1. Foundations of Taxation Law
FRINGE BENEFITS TAX
Chapter 22
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2. Introduction FBT imposed on employers
Assessed under the Fringe Benefits Tax Assessment Act (FBTAA)
The Fringe Benefits Tax rate is 47% for FBT year 1 April to 31 March 2015.
FBT covers a wide range of non-salary benefits provided in respect of employment
There are 13 types of fringe benefit, all valued differently
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3. Liability to pay FBT = x Year of tax runs from 1 April to 31 March
Fringe benefits
taxable amount
for the
year of tax
FBT rate = x
[¶22.2](a)
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4. Assessment and payment of FBT
Employers required to self-assess FBT
Employers must lodge FBT returns by 21 May following the end of the year of tax, or such later date as the Commissioner allows
Employers are generally liable to pay quarterly instalments of FBT and report these on their activity statements
FBT instalments credited against their actual FBT liability for the year
FBT and the cost of benefits are generally deductible to employers under s 8-1 ITAA97
[¶22.2](b)
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5. Fringe benefit “Fringe benefit” arises where:
A benefit is provided during a year of tax
By an employer, an associate of the employer, or a third party under an arrangement with the employer or associate of the employer
To an employee or an associate of the employee
In respect of the employment of the employee
[¶22.3](a)
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6. Fringe benefit Employer, associate or third party arranger
“Employer” is defined in s 136(1) as a person who pays, or is liable to pay, “salary or wages”.
It is important to note that a benefit does not have to be provided by an employer to an employee directly to qualify as a fringe benefit. Benefits provided by an associate of the employer may also qualify as a fringe benefit provided by the employer. The definition of “associate” in s 136(1) refers to s 318 of ITAA and s 159 of FBTAA.
Where the employer is a “natural person”, the employer's associates include: relatives, a partner of the employer and their spouse or child; a partnership in which the employer is a partner Relatives: spouse, parent, grandparent; sibling; uncle; aunt; nephew; niece; lineal descendants, adopted child and their spouses.
[¶22.3](a)
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7. Fringe benefit
“Benefit” is defined in s 13691) of FBTAA and include any right, privilege, service or facility provided under an arrangement in relation to the performance of work. This definition is very wide and is likely to capture most benefits provided by an employer to an employee, whether of a monetary or non-monetary nature.
Provided during the year of tax – FBT is imposed annually and tax is imposed on fringe benefits provided during, or in reference to, a particular FBT year – ie. 1 April to 31 March.
The term “provide” is defined in s 136(1) of FBTAA. In relation to benefits it includes “allow, confer, give, grant or perform” and, in relation to property, the disposal of a beneficial interest in or legal ownership of the property.
[¶22.3](a)
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8. Fringe benefit
FB can be provided by an employer to an employee indirectly through third party arrangements. Although the benefits is provided to the employee by a third party, it qualifies as a fringe benefit from the employer to the employee where the third party does so under an arrangement with the employer.
Employee or associate – An “employee” is someone who receives salary and wages. A FB can also arise where the benefit is not provided to an employee directly, but to an associate of an employee.
In respect of the employment of the employee – the benefit must be provided in respect of the employee's employment to qualify as a fringe benefit. The definition of “in respect of” in s 136(1) specifies that, to qualify as a FB, the benefit must be provided “by reason of, by virtue of, or for or in relation directly or indirectly to, that employment”. “Sufficient and material relationship” between the employment and the provision of the benefit (J & G Knowles (2000)
[¶22.3](a)
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9. Exclusions Salary or wages Superannuation contributions
Benefits under employee share schemes
Exempt benefits, eg
Exempt loans
Exempt car expense payment benefits
Minor benefits with a taxable value under $300
Tools and certain equipment used primarily in the employee’s employment
[¶22.3](b)
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10. Categories of fringe benefit
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
[¶22.3](c)
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11. Calculating taxable values
Each kind of fringe benefit has its own valuation rules
Concessional treatment sometimes applies to “in-house” benefits (but not where there is a “salary sacrifice arrangement”)
Unreimbursed recipient contributions reduce the taxable value of a fringe benefit
“Otherwise deductible rule” reduces the taxable value of a fringe benefit
Reduction amounts are subtracted from the taxable value of certain fringe benefits
[¶22.4](a)
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12. “Otherwise deductible” rule
Generally, reduces the taxable value by the deduction that the employee would have otherwise 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
[¶22.4](b)
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13. Fringe benefits taxable amount
Step 1: Calculate the taxable value of each fringe benefit
Step 2: Divide benefits into:
“GST-creditable benefits” (type 1)
“Other benefits” (type 2)
Step 3: Multiply type 1 benefits by and type 2 benefits by (for 2014/15 FBT year)
Fringe benefit tax Liability
Fringe benefits taxable amount x 47%
[¶22.5](a)
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14. Car fringe benefits
Arises where an employer provides a car for an employee's private use: s 7(1) of the FBTAA.
A “car” is defined in s 136(1) as a motor vehicle designed to carry a load of less than 1 tonne or fewer than nine passengers.
It is important to note that it does not matter whether the employee actually uses the car for private purposes; a fringe benefit arises as long as the car is available for private use: s 7(1).
[¶22.7](a)
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15. Car exempt benefits
A car fringe benefit will be an exempt benefit where the car provided by an employer to an employee is only used for work-related travel and any private use by the employee or an associate of the employee is minor, infrequent and irregular: s 8(2) of FBTAA.
To be exempt the car must be a taxi, panel van, utility truck or other road vehicle not designed for the principal purpose of carrying passengers: s 8(2)(a).
[¶22.7](a)
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16. Taxable value
There are two methods prescribed by the FBTAA for calculating the taxable value of a car fringe benefit:
(a) statutory formula method (s 9); and
(b) cost basis (s 10)
The statutory formula method applies automatically unless an employer elects to use the cost basis: s 10(1). An employer can choose either method for each car that gives rise to a car fringe benefit. An employer's election to use the cost basis is automatically disregarded if the statutory formula method results in a lower taxable value: s 10(5).
[¶22.7](a)
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17. Car benefit: statutory formula
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18. Taxable Value = (C x (100% – BP)) – R
Car benefit: cost basis
Taxable Value = (C x (100% – BP)) – R
C: Operating cost of the car, including deemed depreciation and interest
BP: Business percentage
R: Recipient’s payment
[¶22.7](c)
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19. Car benefit: cost basis
The operating cost of the car consists of any expenses relating to the car incurred by the provider or any other person during the holding period.
Examples of such expenses include repairs and maintenance, registration and insurance attributable to the holding period. Where the car is owned by the provider, an amount for deemed depreciation and deemed interest is also included in operating cost (s 11 of FBTAA describes how deemed depreciation and interest are calculated).
[¶22.7](c)
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20. Car benefit: cost basis
The business use percentage is the percentage of the business kilometre travelled by the car out of the total kilometres travelled by the car during the holding period.
The cost basis may provide a lower taxable value than the statutory formula method where the business use percentage of the car during the year is high. However, log book records and odometer records must be maintained when using the operating cost method which increases the compliance burden: ss 10A and 10B.
[¶22.7](c)
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21. Debt waiver benefit
Arises where an employee (or associate) owes an amount to an employer and the employee (or associate) is released from his or her obligation to repay all or some of that amount: s 14 of FBTAA.
Taxable value of a debt waiver fringe benefit is the amount of the payment or repayment that no longer needs to be repaid: (s 15)
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22. Loan Fringe Benefit
Arises in each year when an employer provides an employee (or associate) with a loan: s 16 of FBTAA.
Exempt benefit – a loan fringe benefit will be an exempt benefit where the loan is provided by a person who provides loans to the general public in the ordinary course of his or her business and the loan to the employee is provided at an interest rate at least equal to the interest rate prevailing at the time on similar loans to the public (eg. A home loan a bank employee at standard commercial terms): s 17(1) and (2) of FBTAA.
[¶22.7](c)
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23. Loan Fringe Benefit
A loan fringe benefit will also be exempt benefit where the loan is essentially an advance to the employee so that the employee can meet expenses that are reasonably expected to be incurred by the employee in the next six months in the course of performing his/her duties of employment: s 17(3).
A loan fringe benefit will also be exempt where the loan is provided to enable the employee to pay a rental bond, security deposit in respect of gas, electricity or telephone services or any similar amount. The employee must be required to repay the loan amount within 12 months and the loan must be provided in conjunction with certain other fringe benefits to be exempt: s 17(4).
[¶22.7](c)
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24. Loan fringe benefit – = Taxable value Notional interest
Accrued interest = –
Generally, notional interest is the interest that would have accrued at the “statutory interest rate” for the year of tax
Special rules apply to:
Pre 1 July 1986 fixed interest loans
Pre 3 April 1986 variable interest housing loans
Operates subject to “otherwise deductible” rule
The statutory rate is published by the ATO at the start of the each FBT year. For the FBT year ending 31 March 2015 the rate is 5.95%(TD 2014/5)
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25. Loan Fringe Benefit
Example – Company Z provides its employee, Robyn with a loan of $10,000 on 1 December at no interest. Robyn has not repaid any amount of the loan at year end.
A loan fringe benefit arises as Company Z has provided one of its employees with a loan.
The taxable value of the loan fringe benefit =
$10,000 x [5.95% - 0%] x 121/365
[¶22.7](c)
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26. Expense payment benefit
Arises where:
an employer pays an expense incurred by the employee; or
An employer reimburses an employee for expenditure incurred by the employee: s 20 of FBTAA.
To constitute an expense payment fringe benefit the expense must be “incurred” by the employee. Broadly an expense is incurred by an employee when the employee is definitely committed to the expense. Some other category of fringe benefit (eg residual fringe benefit) may arise where an employer pays an expense which is not incurred by the employee.
[¶22.10]
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27. Expense payment benefit
Where an employer pays an amount to an employee in relation to expenditure incurred by the employee, it is necessary to consider whether the payment is a “reimbursement” or an “allowance”. The distinction gives rise to very different tax consequences. “Reimbursements” are treated as expense payment fringe benefit and taxed to the employer under the FBT regime, while “allowances” constitute assessable income (ordinary: s6-5 or statutory 15- 2), and are taxed to the employee under the income tax
Taxable value depends on:
In-house property expense payment benefit
In-house residual expense payment benefit
External expense payment benefit
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28. Expense payment benefit
An expense payment fringe benefit is an in-house expense payment fringe benefit where the expense relates to goods or services provided by the employer or an associate of the employer to outsiders in the ordinary course of their business: s 136(1) of FBTAA. Example – an employee purchases a laptop computer from their employer who is a computer retailer. The employer reimburses the employee for the cost of the computer. The reimbursement is an expense payment fringe benefit, which is an in-house expense payment fringe benefit since it relates to property that is sold by the employer in the ordinary course of its business.
An expense payment fringe benefit is an external expense payment fringe benefit if it is not an in-house expense payment fringe benefit: s 136(1). An employer reimburses an employee for the employee's children's school fees. The reimbursement is an external expense payment fringe benefit.
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29. Expense payment benefit
Broadly, the taxable value of an in-house expense payment fringe benefit is the taxable value of the fringe benefit as if it was a property or residual fringe benefit (ie. Assume the employer did not reimburse the employee but provided the property or services directly) s. 22A.
The taxable value of an external expense payment fringe benefit is the amount of the expense or reimbursement incurred by the employer: s 23.
The “otherwise deductible: rule may apply to reduce the taxable value of of an expense payment fringe benefit under s 24 of FBTAA.
[¶22.10]
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30. Meal entertainment benefit
Can be captured by a number of categories, such as expense payment fringe benefits, property fringe benefits and meal entertainment fringe benefits.
Generally, the most specific category is the relevant category for a FB. However, in the case of meal entertainment, an employer can elect for Div 9A of FBTAA to apply to the provision of meal entertainment FB for a particular FBT year, in which case the relevant Fbs will be taxed under this Division and not another: ss 37AA.
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31. Meal entertainment benefit
A meal entertainment FB arises where an employer provides its employees with:
Entertainment by way of food or drink
Accommodation or travel in connection with entertainment by way of food or drink; or
A reimbursement of expenses incurred by an employee in relation to the above.
A meal entertainment FB arises regardless of whether or not the meal entertainment relates to business purposes. Determining whether food or drink is provided as “entertainment” will be a question of fact. Refer TR 97/17.
[¶22.15]
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32. Meal entertainment benefit
Taxable value – two methods:
50/50 split method;
12-week register method.
The 50/50 split method will apply automatically unless the employer elects for the 12-week register method to apply: s 37B of FBTAA.
Under 50/50 split method, the taxable value of meal entertainment FB is half of the expenses incurred by the employer during the FBT year in providing meal entertainment: s 37BA.
Alternatively, the employer can elect the 12-week register: s37CA. Employer must maintain a register of all meal entertainment expenditure over a representative 12-week period an determine the percentage of the expenditure which relates to the provision of meal entertainment as FB.
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33. Meal entertainment benefit
The taxable value under this method is calculated as:
Total meal entertainment expenditure incurred in the FBT year x register percentage.
[¶22.15]
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34. Property benefit
Arises where an employer provides an employee (or associate) with property: s 40.
Note that a FB only arise where the employer gives the employee the property, not just the use of the property. The use of property may be captured by another category such as residual benefits.
Property is defined in s 136(1) as tangible and intangible property. “Tangible property” is defined to mean goods and the definition specifies that this includes animals, fish, gas and electricity”. “Intangible property” is defined as real property (ie. And and buildings), a chose in action and any other kind of property that is not tangible property.
Exempt benefits – where the property is provided to a current employee and the property is provided to and consumed by the employee on a working day and on the business premises of the employer or a related company: s 41. For example, biscuits or fruits provided to employees to be consumed on work premises would be exempt property fringe benefits.
[¶22.18]
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35. Property benefit
Taxable value – depends on whether the property FB is an in-house property or an external property.
In-house – taxable value determined under s 42 as follows:
(1) Where property manufactured, produced, processed or treated by the provider and:
(a) is sold in the ordinary course of business to manufactures, wholesalers and retailers – the TV is the lowest price at which the property was sold; or
(b) is sold in the ordinary course of business to members of the public – the taxable value is equal to 75% of the lowest price at which property was sold to a member of the public;
(c ) in any other case – the taxable value is 75% of the amount that could reasonably be paid to acquire the property from the provider in an arm's length transaction.
[¶22.18]
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36. Property benefit Taxable value (cont)
(2) Where (1) does not apply and the property is acquired by the provider, the taxable value is the lesser of:
(a) the cost of the property if acquired in an arm's length transaction; or
(b) the amount that could reasonably be paid to acquire the property from the provider in an arm's length transaction.
(3) in any other case, the TV is 75% of the amount that could reasonably be paid to acquire the property from the provider in an arm's length transaction.
External property FB – Broadly TV is the cost to the employer, or expenditure incurred by the employer to provide the property: s Where the employer can acquire the property for less than the employee could and the employee reimburses the employer for the cost of acquiring the property, a win-win situation arises since the employer has no FBT liability and the employee has acquired the property for less than the retail price.
[¶22.18]
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37. Housing benefit Valuation rules differ depending upon:
Location (remote, non-remote, outside Australia)
Who is the provider of the benefit
Election of indexation
[¶22.11]
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38. Living-away-from-home allowance
Where employee maintains a home in Australia where they otherwise usually reside or where employee has fly-in fly-out or drive-in drive-out arrangements, the taxable value is :
Amount of the allowance
Less
Exempt accommodation component
Exempt food component
In all other cases, the taxable value is the amount of the fringe benefit
Above rules operate subject to transitional rules
[¶22.12]
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39. Airline transport benefit
Taxable value of an airline transport fringe benefit is 75% of the “stand-by airline travel value” of the benefit at the time the transport starts or at the comparison time
The stand-by airline travel value is:
domestic routes - 50% of the carrier’s lowest standard single economy airfare for that route as publicly advertised during the year of tax
international routes - 50% of the lowest of any carrier’s standard single economy airfare for that route as publicly advertised during the year of tax
Operates subject to “otherwise deductible” rule
[¶22.13]
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40. Board benefit
Generally covers meals provided under industrial agreements
Taxable value is:
$2 per meal for recipients 12 and older
$1 per meal for other recipients
Less any amount paid by the recipient
Operates subject to “otherwise deductible” rule
[¶22.14]
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41. Tax-exempt body entertainment
Applies to “non-deductible exempt entertainment expenditure” in respect of an employee’s employment
Taxable value is the expenditure incurred in providing the entertainment
[¶22.16]
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42. Car parking benefit Employer may choose between 5 methods:
Commercial parking station method
Market value method
Average cost method
Statutory formula method
12-week record-keeping method
[¶22.17]
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43. Residual benefit
The last category of fringe benefits is residual fringe benefits, which is a catch-all category to capture any benefits that do not fall into any of the other categories of fringe benefits: s 45 of FBTAA. Examples of residual FB include the provision of services for free or at a discount; the provision of caravans at work site for the accommodation of employees and waivers of loan establishment fees.
Note that a residual FB can arise in conjunction with another fringe benefit, but not if the benefit is fully captured by another category (Westpac Banking Corporation v FCT (1996).
[¶22.19]
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44. Residual benefit
Exempt benefits – as the scope of residual fringe benefits is unlimited, there are a number of residual benefits that are made exempt in s 47. For example, “business operation facilities”, such as toilets, bathroom facilities, food or drink vending machines, tea or coffee-making facilities, water dispensers and other such amenities are exempt benefits under s 47(4).
Recreational or child care facilities located on the employer's premises are exempt under s 47(2).
Section 47(3) also provides exemption for any private use of property located on the employer's premises where the property is wholly or principally in connection with the operation of the business. This exempts from FBT private phone calls or personal printing at the employer's premises.
[¶22.19]
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45. Residual benefit
Taxable value – TV of a residual FB depends on whether the residual fringe benefit is an in-house residual fringe benefit or an external residual fringe benefit.
Broadly, the TV of an in-house residual fringe benefit under ss 48 and 49 of FBTAA is:
75% of the lowest price at which an identical benefit is sold to a member of the public under an arm's length transaction; or
In any other case, 75% of the amount that could reasonably be paid to acquire the property from the provider in an arm's length transaction.
The TV of an external FB is, broadly, the cost to the employer or expenditure incurred by the employer in providing the benefit: ss 50 and 51.
[¶22.19]
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46. Exempt Fringe Benefit
There are a number of benefits that are exempt from FBT. No FBT liability arises in relation to an exempt fringe benefit.
The exemptions can apply to a particular category of FB or fall within Div 13 of FBTAA, which covers “miscellaneous exempt benefits”.
There are a number of exempt benefits in Div 13, the more common ones are:
Minor benefits – s 58P – a benefit will be exempt as a minor benefit where the notional taxable value of the benefit is less than $300. “notional taxable value” is defined in s 136(1). It is the taxable value of the FB as determined for each category of FB taking into account any reduction for recipient's contribution but not any reduction of TV due to the application of the otherwise deductible rule.
[¶22.19]
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47. Exempt Fringe Benefit
The $300 limit is applied to each benefit and is not a cumulative exemption. However, to be treated as a minor benefit, the frequency and regularity of the minor benefit (and similar or connected benefits) must be taken into consideration and it must be concluded that it would be unreasonable to treat the minor benefit as FB: s 58P(f) of FBTAA; ruling TR 2007/12. The exemption does not apply to in-house fringe benefits which are subject to a $1,000 reduction in TV for each employee.
Infrequent but regular – Joe provides each of his employees with a bottle of wine every Christmas. The cost of each bottle is less than $300 and satisfies the TV limit for minor benefits. The gifts are provided infrequently (once a year) but regularly (every Christmas). There are no similar or connected benefits. TR 2007/12, upon evaluation of the relevant criteria, it can be concluded that the provision of wine is minor benefit as it would be unreasonable to treat it as a FB.
[¶22.19]
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48. Exempt Fringe Benefit Work related item – s 58X
These work-related items are treated as exempt FB:
A portable electronic device;
An item of computer software;
An item of protective clothing
A briefcase; and
A tool of trade; s 58X(2) of FBTAA.
These items will only be eligible for the exemption where they are primarily for use in the employee's employment. In ATO ID 2008/127 the ATO suggest that the provision of a laptop computer to an employee who regularly visits clients is primarily for use in the employee's employment.
Further, the exemption is limited to one item of each type per employee per FBT year unless the item is a replacement item: s 58X(3) and (4) of FBTAA. Note that employees are not entitled to depreciation deductions in relation to these items.
[¶22.19]
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49. Exempt Fringe Benefit [¶22.19]
The legislation does not specify what is a “portable electronic device” and in ATO ID 2008/133 the ATO suggests that it should therefore take on its ordinary meaning. The ATO further suggests that a portable electronic device would be one which is:
Easily portable and designed for use away from an office environment;
Small and light
Able to operate without an external power supply; and
Designed as a complete unit.
Membership fees and subscriptions – s 58Y
These benefits are exempt whether paid for directly by the employer or by way of a reimbursement:
- subscription to a trade or professional journal
- entitlement to use a corporate credit card; and
- entitlement to use an airport lounge membership
Single trip taxi travel – s 58Z – provision of certain single-trip taxi journeys beginning or ending at the employee's place of work is an exempt benefit.
[¶22.19]
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50. Reduction in taxable value
Having determined the taxable value, it is then necessary to determine whether the TV can be reduced because:
It is an in-house FB
There is a recipient's contribution
The otherwise deductible rule applies
All of these reductions can apply individually or in conjunction with the others.
In-house FB – under s 62 of FBTAA, the TV of all in-house (expense, property or residual) FB for each particular employee is reduced by $1,000. Where the TV of all in-house FB to a particular employee is less than $1,000, the TV is reduced to nil and there is effectively no FBT payable on the provision of the in-house FB to that employee. Note that the reduction relates to the particular employee and cannot be done on an aggregate basis.
Recipient's contribution – the definition of TV for most FB reduces the TV by the amount of the recipient's contribution (if any). This step is not required for, for example, car FB, debt waiver FB and loan FB, as it is either not applicable or has been incorporated into the determination of TV at first instance. Where the FB is an expense payment FB that arises because of a reimbursement, the amount of the employee's expenditure is not considered the recipient's contribution (ss 22A(4) and 23) as the employee has been reimbursed for the expense.
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51. Reduction in taxable value
Otherwise deductible rule (ODR) – Most categories of FB also include the “otherwise deductible rule” to reduce the TV of the FB. The otherwise deductible rule is not applicable, for example, to car FB and debt waiver fringe benefits.
Under the ODR, the TV of a FB is reduced by the amount which would have been deductible to the employee had the employee incurred an expense directly rather than received a FB. It is important to note that the ODR only applies in relation to the employee, and not associates of the employee (ie. The expense must have been deductible to the employee).
It is also important to note that the expense must give rise to a one-time-only deduction for the ODR to apply. ie. Depreciation would not qualify as an otherwise deductible expense.
Example – Jerry's employer has agreed to pay his tax agent's fee of $550 for the preparation of Jerry's personal income tax return. The payment of tax agent's free by the employer constitutes an external expense payment fringe benefit. The TV of the FB is the amount of the expense, being $550. The cost of managing one's tax affairs is deductible under s 25-5 of ITAA Therefore, if Jerry had paid the tax agent's fees himself, he would have been entitled to a deduction for the fees. Applying to ODR, the TV of the expense payment FB would be reduced to nil as the $550 would have been fully deductible had it been incurred by Jerry.
[¶22.19]
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52. Type of FB
Having determined the taxable value of each FB, it is then necessary to determine whether the fringe benefit is a Type 1 FB or a Type 2 FB.
A Type 1 FB exist where the employer is entitled to input tax credits (ie. A refund of GST paid) in relation to the provision of a FB: ss 5C(3) and 149A of FBTAA. (gross up factor: for 2014/15 FBT year)
A Type 2 FB is any FB which is not Type 1 FB: s 5C(4). For example, where an employer did not pay GST in relation to the provision of the FB, the FB will be a Type 2 FB as the employer is not entitled to input tax credits in relation to that fringe benefit. Debt waiver FB and loan FB are always Type 2 FB as GST is not applicable to them. (gross up factor: for 2014/15 FBT year)
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53. Fringe Benefits taxable amount
The next step is to calculate the “Fringe benefits taxable amount” as prescribed by s 5B of FBTAA. The FB taxable amount is calculated by “grossing-up” the taxable value of the FB by the appropriate rate.
For Type 1 FB, the fringe benefits taxable amount equals:
Total taxable value of all Type 1 FB x [(FBT rate + GST rate)/{[1-FBT rate] x [1+GST rate] x FBT rate}
For the 2014/2015 FBT year, FBT rate is 47% and GST rate of 10%, the fringe benefit taxable amount for Type 1 fringe benefits equals:
Total taxable value of all Type 1 fringe benefits x
For Type 2 FB, the fringe benefits taxable amount equals:
Total taxable value of all Type 2 FB x (1/(1-FBT rate))
For the 2014/2015 FBT year, FBT rate is 47%, the fringe benefits taxable amount for Type 2 fringe benefits equals:
Total taxable value of all Type 2 FB x
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54. Fringe benefits tax liability
The final step is to determine the employer's fringe benefits tax liability, which can be calculated as:
[(Type 1 fringe benefits taxable amount) + (Type 2 fringe benefits taxable amount)] x FBT rate
See ss 5B(1A) and 66 of FBTAA. The “FBT rate” is equal to the highest marginal tax rate plus the Medicare levy. For the year ending 31 March 2015, the FBT rate is 47%.
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55. Interaction with income tax
Employer – any FBT liability incurred in relation to the provision of FB and the cost of providing the FB is generally deductible as an ordinary business expense under s 8-1 of ITAA 1997 (see also TR 95/24).
Certain expenses that are generally denied deductions are deductible if incurred in the provision of a FB. For example, entertainment expenses are generally not deductible under s 32-5 but are deductible under s where the entertainment expenses are incurred in the provision of a FB. (other expenses: HELP s 26-20(2); recreational club expenses: s 26-45(3)...)
Employee – FB constitutes non-assessable non-exempt income of the employee: s 23L(1) of ITAA 1936; note to s 15-2 of ITAA 1997.
Exempt FB are treated as exempt income of the employee: s 23L(1A) of ITAA 1936; s 15-2 of ITAA 1997.
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56. Interaction with GST
The cost of a FB in determining TV is the GST-inclusive cost: Ruling TR 2001/2. Where the FB relates to a reimbursement, s of GST Act deems the acquisition to have been made by the employer for GST purposes. This provision enables the employer to obtain GST input tax credits in relation to the acquisition (if entitled) even though the acquisition was actually made by the employee and the employer only reimbursed the employee.
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57. General anti-avoidance rule
The FBTAA operates subject to a general anti-avoidance rule contained in s 67 FBTAA
Commissioner can rely on s 67 where an arrangement is entered into for the sole or dominant purpose of reducing an employer’s FBT liability
Commissioner may cancel the tax benefit arising under the arrangement and impose penalty tax
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