How the grossed-up value is worked out
When the taxable value of your fringe benefits passes $2,000 in an FBT year (1 April to 31 March), the employer must report a reportable fringe benefits amount, or RFBA. The reported figure is not the benefit's face value: it is grossed up by a factor of 1.8868 (the lower gross-up rate) to approximate the pre-tax salary you would have needed to buy the benefit yourself. So $10,000 of packaged benefits appears on your income statement as an RFBA of $18,868, and the smallest RFBA that can appear is $3,773.60. The gross-up is why the figure on the income statement always looks alarmingly larger than the benefit felt.
Not taxed directly, but counted in income tests
The RFBA is not added to your taxable income and no income tax is withheld on it; the employer pays any fringe benefits tax. The number exists for income tests. It feeds adjusted taxable income and the related repayment income definitions, which drive compulsory HELP repayments, the Medicare levy surcharge, family assistance payments and the super co-contribution. A packaged car can therefore leave income tax untouched while raising a study loan repayment or switching on the surcharge.
The salary packaging connection
Almost every RFBA starts life as a salary sacrifice arrangement: a novated lease, packaged rent or living expenses at a hospital or charity employer, packaged school fees, and similar. The packaging trades taxable salary for benefits, which is where the saving comes from, and the RFBA is the system's way of remembering the trade when means-testing you. Employees of some hospitals, charities and public benevolent institutions get FBT concessions that make packaging especially attractive, but the reportable amount still appears and still counts in the tests. Before signing a package, run the after-tax position through the salary sacrifice calculator and check where your withholding totals land using the income statement guide.
Where you will see it
The RFBA appears on the income statement in myGov, separate from salary and withholding, and pre-fills into your tax return, where the ATO applies it to the income tests automatically. Note the timing: the FBT year runs 1 April to 31 March, out of step with the income year, so the RFBA reported alongside a financial year's salary reflects packaging up to the 31 March inside that year. Benefits packaged between April and June surface in the following year's figure, which regularly confuses people reconciling a new novated lease against their statement. Nothing to pay, nothing to claim; the only mistake available is forgetting it exists when estimating a HELP repayment or surcharge position. Neighbouring terms, including taxable income and the Medicare levy, are defined in the glossary.
Sources
- ATO: Reportable fringe benefits for employees (the $2,000 threshold and the 1.8868 lower gross-up rate)
Narelle Hartigan is a CPA-qualified tax accountant with over a decade of experience in Australian personal taxation and payroll. She founded PAYG Calculator Australia to make tax withholding easy for every Australian worker to understand.