If an employee makes a payment to you as a contribution towards the cost of providing a fringe benefit, the taxable value of that fringe benefit is reduced by the amount of the payment. This payment is referred to as an employee contribution, or recipient's contribution. 

Compare these examples of a desktop computer with the purchase price of $3,500.

Example – without employee contribution

If you’re registered for GST and you pay, or reimburse, the full purchase price of $3,500 – the taxable value is $3,500 and the fringe benefits tax is $3,421.60; based on specific criteria. 

Example – with employee contributions

Using the same criteria and still registered for GST, let’s say the employee pays you $2,000 towards the actual benefit, then the taxable value is $1,500 and the FBT obligation is $1,466.40. This shows that an employee contribution towards the actual benefit can reduce the amount of tax you need to pay. 

There are some other important rules around employee contributions, like they can only be made from an employee’s after-tax income, and they are included as part of your assessable income and GST may be payable. So, if you’re thinking about going down this track look into it more thoroughly beforehand.