Fringe Benefit Tax (FBT) was introduced in April 1985 and has not undergone substantial changes since then apart from the introduction of multiple rates of FBT in 2001. The objective of the Government in enacting the rules was to stem tax avoidance through the provision of non-assessable fringe benefits to employees and to create greater neutrality in the way employee remuneration is taxed irrespective of whether it is in cash or fringe benefits. The amount of FBT collected each year is very small in comparison to total tax collected but, if it was not levied, there would be significant tax avoidance costing much more than the FBT forgone. In common with most taxes, there are trade-offs. FBT imposes compliance costs on employers which must be balanced by the amount of revenue collected from FBT. It is not desirable for employers to incur huge compliance costs to raise only a small amount of FBT.

Question: 

Outline a range of proposals to reform the current FBT rules. Each of your proposals must aim to either.

Improve the neutrality of the FBT rules vis--vis cash remuneration, OR  reducing employer compliance costs without significantly undermining collections of FBT or giving rise to significant tax avoidance opportunities for employers.

Answer rating: 100% (QA)

1 Simplification of FBT Calculation One proposal could be to simplify the calculation of FBT by stre... View the full answer