Topic 05 FBT - Lecture notes 5 PDF

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BLAW 30002 TAXATION LAW I Fringe Benefits Tax (Topic 5) Professor Sunita Jogarajan Melbourne Law School

OBJECTIVES 

Understand and apply the rules for the taxation of fringe benefits



Understand the interaction between the taxation of fringe benefits and the taxation of income

2

READING 

Textbook:



All legislative references in lecture slides → note that all references are to the Fringe Benefits Tax Assessment Act 1986 unless otherwise stated

3











Announced 19 September 1985 → came into effect → imposed on provision of fringe benefits, not receipt of income , not the employee Relevant legislation is the Fringe Benefits Tax Assessment Act 1 BTAA) NB: FBT Year = 1 April to 31 March BN:

4

STEPS IN DEALING WITH  

    

 

Check whether it is fringe benefit Identify the Check whether an Determine the Check if there is a Determine whether the F benefit Calculate the f

of that applies

alue

t 5

I REQUIRE:    

B To

,a

rty

who pays FB tax ?

nt of the



employee  The benefit must be provided for or definition of ‘in respect of’ in s  ‘Sufficient and m (CS 7.2)

, or to’ the ) nowles (2000)

(section 136(1) – definition of ‘fringe benefit’)

6

STEP 2:

?

EXAMPLES: 

ontributions



s

  

Benefits under Paym

me oyment

(section 136(1) – definition of ‘fringe benefit’) 7

STEP 3: WHICH

?

  

L

   

D

  

Ta

  

8

STEP 4: I

?

Excluded under a specific category 

 Loans made in the ordinary course of business on arm’s-length terms  Loans to meet employment-related expenses in the next 6 months: s 17(3) 

P  Property supplied to employees and consumed on work premises: s 41



 Recreational or child care facilities: s 47(2)  Property provided wholly/principally for work purposes: s 47(3)  “Business operation facilities” such as toilets, tea and coffee making facilities on business premises: s 47(4)

9

STEP 4: IS IT EXEMPT? L 



pt Benefits’

Frin enefits related to the provision of a car fringe benefit: s 53 ‘  Not for ‘in-house benefits’

 

ees and s



 Includes ride-share services (amended June 2020)

10

STEP 5: TA 

TE THE E

Car fringe benefit – either:  The

 The

method (section 9); OR

t method (section 10) Taxable value = (C * (100% - BP)) - R

11

STEP 5: CALCULATE THE TAXABLE VALUE 

 Amount of the debt that is waived during the year ( 

 (

-

)*

t*( ear) (s 18)  1 April 2020 – 31 March 2021 Benchmark Interest Rate = 4.80% 12

STEP 5: CALCULATE THE TAXABLE VALUE e benefit:





→ look at property / residual benefit (s 22A)





→ amount of the expense (s 23)

in-house = employer provides in ordinary course of business, course fee uni pays external emplyer has to acquir to give t employee, phone bill uni

Meal entertainment fringe benefit:  50/50 method (s 37B); or  Register method (s 37C). 13

STEP 5: CALCULATE THE TAXABLE VALUE 

P  In-house (s 42) 

f lowest price charged to customers if sold to public or lowest price if sold to manufacturers/wholesalers/retailers; or  Lower of arm’s length cost & arm’s length price.

 External → cost to employer (s 43)

t:





→ 75% of lowest price charged to customers or 75% cost to acquire benefit from the provider (ss 48 & 49)  → cost to employer (ss 50 & 51) 14

STEP

ON UE? e benefits: s 62





R

ntribution

 Not for car FB; loan FB and debt waiver FB



“

ule”

 Not for car FB and debt waiver FB 15

EXAMPLE employer provides him with a at est. The loan was provided from 1 May 2020 to 30 June 2020. Roger uses to purchase in Commonwealth Bank and $ to pay of his personal credit on a loan to purchase shares is a ta .I

What is the taxable value of the loan fringe benefit? What if the loan was provided at an interest rate of 6%?

STEP 7: 

Type 1 Fringe Benefits 

(Topic 2)



Type 2 Fringe Benefits  Employer (Topic 2)  

ax credits

→ eg. international flights; school fees



T 17

STEP 8: 

Type 1 Fringe Benefits Fringe benefits taxable amt = Taxable value x 2.0802: s 5B



Type 2 Fringe Benefits Fringe benefits taxable amt =

18

STEP 9: CALCULATE THE FBT :



Fringe benefits 47%): s 66



F

FBT rate (i.e.

loyer: s 66

19

INTERACTION WITH INCOME TAX 

Fringe benefits are not assessable income for employees  Not ordinary income: s 23L ITAA36  Not caught by s 15-2: Note to s 15-2 ITAA97



Deductions  Employer can claim a d  NB:

A97 20...