of, they’re happier. Happy employees are more motivated, engaged, and productive.
Tax advantages
In some places, like Australia with its Fringe Benefits Tax (FBT), offering fringe benefits can also come with tax perks for companies. Though it might sound a bit complex, strategically offering certain benefits can be financially savvy.
For employees
Financial security and savings
Benefits like health insurance, retirement contributions, or even educational support can save employees a lot of money in the long run. You get a financial safety net on top of your salary.
Work-life balance
Some perks, like flexible working hours, working from home, or extra vacation days, can make a huge difference in balancing work with personal life. It means you can take care of your personal stuff without stressing about work all the time.
Personal and professional growth
Benefits aren’t just about the here and now. Things like professional development courses or tuition reimbursement are about investing in your future. It shows that a company believes in your potential and wants to help you grow.
Frequently Asked Questions
FBT is a tax that employers pay on certain benefits they provide to their employees or their families. It’s a bit unique because it’s the employer, not the employee, who pays the tax. The idea is to ensure that these perks are fairly taxed, similar to monetary income.
Not all of them. Some benefits are exempt or receive favorable treatment, like minor benefits that are infrequent and small in value (under $300), or certain work-related items like laptops or phones used primarily for your job. This system is designed to acknowledge that some benefits are essential for work or are of relatively low value, making it unnecessary to tax them.
Good employers understand that a supportive work environment and a comprehensive benefits package attract and retain the best talent. Offering fringe benefits is an investment in their team’s happiness and productivity. Despite the FBT, the value these benefits add in terms of employee satisfaction and loyalty often outweighs the cost.
It’s about building a positive workplace culture where employees feel truly valued beyond just their salaries.
Employers are required to keep you informed about the fringe benefits you’re receiving. This is often detailed in your employment contract or benefits summary. Additionally, employers provide an annual report by the end of the FBT year (March 31) that outlines the total value of the fringe benefits you’ve received, which can be helpful for your personal financial planning.
Explore the benefits your workplace should have with The Bookkeeping Studio
Don’t settle for a job or workplace that doesn’t value your contribution.
It’s crucial not to settle for a job where you feel undervalued or where the benefits don’t align with what truly matters to you. You deserve a workplace that not only appreciates your hard work but also shows it in ways that improve your life. Fringe benefits show that your company trusts you and is more interested in the quality of your work than just clocking hours.
At The Bookkeeping Studio, we believe that a well-rounded compensation package goes beyond just a salary. It’s about creating an environment where employees feel valued, supported, and motivated. That’s why we offer resources and guidance to help both employers and employees navigate the world of workplace benefits.
Hey, my name’s Bindi Gethen! I’m the founder of The Bookkeeping Studio in Australia. With over 15 years of experience in the industry, I have a deep understanding of the challenges that small and medium-sized business owners face when it comes to managing their finances.
I am passionate about empowering my clients with the financial information they need to succeed. My team and I pride ourselves on our commitment to exceptional value, accuracy, and confidentiality. Our virtual bookkeeping services include payroll, budgets, and management reporting, among others.
Not to toot our own horn, but we can assure you that you won’t find a bookkeeping partner like us anywhere else in the Southern Highlands.
