6. FBT - Tabled Fringe Benefits Tax summary PDF

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Summary

Tabled Fringe Benefits Tax summary...

Description

FBT

Fringe Benefits Tax Assessment Act 1986 (FBTAA) FBT year = 1 April – 31 March Imposed on employer providing the FBs Therefore tax base = provision of FBs 9 Steps Step Identify whether a FB exists s.136(1)

Check whether FB is excluded from definition s.136(1)

Identify category of FB that applies

Check whether exemption applies

Issues Require:  s.136(1) 1. A benefit  s.136  inc. any right/privilege/facility 2. Provided during year of tax 3. By employer/associate/3rd party  not just any 3rd party – only captured if provided by 3rd party under arrangement of employer 4. To employee or associate (spouses/etc)  note: employee doesn’t have to be current – may be past employee 5. In respect of the employment of the employee  is the benefit provided because of the employment?  requires sufficient and material relationship  J&G Knowles [83]  Where there is more than just employer/employee relationship ask: “would employee have received benefit event if they weren’t employee? o If yes,  no FB o If no  there is an FB E.G.: -

Salary or wages  includes bonuses and allowances Superannuation contributions Payments from super funds Benefits under employee share scheme Payments on termination of employment

13 Categories  only 7 relevant for this subject: 1. Car  Div 2 o Employer gives employee car to use 2. Debt waiver  Div 3 o Employee owes money to employer and employer waives the debt 3. Loan  Div 4 o Employer provides employee with a loan 4. Expense payment  Div 5 o Employer pays an expense of employee - could pay directly or be a reimbursement 5. Meal entertainment  Div 9A o Employer provides employee with meal entertainment - when food or drink is provided with purpose of entertainment - also covers travel and accom if the travel and accom is provided as part of the meal entertainment  Look at purpose or function by looking at 3 things i. Social or business function 1. Social - more likely entertainment 2. Business - less likely but could still be entertainment ii. When is the food or drink provided? 1. During work hours - less likely entertainment 2. Outside work hours - more likely entertainment iii. What type of food is provided? 1. Light meals e.g. sandwiches - not entertainment 2. Proper meals e.g. 3 course meals or pizza - entertainment 6. Property  Div 11 o Employer gives employee property (e.g. book) 7. Residual benefits  Div 12 o Catch all - if it doesn’t fall into any of the other categories Must use the most specific category – not just residual BUT for meal entertainment, employer may use meal entertainment, property, or residual E.G. - Loans: Loans made in ordinary course of business on arm’s-length terms  s.17(1)&(2) Loans to meet employment-related expenses in the next 6 months  s.17(3) - Property Property supplied to employees and consumed on work premises  s.41  e.g. biscuits for teachers – if eat there then exempt, if wrap up and take home then not exempt - Residual Recreational or child care facilities  s.47(2) Property provided wholly/principally for work purposes  s.47(3)  “business operation facilities” e.g. toilets/tea and coffee making facilities on business premises OVER PAGE: DIV 13 EXEMPT BENEFITS

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FBT

Determine taxable value

Division 13: Exempt benefits FB’s related to provision of a car FB  s.53 o E.g. if employer provides car – that is FB – if employer then pays for petrol etc, these expenses are not also FB’s Minor benefits (< $300)  s.58P o Cannot be frequent or regular benefit o Doesn’t apply to in-house benefits Work-related items  s.58X e.g. calculators/laptops/tools Membership fees & subscriptions  s.58Y Single trip taxi travel beginning or ending at employee’s place of work  s.58Z 1. Car  either a. Statutory formula method  s.9, or

b.

Operating cost method  s.10

2. 3.

Check if there is a reduction in taxable value

Debt waiver  amount of debt that is waived during year  s.15 Loan  s.18: = [benchmark interest rate (5.25%) – Actual interest rate]*Loan Amount*(# of days loan provided during year/# days of FBT year)  benefit = the interest employee saved from getting loan from employer rather than bank  if employer lost or didn’t save any money, FB = 0 4. Expense payment  a. In-house  look at property/residual benefit  s.22A b. External  amount of expense  s.23 5. Meal entertainment  either a. 50/50 method  s.37B  taxable value = 50% of total meal entertainment exp, or b. register method  s.37C  work out what % was actually FB 6. Property  a. In-house  s.42  either: i. 75% of lowest price charged to customers if sold to public or lowest price if sold to retailers, OR ii. Lower of arm’s length cost & arm’s length price b. External  cost to employer  s.50&51 7. Residual benefits  Div 12 3 ways we can reduce taxable value: 1. In-house FB’s  s.62 o Can reduce taxable value by $1k for each employee o For each employee the first 1k is tax free o Note:  On per-employee basis  Can't transfer this between employees  Can't carry forward  $1k per year per employee - if you don't use your $1k then too bad 2. Recipient’s contribution Taxable value reduced by the amount of the recipient's contribution Note: have already taken this into account for car fringe benefits in step 5 Doesn’t apply to loan and debt waiver FBs because just doesn’t logically make sense 3. “Otherwise deductible” Reduce taxable value by any amount that would have been deductible to the employee if they paid for the benefit themselves and did not get it from the employer o I.e. if the employee didn’t get a FB and paid for the expense themselves then would they have gotten a deduction If deductible by employee, employer's taxable value is reduced by the amount that would've been deductible Note: doesn’t apply for car FBs or debt waiver FB

Type 1 or Type 2 benefit

Try and reduce value as much as you can  use as many of these reductions that apply – if all apply, use all Type 1  employer entitled to GST input tax credits  is it a creditable acquisition? Type 2  employer not entitled to GST input tax credits E.g. loan and debt waiver FB’s (input taxed supplies)

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FBT

Calculate FB taxable amount

Type 1  FB taxable amount = taxable value * 2.0802  s.5B Type 2  FB taxable amount = taxable value * 1.8868  s.5B

Calculate FBT liability FBT liability = FB taxable amount * FBT rate (47%)  s.66 Note: FBT rate = highest marginal tax rate (45%) + Medicare levy (2%) Imposed on the employer  s.66 Interaction between FBT and income tax FB’s are not assessable income for employees Not OI  s.23L ITAA36 Not caught by s.15-2  s.15-2 ITAA97 Even if no FBT is paid or it’s exempt  still not assessable under income tax Deductions -

Employer can claim a deduction for FBT + the cost of providing the FB Note: non-deductible expenses may become deductible if provided as FB

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