The Government recently amended the law to increase the annual fringe benefits tax (FBT) caps for employees of public benevolent institutions (PBIs) and health promotion charities, public and not-for-profit hospitals, public ambulance services and certain other tax exempt charities. These changes were introduced by the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and the related Bills. These Bills were passed by both Houses without amendments and received assent on 25 June 2014.
The effect of the change is that for PBIs and health promotion charities, the FBT exemption for benefits will increase to a grossed-up annual cap of $31,177 per employee (currently $30,000). For public and not-for-profit hospitals and public ambulance services, the FBT exemption for benefits will increase to a grossed-up annual cap of $17,667 per employee (currently $17,000).
The increase to the FBT caps applies from 1 April 2015 until 31 March 2017, and is to protect the cash value of the benefits received by employees of these entities, as the government has increased the FBT rate from 47% to 49% from 1 April 2015 until 31 March 2017.
Also, the FBT rebate rate will be aligned with the FBT rate from 1 April 2015. This means that for certain other tax-exempt entities, such as charitable institutions that are currently entitled to a 48% rebate of the FBT otherwise payable up to a grossed up cap of $30,000, the rebate rate will increase to 49% from 1 April 2015 until 31 March 2017, and then fall to 47% (not 48%) from 1 April 2017. The cap will be increased from $30,000 to $31,177 from 1 April 2015 until 31 March 2017.