FRINGE BENEFITS TAX SEMINAR

1
FRINGE BENEFITS TAX SEMINAR

• 19 March 2001

Presented by Geoff WheatleyKaren Kirkham Drew
Ashton
2
FBT SEMINARS

• Introduction to Fringe Benefits Tax
• GST/FBT Interaction
• Reportable Fringe Benefits
• Reimbursement vs Allowance

3
INTRODUCTION TO FRINGE BENEFITS TAX
4
IMPACT WHEN WRONG

• Penalties - up to 200
• Government body - only per annum component
• Real cost to budget
• Roll back - number of years
• If late - general interest charge

5
FRINGE BENEFITS TAX

• Is a
• tax on employers
• on fringe benefits provided to employees

6
WHAT IS A BENEFIT?

• Benefit
• broadly defined
• includes any right privilege, service or
  facility
• e.g.
• company car
• home phone reimbursement
• employee awards

7
WHAT ISNT A FRINGE BENEFIT?

• Salary or wages, all allowances (except LAFHA)
• Eligible termination payments
• Certain capital payments
• Most superannuation contributions

8
WHEN IS IT ASSESSED?

• A fringe benefit is assessable in the year when
  the benefit is provided to the employee and/or
  their associate

9
WHO IS AN EMPLOYEE?

• Employee
• current
• former
• future
• person who receives or is entitled to receive
  salary or wages

10
SALARY AND WAGES

• Where amount must be withheld
• Under Schedule 1-Tax Admin Act
• To the extent payment is assessable

11
EMPLOYEE VS CONTRACTOR

• Why is it relevant?
• PAYG
• FBT
• SGC
• PRT
• Workers compensation

12
EMPLOYEE

• Payments made for
• the labour of the person
• labour content gt 50 of contract value
• contract does not require a result
• no power to delegate
• not working for himself / herself

13
EMPLOYEES ASSOCIATE - S136/S26AAB

• Immediate family
• Relative
• De facto spouse

14
EMPLOYER

• Current
• Former
• Future
• Pays salary and wages
• Liable for FBT

15
ASSOCIATE OF EMPLOYER Section 159

• State is associate of each authority of the state
• Authority of state is associate of each other
  authority of the state

16
DEFINITION OF AN ARRANGEMENT

• Definition
• any agreement, understanding, promise or
  undertaking, whether expressed or implied,
  enforceable or not
• any scheme, plan, proposal, action, etc

17
WHAT IS AN ARRANGEMENT?

• Agreement between employer and third party
• For provision of benefit to employee
• Employer knowingly participated in, or
• Facilitated provision of the benefit

18
IN RESPECT OF EMPLOYMENT

• Must be provided in respect of employment

19
HOW IS EACH DIVISION STRUCTURED?

• Framework
• Definition
• Exemptions
• Calculation of taxable value
• Reductions in taxable value
• Section 136 definitions

20
ADDITIONAL DIVISIONS

• Division 13 - exempt benefits
• e.g. lap-top computers, certain taxi travel
• Division 14 - reductions
• e.g.
• home leave travel
• certain remote area benefits

21
WHAT IS AN EXEMPT MINOR BENEFIT?

• Defined section 58P
• lt 100
• Difficult to record or value
• Infrequent and irregular
• Consider associated benefits
• Not for tax-exempt entertainment

22
CAN A FRINGE BENEFIT BE INCOME?

• Section 23L ITAA
• fringe benefits and exempt benefits exempt from
  income tax

23
HOW DO YOU CALCULATE FBT PAYABLE

• Aggregate Fringe Benefits Amount
• GST inclusive value of benefit
• Less employee contribution
• Less otherwise deductible

24
HOW DO YOU CALCULATE FBT PAYABLE

• Identify Type 1 individual fringe benefits
  amounts
• Identify Type 1 excluded fringe benefits
• Add together - Type 1 Aggregate
• Fringe Benefits Amount
• Gross-up by new gross-up rate

25
HOW DO YOU CALCULATE FBT PAYABLE

• Identify Type 2 individual fringe benefits
  amounts
• Identify Type 2 excluded fringe benefits
• Add together - Type 2 Aggregate Fringe Benefits
  amount
• Gross-up by old gross-up rate
• Add Type 1 and 2 Aggregate Fringe Benefits
  amounts
• Apply FBT rate of 48.5

26
WHAT ARE TYPE 1 BENEFITS?

• Benefits provided to employees (or associate) in
  respect of which the provider (e.g. employer) was
  entitled to (partial or full) input tax credit at
  the time the benefit was acquired. GST -
  creditable benefit
• FBT rate GST rate
• (1 - FBT rate) x (1 GST rate) x FBT rate
• 2.1292 approximately

27
WHAT ARE TYPE 2 BENEFITS?

• Those that are not type 1
• Benefits provided prior to 1 July 2000
• GST free benefits
• Goods and services not acquired by employer
• Provided by certain employers whose activities
  are input taxed

28
WHAT IS THE TYPE 2 GROSS-UP RATE?

• 1
• 1-FBT rate
• 1.9417 approximately

29
EXAMPLE OF CALCULATION

• Type 1 Aggregate Fringe Benefits Amount x 2.1292
• 470,000 x 2.1292 1,000,724
• Type 2 Aggregate Fringe Benefits Amount x 1.9417
• 200,000 x 1.9417 388,340
• ? (1,000,724 388,340) x 48.5
• 673,696

30
WHAT IS AN EMPLOYEE CONTRIBUTION?

• After tax contribution by employee
• Total contribution reduces taxable value
• If input tax credit claimed - 1/11 of cash
  contribution to provider is GST

31
WHAT IS THE OTHERWISE DEDUCTIBLE RULE?

• An expense the employee would have been entitled
  to claim in their own income tax return if it had
  not been paid or reimbursed by the employer
• Only employee not associate
• Jointly deemed to be to employee
• Declaration in certain circumstances

32
WHAT ARE THE GST IMPLICATIONS OF AN EMPLOYEE
CONTRIBUTION?

• If cash payment to employer - 1/11 GST
• e.g. after tax contribution by employee
• If paid expense themselves GST already paid
• e.g. employee pays for petrol and not
  reimbursed
• Total employee contribution used to reduce
  taxable value

33
HOW DO YOU CALCULATE SALARY SACRIFICE AMOUNTS?

• Cost of item FBT - input tax credit
• e.g. home telephone 550
• 550 Cost(50) input tax credit568 FBT
• 1068 salary sacrifice

34
SALARY SACRIFICE post 1.7.00

• Salary 70,000 70,000
• Sacrifice - 1068
• 70,000 68,932
• Tax 21,330 20,812
• 48,670 48,120
• Telephone bill 550 -
• Net Disposal Income 48,120 48,120

35
SALARY SACRIFICE

• TR 1999/D7
• Prospective arrangements effective
• Retrospective arrangements ineffective
• Final has not been issued as yet

36
REPORTABLE FRINGE BENEFITS
37
FRINGE BENEFITS ON PAYMENT SUMMARIES

• Effective from 1 April 1999
• Where taxable value gt 1,000
• On P/S from year 30 June following FBT year
• Affects everyone

38
FRINGE BENEFITS ON PAYMENT SUMMARIES

• All taxable fringe benefits
• Except excluded fringe benefits
• car parking
• entertainment by way of food and drink
• hiring or leasing entertainment facilities
• certain remote area benefits

39
FRINGE BENEFITS ON PAYMENT SUMMARIES

• Grossed-up value reported
• Old gross-up rate used 1.9417
• Not reported
• exempt benefits
• otherwise deductible portion

40
FRINGE BENEFITS ON PAYMENT SUMMARIES

• Effects
• Superannuation Contributions Surcharge
• Medicare levy surcharge
• income tested government benefits
• HECS
• child support payments
• termination payments surcharge
• family allowance?

41
FRINGE BENEFITS ON PAYMENT SUMMARIES

• Problems
• pro-rata some benefits
• what is taxable value?
• non-packaging items
• if someone leaves

42
REBATEABLE EMPLOYERS

• Includes non-profit, non-government employers
  e.g. non-profit schools, clubs
• Eligible for 48 rebate of tax payable
• From 1 April 2001 - Rebatable limit
• 30,000 grossed-up taxable value per employee

43
EXEMPT EMPLOYERS

• Includes PBIs, public and not for profit
  hospitals
• Exempt from FBT on fringe benefits provided
• From 1/04/2000 - exempt limit
• 17,000 grossed-up taxable value for employees
  in public and not for profit hospitals
• From 1/04/2001 - exempt limit
• 30,000 grossed-up taxable value for other
  employers

44
HOW DO YOU IDENTIFY A FRINGE BENEFIT?

• Review
• salary packages
• expense reimbursements
• entitys policy on benefits
• last years FBT return

45
REIMBURSEMENT VS ALLOWANCE

• FBT
• reimbursement of actual expenditure
• Income Tax
• payment of allowance for anticipated expenditure
  (except LAFHA)

46
CAR FRINGE BENEFITS
47
WHEN IS A CAR SUBJECT TO FBT?

• Car
• held by employer or associate
• provided to employee or associate
• at any time on a day
• in respect of employment

48
WHEN IS A CAR SUBJECT TO FBT?

• When it is
• applied for private use, or
• available for private use
• unless exempt

49
WHAT IS A CAR?

• Car
• road vehicle designed to carry
• lt 1 tonne or
• lt 9 passengers
• motor car (4 wheel drive), station wagon, panel
  van, utility truck
• does not include a motor cycle

50
WHAT CARS ARE EXEMPT?

• Taxi, panel van, utility truck carrying lt 1
  tonne or
• Road vehicle carrying lt 1 tonne and not
  principally to carry passengers and
• Private use nil, minor or infrequent
• Work related travel - to/from work or incidental
  to employment

51
WHAT CARS ARE EXEMPT?

• Emergency service vehicles
• ambulance, fire fighting and police
• marked
• fitted with sirens

52
HAS THE ATO ISSUED ANY GUIDANCE ON EXEMPT CARS?

• MT 2024
• dual cabs - exempt only if
• utility truck and private use, minor, irregular
  and infrequent or
• if it is designed to carry load
• gt 1 tonne or
• gt 8 passengers
• consider whether residual benefit

53
HAS THE ATO ISSUED ANY GUIDANCE ON EXEMPT CARS?

• MT 2024
• 4 wheel drives not principally designed to carry
  passengers
• MT 2033
• modified cars

54
WHAT DOES ANY TIME OF DAY MEAN?

• Day of acquisition/disposal
• One car benefit
• Pool cars
• actual private use
• parked at home statutory formula
• available for private use

55
PRIVATE USE

• The car is
• applied for private use
• available for private use

56
CALCULATING THE TAXABLE VALUE

• Statutory formula
• days available for private use
• Cost basis (operating costs)
• private vs business kilometres

57
CALCULATING THE TAXABLE VALUE

• Statutory formula
• administration easier
• Cost basis (operating costs)
• log books required
• administration harder
• lower FBT cost - sometimes

58
STATUTORY FORMULA
59
WHAT IS THE STATUTORY FORMULA?

• T.V. ABC - E
• D
• Where
• A - Base value D - Days in year
• B - Statutory fraction E - Employee
  contribution
• C - Private use days (not salary
  sacrifice)

60
WHAT IS THE BASE VALUE?

• At the time the car was first held by the
  provider, was it
• owned or
• leased

61
BASE VALUE - OWNED

• Cost price
• less stamp duty
• government charges
• registration
• plus
• non-business accessories (including acquisition
  and fitting costs)
• GST or sales tax and delivery costs
• less
• GST inclusive employee contributions

62
BASE VALUE - LEASED

• Leased car value (GST inclusive)
• market value
• cost price to lessor
• Plus non-business accessories
• Less employee contributions MT 2021
• ATO concession for employee trade-in
• ATO reconsidering view

63
HOW IS SALES TAX EXEMPTION CALCULATED?

• To 30 June 2000
• Sales tax in invoice
• Tax inclusive recommended retail price x
  applicable
• Non-luxury cars actual cost x sales tax rate
  applicable to non-luxury cars

64
CAN THE BASE VALUE BE REDUCED?

• Section 9(2) and TD 94/28
• 1/3 reduction - held more than 4 years at 1 April
• accessories not reduced

65
WHAT IS STATUTORY FRACTION?

• Annualised kilometres
• lt 15,000 26
• 15,000 - 24,999 20
• 25,000 - 40,000 11
• gt 40,000 7
• Remember must annualise

66
HOW DO YOU ANNUALISE KILOMETRES?

• A x B
• C
• A - Kilometres travelled in year
• B - Days in year
• C - Days in holding period

67
HOW DO YOU VERIFY ODOMETER READINGS?

• Closing reading
• declaration by employee
• petrol card reading
• Alternatives per TD 94/26
• repair invoices
• service records

68
HOLDING PERIOD

• Period in the year of tax that car is held by the
  provider

69
PRIVATE USE DAYS

• Includes
• days the vehicle is actually driven for private
  use and
• days the vehicle is available for private use

70
WHAT IS PRIVATE USE?

• Use not exclusively in course of producing
  assessable income of employee
• travel to/from home
• travel to shops
• travel for personal purposes

71
WHAT IS AVAILABLE FOR PRIVATE USE?

• Not at business premises of employer
• Parked at employees residence
• Parked at airport
• Not available for private use
• TD 94/16 safe storage
• prohibition on private use (MT 2021)
• at repair shop and undriveable

72
EXAMPLE OF STATUTORY FORMULA

• Cost (inc GST) 27,900
• Accessories Non-business 2,500
• Kilometres (annualised) 24,500
• Unavailable days 5

73
EXAMPLE OF STATUTORY FORMULA

• 30,400 x 20 x 360
• 365
• T.V. 5,997

74
WHAT DOCUMENTATION IS REQUIRED?

• Cost price
• Days unavailable and reason
• Odometer reading
• Alternatives to above
• Employee contribution
• not salary sacrifice

75
ARE CAR EXPENSES SUBJECT TO FBT?

• Car running expenses exempt from FBT if statutory
  formula used
• registration and insurance
• fuel and repair
• RACV roadside assistance

76
OPERATING COST METHOD
77
WHAT IS THE OPERATING COST METHOD?

• C x ?100 - BP? - R
• C - Operating costs
• BP - Business use
• R - Recipients contribution

78
WHAT ARE OPERATING COSTS?

• Rego and insurance
• Fuel, repairs, service, car wash
• Notional depreciation
• Notional interest x WDV
• 7.3 - 31 March 2001
• Lease charges

If owned
If leased
79
OPERATING COSTS

• Include all such expenses incurred by any person
  (whether the provider of not)

80
APPORTIONMENT OF OPERATING COSTS

• Holding period
• Days unavailable

81
BUSINESS PERCENTAGE

• Is the percentage of the total distance travelled
  by the car that relates to business use

82
CALCULATING BUSINESS PERCENTAGE

• Employer makes a reasonable estimate of the
  business kilometres travelled in the holding
  period
• Divided by the total kilometres travelled

83
ESTIMATE OF BUSINESS KILOMETRES

• Employer must take into account all relevant
  matters
• log books
• odometer records
• variations in pattern of use

84
WHAT IS A LOG BOOK?

• Kept for 12 weeks - section 162H
• Requirements for each business trip
• date trip began and ended
• odometer reading at start and end of trip
• number of kilometres travelled
• purpose of journey
• made ASAP at end of journey

85
WHEN IS A NEW LOG BOOK REQUIRED?

• New log book every five years
• Employer elects to treat as log book year
• Commissioner advises in writing the year is to be
  a log book year
• Business usage changes by 10 or more

86
ODOMETER RECORDS

• Beginning and end of the holding period
• In a log book year - beginning and end of the
  applicable log book period

87
EXAMPLE OF OPERATING COST METHOD

• Operating costs 15,000
• Business 70
• 15,000 x (100 - 70)
• 15,000 x 30
• 4,500

88
WHAT ARE THE DOCUMENTATION REQUIREMENTS?

• Election Section 10(4)
• Car expenses
• Cars WDV at 31 March 2000 and 31 March 2001
• Log book
• Employee contributions

89
WHAT ARE THE DOCUMENTATION REQUIREMENTS?

• Odometer records
• Employers estimate of business kilometres
• Employers specified business use percentage

90
CAR FRINGE BENEFITSGST Transitional Rules

• Denial of Input tax credits on new car purchases
• No entitlement to credits in 2000/2001
• 50 entitlement to credits 1/7/01 - 30/6/02
• Full entitlement 1/7/02 onwards
• Previously WST exempt entities can claim

91
CAR FRINGE BENEFITSEntity owned vehicles

• GST on acquisition
• partial/full ITC entitlement FBT_at_ 2.1292
• I.e. cars purchased 1/7/01 onwards
• No ITC entitlement
• I.e. cars purchased prior to 1/7/01

92
CAR FRINGE BENEFITS

• GST on lease payments
• ITC entitlement FBT _at_ 2.1292
• No ITC entitlement FBT _at_ 1.9417
• Transitional period
• Pre 2/12/98 and 8/7/99 leases
• Residual value post 30/6/00 subject to GST

93
CAR FRINGE BENEFITSTR 2000/D8

• Gross-up rate dependant on ITC entitlement on
  acquisition or lease costs
• Up to 30/6/00 Type 2
• From 1/7/00 Type 1?
• Entitlement to ITC on running costs immaterial

94
WHAT HAPPENS WITH REPLACEMENT CARS?

• Statutory formula
• separate calculation
• Operating cost
• elect - replacement car
• same business , or
• separate car
• new log book

95
WHAT HAPPENS WITH SHORT TERM HIRE?

• ATO view
• lt 12 weeks not a car fringe benefit, e.g.
• extensive repairs
• awaiting new car
• still a benefit

96
WHAT IS A NOVATED LEASE?

• Tripartite agreement between lessor, employer and
  employee
• Employer liable for expenses whilst employs
  employee
• Liability moves with employee

97
NOVATED LEASES

• Taxation Ruling TR 1999/15
• Only full novations tax effective
• under partial novation, original not rescinded
• per ATO under a partial novation, the employee is
  assessable on sub-rental, but no deduction for
  rental (section 51AF)

98
IS A LEASED VEHICLE SOLD TO EMPLOYEE SUBJECT TO
FBT?

• Sold to employee at residual
• Current ATO view - TD 95/63
• Granby v FC of T
• Profit assessable to employee?

99
ATO - COMMON ERRORS

• Cars - travel to and from work only
• Private use of exempt vehicles
• Base value
• delivery costs
• registration and stamp duty
• Incorrect annualisation of kilometres
• Log books

100
PAYMENT SUMMARIES AND CARS

• Cost base 30,000
• Taxable value using Statutory Formula (7)
  2,100
• Payment summary amount 4,077

101
PAYMENT SUMMARIES AND CARS

• Operating costs 12,760
• Business use 90 11,484
• Private use 10 1,276
• Payment summary amount 2,477

102
TAX EXEMPT ENTERTAINMENT FRINGE BENEFIT
103
WHAT ISSUES NEED TO BE CONSIDERED?

• Entertainment
• Meal entertainment
• Entertainment facility leasing expenses
• Valuation method
• actual
• 50/50 split
• 12 week register
• Arrangements

104
ENTERTAINMENT
105
WHAT IS ENTERTAINMENT?

• Provision of entertainment by way of
• food, drink or recreation
• accommodation or travel for
• whether of not
• business discussions occur

106
WHAT IS MEAL ENTERTAINMENT?

• Provision of entertainment by way of
• food or drink
• accommodation or travel for
• payment, reimbursement of expense
• whether or not
• business discussions occur

107
WHAT ABOUT FOOD/DRINK AND ENTERTAINMENT?

• TR 97/17
• only when the food and drink confers
  entertainment on the recipient

108
WHAT NEEDS TO BE CONSIDERED?

• What type of food and drink
• When provided
• Where provided
• Why provided

109
COMMON EXAMPLES OF MEAL ENTERTAINMENT?

• Restaurants
• Dining rooms
• On-premises functions
• At seminar

110
WHAT IS NOT SUBJECT TO FBT?

• Sustenance
• Light meals
• Working lunch, dinner
• Meals while travelling

111
WHAT ARE EXAMPLES OF ENTERTAINMENT RECREATION?

• Golf days
• Theatre tickets
• Football, cricket matches
• Holiday travel
• Conference day trips
• Sponsorship tickets

112
IS IN-HOUSE ENTERTAINMENT EXEMPT?

• Subject to FBT
• Section 41 exemption does not apply to Division
  10 benefits

113
WHAT IS ENTERTAINMENT FACILITY LEASING EXPENSE?

• Hiring or leasing of
• corporate box
• boats, planes for entertainment
• other premises, facilities for entertainment
  excluding
• cost of food or drink

114
WHAT IS TAXABLE VALUE OF EFLE?

• Employee share
• or
• 50/50 split
• Exclude advertising component

115
ENTERTAINMENT

• FBT
• Entertainment - Employee Yes
• off premises - Third parties No
• Entertainment - Employee Yes
• in-house - Third parties No
• - Associate Yes
• Sustenance - Employee/
• third parties No

116
MEAL ENTERTAINMENT- WHAT IS ACTUAL EMPLOYEE COST?

• Unless election made
• Cost attributable to employee entertainment
• Subtract employee contributions

117
WHEN DO YOU USE ACTUAL COST METHOD?

• All costs and data available
• Employee meals lt 50

118
WHAT IS 50/50 SPLIT METHOD?

• Must elect to apply
• 50 of all meal entertainment
• employees and associates
• non-employees

119
WHAT IS 50/50 SPLIT METHOD?

• Deduct employee contributions
• No otherwise deductible reduction
• No minor benefits exemption

120
WHEN SHOULD 50/50 SPLIT METHOD BE USED?

• To save administration time and costs
• When employee meals gt 50
• When no detail of actual cost
• When no 12 week register

121
WHAT IS 12 WEEK REGISTER METHOD?

• Must elect to use
• Continuous 12 week period
• Representative period
• Deduct employee contributions
• No otherwise deductible reduction
• Valid for current year and next 4
• New register if 20 increase in expenditure

122
WHAT IS ENTERTAINMENT UNDER ARRANGEMENT?

• Entertainment provided by third party
• to employee, or associate
• is a fringe benefit if it is provided under an
  arrangement

123
ENTERTAINMENT

• Accounts required
• No FBT
• FBT
• Allows for choice of method

124
EXPENSE PAYMENT, PROPERTY RESIDUAL FRINGE
BENEFITS
125
GENERAL OVERVIEW

• Definition
• Exempt benefits
• Taxable value
• Otherwise deductible rule
• declarations
• documentation

126
WHAT IS AN EXPENSE PAYMENT FRINGE BENEFIT?

• Employer
• pays employees expense
• reimburses employees expense
• e.g. home phone, mortgage repayments

127
ARE THERE ANY EXEMPTIONS?

• Exempt accommodation - LAFH
• declaration
• Exempt car expense
• cents per kilometre reimbursement
• No-private-use declaration

128
WHAT IS A NO-PRIVATE-USE DECLARATION?

• Employer reimburses business expenses only
• Annual declaration by employer
• all employees
• particular class or
• particular employees

129
HOW IS TAXABLE VALUE CALCULATED?

• In-house
• External - GST inclusive amount paid or
  reimbursed
• Less
• employees contributions
• otherwise deductible portion

130
WHAT IS AN IN-HOUSE BENEFIT?

• Provider is employer or associate
• Provider supplies identical or similar property
  to outsiders
• 500 reduction per employee per year

131
WHAT IS OTHERWISE DEDUCTIBLE RULE?

• Employee only
• Once-off deduction
• Wholly or partly
• Documentary evidence
• Declaration - showing deductible

132
WHAT DOCUMENTARY EVIDENCE IS REQUIRED?

• Must satisfy Subdivision 900-E of ITAA 1997
• invoice, etc showing
• dates expenditure incurred
• name and address of provider/supplier
• nature of goods or services
• date of document
• amount of the expense
• credit cards?

133
WHAT IS A RECURRING FRINGE BENEFIT DECLARATION?

• Employee receives series of fringe benefits
  essentially the same but for differences in value
  or proportion of business use
• Declaration valid for 5 years unless 10 variation

134
WHEN IS A TRAVEL DIARY REQUIRED?

• Domestic
• gt 5 nights and
• not exclusively business
• Overseas gt 5 nights

135
WHAT INFO IS REQUIRED IN A TRAVEL DIARY?

• FBTAA requires
• place where activity undertaken
• duration of activity
• date and time activity commenced
• nature of activity

136
ARE THERE ANY VARIATIONS?

• MT 2038 adds
• within 2-3 days of activity
• itinerary may satisfy requirements

137
WHEN DOES A PROPERTY FRINGE BENEFIT ARISE?

• Property provided by employer, or
• Associate, or
• Third party arranger
• To employee or associate
• Ownership passes or will pass

138
WHAT IS PROPERTY?

• Broadly defined and includes
• tangible - goods, etc
• animals, gas, electricity
• intangible - real property
• chose in action
• other property

139
WHAT ARE THE TWO TYPES?

• In-house
• External

140
HOW DO YOU CALCULATE TAXABLE VALUE?

• External benefits
• Provider is employer or associate
• Property purchased by provider
• Taxable value is cost price

141
TAXABLE VALUE EXTERNAL

• Other cases - notional value
• All cases - less employee contribution

142
DOES OTHERWISE DEDUCTIBLE RULE APPLY?

• Yes, provided
• once and only deduction
• declaration provided
• documentary evidence

143
WHAT ARE RESIDUAL FRINGE BENEFITS?

• Catch all provision
• Benefit is residual if not caught under other
  provisions

144
WHEN IS THE BENEFIT TAXABLE?

• In the year
• it is provided, or
• where provided over a number of billing periods
• when it is due and payable
• e.g. electricity

145
ARE THERE ANY EXEMPTIONS?

• Employee transport provided to public
• Recreational/childcare facilities on business
  premises
• Property used in and on employers business
  premises
• LAFH accommodation

146
ARE THERE ANY EXEMPTIONS?

• Motor vehicle not for private use
• Unregistered motor vehicle
• Transport for oil rig and remote area employees
• Priority of access to childcare facilities
• No private use declaration

147
HOW IS TAXABLE VALUE CALCULATED?

• In-house
• External non-period - ALP paid
• External period - ALP paid

148
WHAT ABOUT OTHERWISE DEDUCTIBLE RULE?

• Employee only
• Once only deduction
• Declaration required except
• exclusive employee residual benefit
• extended travel residual benefit
• Declaration includes recurring benefit

149
WHAT ARE BUSINESS PREMISES?

• TR 2000/4
• premises or part are
• of the person
• used for business operations
• neither ownership nor exclusive possession
  necessaryneed control over and right to
  possession of premises

150
IS PROVISION OF CLOTHING AND UNIFORMS TAXABLE?

• Amount paid by employer
• Less
• employees contribution
• otherwise deductible amount

151
ANY ATO GUIDANCE ON OTHERWISE DEDUCTIBLE?

• TR 97/12 TD 1999/62
• protective clothing
• occupation specific clothing
• compulsory and distinctive clothing which
  identifies the employer
• non-compulsory occupational clothing registered
  with DIST

152
WHEN ARE CLOTHING UNIFORMS NOT OTHERWISE
DEDUCTIBLE?

• TR 97/12
• conventional clothing
• non-protective clothing
• heavy duty conventional clothing

153
COMPULSORY CORPORATE UNIFORMS GUIDELINES TD
1999/62

• If not registered, need to be distinctive and
  compulsory
• Prescribed in express policy
• Commitment from employees

154
FLOWCHART
Yes
No
No
Yes
Yes
No
No
Yes
155
TEST CASE

• Currently being heard
• Funded by ATO
• Are work related sun protection products
  deductible?

156
WHAT ABOUT TEAM AWARDS?

• FBT payable
• Otherwise deductible?
• Minor benefit - lt 100

157
WHAT ARE ELIGIBLE WORK RELATED ITEMS?

• All exempt
• briefcase
• protective clothing
• calculator
• tools of trade
• mobile phone or car phone (provided)
• notebook or laptop computer

158
WHAT ARE REQUIREMENTS?

• Provided as expense payment, property or residual
• No work use pre-requisite
• No dollar limit
• No substantiation or declaration

159
WHAT ABOUT A MOBILE OR CAR PHONE?

• Only a work-related item if primarily for use in
  employees employment
• No substantiation requirements
• Consider practical evidence

160
WHAT ABOUT ELIGIBLE MEMBERSHIP OR SUBSCRIPTION?

• Exempt
• trade or professional journals
• corporate credit card
• airport lounge membership
• No declarations required

161
WHAT ABOUT TAXI TRAVEL?

• The travel is a single taxi trip
• The travel begins or ends at employees place of
  work
• No time restrictions

162
HOW TO VALUE PRIVATE USE MOTOR VEHICLES NOT CARS

• MT 2034
• methods to value benefits
• operating cost
• cents per km
• TD 2000/20
• cents per km for year commencing 1 April 2000

163
CAR PARKING FRINGE BENEFITS
164
WHEN DOES A CAR PARKING FRINGE BENEFIT ARISE?

• Section 39A
• employer controlled premises
• commercial car park - 1 km
• 4 hours between 7.00am - 7.00pm
• employee or associate used car
• primary place of employment

165
WHEN DOES A CAR PARKING FRINGE BENEFIT ARISE?

• Section 39A (contd)
• car space near primary place of employment
• car travel between work and home
• commercial car park gt 5.46/day at 1 April 2000

166
WHAT ARE EMPLOYER CONTROLLED PREMISES?

• Within employers premises
• Controlled by employer

167
WHAT IS A COMMERCIAL CAR PARK?

• Section 136 - definition
• Spaces available to public
• All day for a fee i.e. gt 6 hours during daylight
  hours - 7.00am - 7.00pm
• TR 96/26
• Run with a view of profit
• Anti-avoidance provisions

168
WHAT IS NOT A COMMERCIAL CAR PARK?

• Penalty rates
• short term shoppers
• hotel guests
• Car park for special functions
• Kerb side parking meters

169
HOW DO YOU CALCULATE THE 4 HOURS?

• 7.00am - 7.00pm
• Total duration exceeds 4 hours
• Times in that day are cumulative

170
WHAT IS PRIMARY PLACE OF EMPLOYMENT?

• Business premises or associated premises
• Employee performed duties of employment
• Place is sole or primary place
• On that day

171
WHAT IS NEAR PRIMARY PLACE OF EMPLOYMENT?

• Not defined
• Within walking distance?

172
WHAT IS TRAVEL BETWEEN WORK AND HOME?

• Car is used to commute between employees
  residence and employees place of employment - at
  least one way directly

173
HOW DO YOU CALCULATE 1KM RADIUS?

• From car park entrance to car entrance of those
  premises
• Within 1km by shortest practicable route
• By foot, car, train, boat
• Measurement - your choice e.g. odometer reading,
  street directory

174
HOW DO YOU CALCULATE TAXABLE VALUE?

• Number of benefits
• actual
• statutory formula method
• 12 week register
• combination of above

175
HOW DOES THE 12 WEEK REGISTER WORK?

• Election required
• Specify cover
• all employees
• particular class
• particular employees
• New register - if 10 increase

176
WHAT ABOUT THE STATUTORY FORMULA?

• 228 days
• Election required
• To cover
• all employees
• particular class of employees
• particular employees

177
WHEN WOULD YOU USE STATUTORY FORMULA?

• Multiple use of spaces
• No records
• Save administration
• Weekend use

178
CAR PARKING
No
Yes
Or
179
WHAT VALUATION METHODS MAY BE USED?

• Lowest car park cost
• Market value
• Average lowest cost
• Mixture of above

180
WHAT IS LOWEST COST METHOD?

• Lowest fee charged for all day parking (inc GST)
• To members of the public
• All day - 6 hour period TR 96/26
• Within 1km of where vehicle parked
• Corporate rate not acceptable

181
HOW DO YOU CALCULATE THE ALL DAY FEE?

• If weekly, monthly or yearly fee
• total fee (inc GST)
• business days in period

182
WHAT IS MARKET VALUE?

• TR 96/26
• Valuation by suitably qualified valuer
• Election required
• Valuers report by declaration date

183
WHAT IS AVERAGE LOWEST COST?

• Average of lowest fee on
• First and last days in the FBT year
• Must be representative
• Must include GST post 30/06/00

184
WHAT ARE RECORDKEEPING REQUIREMENTS?

• Actuals method
• declaration by lodgment date stating
• number of available car spaces
• daily value of those spaces
• number of business days
• valuation method chosen

185
WHAT ARE THE COMMON ERRORS?

• Actual amount paid used
• FBT paid for each space each day
• Benefit not returned

186
LAFHA
187
WHAT IS A LAFHA?

• Paid by employer to employee
• As compensation for additional expenses incurred
  by employee, or
• Other additional disadvantages to which employee
  is subject
• Employee required to LAFH to perform employment
  duties

188
HOW DO WE CALCULATE TAXABLE VALUE?

• Amount of allowance
• Less
• exempt accommodation and/or
• exempt food components
• LAFH declaration required

189
WHAT IS EXEMPT ACCOMMODATION?

• Additional accommodation expenses for
• employee
• eligible family members
• amount employee could reasonably be expected to
  incur

190
WHAT IS EXEMPT FOOD COMPONENT?

• Reasonable food expenditure above
• Statutory food amount of
• 42 - adults
• 21 - children under 12
• TD 2000/21 reasonable food component

191
STRUCTURE OF FOOD COMPONENT
Excess
146
42
Normal
Nil
One Adult Living Away From Home
192
WHO IS CONSIDERED TO BE LIVING AWAY FROM HOME?

• ATO approach
• no set time
• case by case analysis
• MT 2030
• Expatriates - four years?
• Domestic - one to two years?

193
TREATMENT OF CERTAIN BENEFITS

• Leasing furniture - exempt
• Education expenses
• Home Leave
• Relocation transport

194
ARE YOU STILL LIVING AWAY FROM HOME?

• Tax Office guidance to date - MT 2030
• living away from usual place of residence
• in order to perform duties of employment
• expectation to return to old locality
• appointment of fixed duration
• Working holiday visas TD 2000/D5

195
WHAT ARE THE DIFFERENCES BETWEEN LAFHA AND
TRAVEL?

• LAFHA
• change in job location
• change in residence
• generally for longer periods of time
• family move with employee
• Tax treatment
• LAFHA - FBT
• travel allowance - income tax

196
LOAN FRINGE BENEFIT
197
WHAT IS A LOAN FRINGE BENEFIT?

• Loan with obligation to repay
• Principal unpaid at due date
• Deferred interest loan - new loan

198
WHAT DOES A LOAN INCLUDE?

• Advance of money
• Provision of credit
• Payment of amounts on behalf of another with
  obligation to repay
• Any transaction which could be categorised as a
  loan

199
ARE THERE ANY EXEMPT LOANS?

• Employers business
• Arms length rate
• Advance for employment related expenses

200
ARE THERE ANY EXEMPT LOANS?

• Advance for
• rental bond
• security deposit
• relates to LAFH
• 12 months maximum
• TD 95/17 and 95/18

201
HOW DO YOU CALCULATE THE TAXABLE VALUE?

• Loan x statutory interest rate (7.3)
• LESS
• Loan x actual interest rate

202
CAN TAXABLE VALUE BE REDUCED?

• Otherwise deductible rule
• Loan to employee only, but see
• National Australia Bank case
• joint loans deemed to be to employee

203
WHAT ARE THE DOCUMENTATION REQUIREMENTS?

• Declaration for any reductions

204
HOUSING FRINGE BENEFITS
205
WHEN DOES A HOUSING FRINGE BENEFIT ARISE?

• Lease or licence
• For employee to
• Occupy or use
• Unit of accommodation as
• Usual place of residence

206
WHAT IS A UNIT OF ACCOMMODATION?

• House, flat or home unit
• Hotel, hostel, motel or guesthouse
• Bunkhouse or living quarters
• Ship or floating structure
• Caravan or mobile home

207
WHAT IS USUAL PLACE OF RESIDENCE?

• Place at which a person resides
• Sleeping accommodation whether
• permanent
• temporary
• shared basis

208
HOW DO YOU CALCULATE THE TAXABLE VALUE?

• Accommodation outside Australia
• Accommodation in non-remote areas
• Accommodation in remote areas (now exempt)

209
ACCOMMODATION OUTSIDE AUSTRALIA

• Market value
• Less
• Any employee contribution

210
NON-REMOTE AREA ACCOMMODATION

• Market valuation
• In-house - 75 market valuation
• Statutory annual value
• Less employee contribution

211
WHAT IS STATUTORY ANNUAL VALUE?

• 1st year market value
• Later years - previous years value indexed
• Revised every ten years
• Elect to use market value
• Index factor TD 2000/30

212
WHAT IS MARKET VALUE?

• Guide - MT 2025
• Onerous conditions ignored, e.g.
• employees on-call
• caretakers residence

213
WHAT IS REMOTE AREA ACCOMMODATION?

• Usual place of employment in remote area
• Customary for employers to provide free or
  subsidised accommodation (TD 93/200)
• Provided because of nature of work
• New exemption from 1 April 2000

214
WHAT IS A REMOTE AREA?

• Not adjacent to an eligible urban area (s.140)
• 40kms from a census population centre of 14,000
  or more (28,000 for Zone AB)
• AND
• 100kms from a census population centre of 130,000
  or more
• Note changes for hospitals charitable
  institutions and police

215
Completing Reviewing the FBT Return
216
The End of the Process

• Identification of all benefits
• Identify all applicable concessions
• Documentary support
• Pre-lodgement review
• Considerations for next year

217
Common Errors

• Exempt but taxable cars
• Phone, rates, school fees, etc
• Taxable LAFHAs
• Expatriates tax, insurance payments
• Non-exempt relocation payments
• Taxable housing benefits

218
What Can You Do To Manage FBT Costs?

• Assess your organisations level of risk
• Adequate Systems in place
• Identify all concessions available
• Remuneration planning
• Ongoing management

219
Any Further Questions

• Karen Kirkham 8603 4119
• Drew Ashton 8603 4174