Fringe Benefits Tax

Overview FBT payable by employer Legislation contained in the Fringe benefits tax assessment Act 1986 FBT year runs from 1 April to 31 March FBT returns must be prepared and lodged by 21 May following the end of FBT year

What is a Fringe benefit? Non-cash Benefits provided by an employer to an employee or associate of employee Employees past present and future employees Items specifically excluded Salary & wages Superannuation fund contribution Payments upon termination of employment

Calculation of FBT 1. Identify type of fringe benefit 2.Calculate taxable value of fringe benefit 3.Gross up taxable value of fringe benefit 4.Multiply the FBT rate by the grossed up taxable value of the fringe benefit

Determining whether FBT applies Is there a benefit? Is it provided during the year of tax? Is it provided by an employer or third party Is it provided to an employee? Is it provided in respect of employment

2 gross up factors Type 1 Type 2 2.0647 GST included in benefits 1.8692 No GST in benefit

Reportable Fringe benefits Reported on a taxpayer’s Payment summary, but are not assessable income Relevant for determining Medicare Levy Surcharge liability Individual Fringe benefits of $2,000 or less are not reportable

Types of Fringe benefits Car Debt waiver Loan Expense payment Housing Living-away-from-home allowance Airline transport Board Meal entertainment Tax-exempt body entertainment Car parking Property Residual

Calculating taxable values Each type of fringe benefit has its own valuation rules General principles: Concessions are given for “in-house” benefits Unreimbursed recipient contributions reduce taxable value The “otherwise deductible” rule may also apply to reduce the taxable value Reduction amounts are subtracted from the taxable value (Div 14)

Otherwise deductible Rule Generally, reduces the taxable value by the deduction that the employee would otherwise have received if he or she had incurred the expenditure to acquire the benefit Only applies to some fringe benefits: loan fringe benefits expense payment fringe benefits airline transport fringe benefits board fringe benefits property fringe benefits residual fringe benefits

Car fringe benefit –Statutory Method A: Base value of the car B: Statutory fraction C: Number of days benefit provided D: Number of days in the FBT year E: Recipient’s contribution Taxable Value=ABC/D-E MTG 35180/35190

Car fringe benefit- cost method C: Operating cost of the car, including deemed depreciation and interest BP: Business percentage R: Recipient’s contribution Taxable value=(C*100%-B))-R MTG 35230/35240

Operating Cost method Uses actual costs of vehicle Deemed depreciation See MTG

Debt Waiver Fringe benefit Taxable value of a debt waiver fringe benefit is the amount of the payment or repayment that has been waived (s 15) MTG 35270

Loan Benefit Loan Fringe benefits arise when employer makes loan to employee at at a low or interest free rate Taxable value of the loan is difference between the interest due on the loan at benchmark rate(7.4% 31 March 2013) And the interest charged Operates subject to “otherwise deductible” rule

Expense payment Fringe benefit Taxable Value Gross up School Fees(no GST) Amount paid Type 2 Golf Club Fees(inc GST) Type 1 Holiday expenses(inc GST) Amount Paid Telephone expense(inc GST) Amount Paid less deductible portion Home Mortgage Payments (No GST) MTG 35-330

Property Fringe Benefits A Benefit arises when Property is provided to employees at a discount by the. These are also describe as “in-house” fringe benefits Exemptions Goods supplied and consumed on employers premises -First 1,000 of the taxable value is exempt

Taxable Value of Prpoerty fringe benefits If employer is Retailer The taxable value of an in-house fringe benefit is generally 75% of the lowest price charged to public for the benefit less any amount actually paid for the benefit If employer is wholesaler, taxable value is the employer’s lowest selling price less amount paid by employee

Car Parking Fringe benefits Car parking facilities provided by an employer to an employee may be a taxable fringe benefits The car must be parked on business premises A commercial car park is within one kilometre of business premises The Commercial car park must also charge members of the public more per day than the car parking threshold(currently $7.71)

Exemptions Mobile phone Protective clothing Calculator, briefcase Taxi travel to and from employer premises Minor with a value <$300 See MTG 35645