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

An amount of salary or wages voluntarily sacrificed into superannuation is assessed as employment income. A customer’s payment summary will include details of the amount salary sacrificed into superannuation as reportable employer super contributions. Salary sacrificing into superannuation is not subject to Fringe Benefits Tax rules.

Where an employee salary sacrifices for a benefit other than superannuation (fringe benefits), this is known as salary sacrificing or salary packaging and is assessed as income.

The amount of salary sacrifice will be included in the reportable fringe benefit amount reported by the employer. For this reason, care needs to be taken not to assess the same income twice.

For example, Lauren includes her salary sacrifice amount used to purchase a fringe benefit in her fortnightly report. At the end of the reporting year, the total reportable fringe benefit amount is presented to Lauren through Single Touch Payroll (STP). This amount should not be assessed as income as the income has already been assessed throughout the year in which Lauren had the use of the fringe benefit purchased through the salary sacrifice arrangement.

A separate procedure applies for assessing fringe benefits for family assistance and Paid Parental Leave scheme payments.

Fringe benefits are a valuable consideration for social security Income Test purposes; the non-grossed-up value of the fringe benefit is assessed as employment income. This is the actual cost to the employer of providing the fringe benefit. (Exception: there are specific exemptions such as the value of board and lodging).

As fringe benefits are considered employment income, they can be used in calculating the reduction of affecting income through the use of Working Credits and Work Bonus.

Whether a customer or their partner salary sacrifices into a fringe benefit, the income sacrificed is assessed as income for income support payments. There is no further calculation required where it can be determined that the income sacrificed for the fringe benefit is the non-grossed-up amount.

The fringe benefits total shown on a person's payment summary (group certificate) or individual income tax return is the grossed-up amount. These are also known as reportable fringe benefits amount (RFBA). The total is reported on the payment summary or individual income tax return (as a separate item) if the non-grossed-up amount is more than $2000 ($1000 before 1 July 2007). For Income Test purposes, the value of all non-grossed-up fringe benefits (that is, reportable and non-reportable) must be determined regardless of whether or not they appear on the payment summary or individual income tax return. These amounts are for a prior period and may not be an indication of current FBT amounts.

The amount of reportable fringe benefit amount reported by the employer will represent salary sacrifice and benefits provided by the employer at no cost to the employee. For this reason, care needs to be taken not to assess the same income twice.

For example, Lauren includes her salary sacrifice amount used to purchase a fringe benefit in her fortnightly report. At the end of the reporting year, the total reportable fringe benefit amount is presented to Lauren through Single Touch Payroll (STP). This amount should not be assessed as income as the income has already been assessed throughout the year in which Lauren had the use of the fringe benefit purchased through the salary sacrifice arrangement.

If the evidence provided contains the grossed-up amount of fringe benefits purchased through the salary sacrificing arrangement, use the following formula to calculate the non-grossed-up amount:

Non-grossed-up amount = grossed-up amount x (100% - Fringe Benefit Tax rate).