Assessing fringe benefits for Social Security income test purposes 108-05020040

Mary provides an employer letter explaining the company provides a mobile phone for private use and the cost is $200.

The non-grossed-up amount is $200. This is the only fringe benefit received by Mary.

As the non-grossed-up amount is less than the $2000 minimum reportable fringe benefit amount, it will not appear on Mary’s payment summary. The amount of $200 is the fringe benefit amount to be assessed and included in Mary's income.

John's employer is paying John's personal expenses of child care and health insurance on John's behalf. John provides a letter that lists the reportable fringe benefits total.

This amount is the grossed-up amount calculated by the employer using the Fringe Benefit Tax rate. It factors in the income tax that would be paid if the employee was paid in cash rather than in fringe benefits. This higher figure grossed-up amount reflects the gross salary that would have to be earned to purchase the benefit from after tax dollars. For grossing-up purposes, the rate of FBT is equal to the highest marginal rate of income tax plus the Medicare levy.

For John, the amounts on the letter for the current financial year are $3,883.50 and $5,825.24, giving a reportable fringe benefits total of $9,708.74. For pension and allowance Income Test purposes, calculate the non-grossed-up amount.

Non-grossed-up fringe benefits = grossed-up value of benefits x (100% - Fringe Benefit Tax rate).

The FBT rate for FBT year ending 31 March 2020 is 47%.

$9708.74 x (1 - 0.47) = $9708.74 x 0.53 = $5145.63

$5145.63 is the amount of non-grossed-up fringe benefits taken into account under the Income Test.

If John received that same amount of reportable benefits for the financial year ending 30 June 2016.

The FBT rate for the FBT year ending 31 March 2016 is 49%

$9708.74 x (1 - 0.49) = $9708.74 x 0.51 = $4951.45