FBT: How to Structure Remuneration Packages for 1986–87

Christine Martini, Brett Collins and John Rickard

Australian Economic Review, 1986, vol. 19, issue 4, 39-44

Abstract: The purpose of this article is to determine the optimal structure of remuneration packages in the new fringe benefits tax (FBT) environment. We will describe precisely how the optimal structure of remuneration packages depends upon the (marginal) rates of FBT, personal income tax and corporate tax. The fundamental decision rule for employers and employees to optimise the value of remuneration packages is quite simple. First substitute the FBT rate, f, and the employer's marginal tax rate, t, into I = f(1 + f ‐ t)‐1. Then if the employee's marginal tax rate i is greater than I the employer should provide any benefits until i falls to the value I. At or below this point the employee would be better off to provide all subsequent benefits.

Date: 1986
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