Fringe Benefits Tax PDF

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Summary

Fringe Benefits Tax Notes...

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Fringe Benefits Tax Key notes -

Tax is imposed on the employer Imposed on the provision of fringe benefits not income To stop people from avoiding the income tax

Step 1: Is there a Fringe Benefit -

s136(1) FBT Act states that there is a fringe benefit where there is o a benefit  includes any rights, benefits, privileges, services or facilities provided under the performance of work  would capture all o provided during the year of tax  FBT year, 1 April – 31 March o by an employer or associate or third-party arranger  he cannot escape FBT even if he doesn’t pay the person salary or wages  whoever give also will be captured o to an employee or an associate  anyone who receives salary, wages, allowances, bonuses and commissions o in respect of the employment of the employee  CASE: J & G Knowles  sufficient and material relationship by which if you would still receive the benefit if you were not working then it is NOT in respect of employment

Step 2: Is it excluded -

These are excluded because they are already taxed under income tax o Salary and wages o Superannuation contributions o Payment from superannuation funds o Benefits under an employee share scheme o Payments on termination of employment

Step 3: Which category of fringe benefit -

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Car fringe benefit (Division 2) o Employer give car for employee to use Debt wavier fringe benefit (Division 3) o Employer waive the debt owed by employee Loan fringe benefit (Division 4) o Employer give employee loan Expense payment fringe benefit (Division 5) o Employer pays reimbursement or expenses Meal fringe benefit (Division 9A) o Provide employee with meal entertainment outside of work hours is likely  Light meals maybe no, proper meal yes  ATO guidelines: business or social purpose, time and date, type of meal Property fringe benefit (Division 11) o Employer gives employee items Residual benefits (Division 12) o Anything that is not captured Choose the most specific category, only meal they can choose meal/property/residual

Step 4: Is it exempt (means you don’t have to pay) -

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Loans fringe benefit exemptions o Made in the ordinary course of business on arms-lengths terms s17(1) & (2)  Bank give bank employee on ordinary terms like customers it will be exempted o Loan given to meet employment related expenses in the next 6 months, s17(3) Property fringe benefit exemptions o Property supplied to employees and consumed on work premises s41  Give biscuits and the employees eat it at work then it is exempt o Residual fringe benefit exemptions  Recreational or child care facilities s47  If the employer provided such facilities it would be exempted  Property provided wholly for work purposes s47(3)  Business operating facilities like toilets, coffee, tea is exempt s47(4) Division 13 exemptions o Provision of car fringe benefit s53  Employer give you the car for use, that is the FBT and anything related to the car is not a separate fringe benefit meaning cannot be double o Minor benefits s58P  Less than $300 than it is exempt  But if it is frequent and regular it is NOT exempt  In house also NOT exempt o Work related items s58X  Calculators o Memberships and subscriptions s68Y o Single trip taxi travel where you begin or end at the employee’s place of work s58Z

Step 5: Calculate the Taxable Value (each category is different) -

Car fringe benefit o Statutory formula or  They will give all the numbers

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Operating cost

 C is the operating cost  BP is the percentage used for business purposes  R is the recipient’s contribution Debt waiver fringe benefit o Amount of debt that is waived during the year Loan fringe benefit o (Benchmark interest rate -Actual interest rate) X Loan Amount X (Number of days loan provided during the year / Number of days in FBT year) Expense payment fringe benefit o In house  look at property/residual benefit

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 Lawyers provide law services to law firm employees o External  amount of expense Meal entertainment fringe benefit o 50/50 method s37B  Employer to calculate total and taxable value is 50% o Register method s37C  Employer maintain register for 12 months  work out % for FBT only if the amount is very small Property fringe benefit o In-house s42  75% of price sold to public or lowest price sold to manufacturers o External s43  Cost to employer Residual fringe benefit o In-house  75% of lowest price charged to customers or 75% cost to acquire benefit from the provider o External  Cost to employer

Step 6: Is there a reduction to taxable value -

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In-house benefit s62 o If it is in house you can deduct $1000 for each employee Recipient contribution o Amount recipient put in o Not for car FB, loan and debt waiver Otherwise deductible rule o Not for car FB and debt waiver FB o If the employee didn’t get a benefit but an expense instead

Step 7: Type 1 or Type 2 -

Type 1 o Employer entitled to GST input tax credits Type 2 o Employer not entitled to GST input o Loan and debt waiver

Step 8: Calculate the FBs taxable amount s5B -

Type 1 o Fringe benefits taxable amount = taxable value x 2.0802 Type 2 o Fringe benefits taxable amount = taxable value x 1.8868

Step 9: Calculate the FBT Liability -

Liability = FBTA x FBT rate (47%) s66 Imposed on employer s66...