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When you are employed by a business entity, you can sometimes receive benefits other than cash. For example, you may be given a company car, which you not only use for corporate purposes, but also for personal purposes.

Or, alternatively, the company pays for you to go on a holiday to the Caribbean.

The reason that most people worry about fringe benefits is that they can (in some countries) cause tax issues. Why? Because if fringe benefits are not taxed then it creates a loophole through which people can be rewarded without being taxed on them. So, for example, if the company pays for a holiday worth $2000, then effectively they've given you $2000 worth of value that you haven't had to pay tax on.

In Australia, for example, a fringe benefits tax has been introduced that makes it harder for employees to be rewarded with fringe benefits without paying tax on them.

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