Fringe Benefits Tax (FBT) uses two gross-up rates that determine how the taxable value of a benefit is converted to an equivalent grossed-up value before the 47% FBT rate is applied. Type 1 (gross-up rate of 2.0802) applies to benefits where the employer is entitled to a GST input tax credit on the benefit — for example, where the employer pays for a service that includes GST and they can claim that GST back. Type 2 (gross-up rate of 1.8868) applies to benefits where there is no GST credit entitlement — for example, wages, salary sacrifice arrangements, or benefits that are GST-exempt. In ChangeGPS FBT, you classify each benefit as Type 1 or Type 2 in the Expense Payment tab and other relevant benefit tabs. Using the wrong gross-up type will result in an incorrect FBT liability calculation.
In FBT what are Type 1 and Type 2 gross-up rates and which one applies?
FBT gross-up rates in ChangeGPS: Type 1 vs Type 2 and GST treatment