Fringe Benefits Tax Reforms How Effective Have They Been?

The Australian Fringe Benefits Tax system has undergone several waves of reform in recent years. This paper seeks to evaluate the effectiveness of those reforms by reference to the policy objectives underlying the system. In particular equity objectives are examined by reference to the extent to which the system continues to permit tax-effective salary & benefit packaging to some sectors of the community. The conclusion reached is that the policy objectives behind the FBT reforms have not been achieved. Whilst the current rules provide a general disincentive for employers to provide fringe benefits, there are still many specific situations in which fringe benefits provide a highly tax effective alternative to salary or wages. Options for reform are suggested in the areas of on-costs, car benefits, and treatment of rebateable and exempt employers.