Fringe Benefits Tax
Came into effect 1 July 1986
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Fringe Benefits Tax Assessment Act 1986 (Cth )FBTAA -
Tax 'benefits' that an employer provides an employee -
This is an issue of compliance as it is very difficult, thus if each employee is to calculate it, it would be very hard for everyone to understand the concept
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Imposed on employer rather than employees -
FBT has the highest marginal rates as well as the associated levies
The FBT year is different form the tax year as it goes from the1st of April to 31st Marchof the following year, it is different as it makes it easier to those doing the taxes.
Fringe benefits are non-assessable and non-exempt income.
FBT questions
Identify is there is a fringe benefit and is it excluded -
Benefits provided during the year of tax by an employer, associate or arranger to an employee or associate in respect of the employment of the employee
Current employer is someone who pays or is liable to pay salary and wages Associates examples; relative, spouse, child or partners or partnership Arrangement; any agreement understating promise or undertaking Fringe benefits are defined in s136(1)
Salary and wages
○ Super
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Benefits under employee share scheme
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Payments on termination
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Irregular & infrequent benefit with a taxable amount < $300
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Minor fringe benefits s58P
Portable electronic devices, software, clothing, tools of the trade
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Work-related items: s58X
Subscription to trade or professional journal; entitlement to use corporate credit card or airport lounge membership
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Membership fees & subscriptions: s58Y
Beginning or ending at employee's place of work
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Single-trip taxi travel: s58z
Miscellaneous exemptions
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Does not include
We need to understand this as each category is calculated differently and there 13 categories of benefits, however we will only cover 2 of these being car (Div 2), and expense payment benefits (Div 5)
Car Fringe BenefitsDiv 2
Standard 4 door car, no trucks or bikes, defined in s136 Is it garaged near or at the residence of the employee.
Is it availablefor private use?
Valuations?
TV = (ABC/D) - E Statutory formula FBTAA s9 -
Exempt if: car provided is only used for work-related travel and any private use is minor, infrequent or irregular: s8 What is the category of the benefit?
Lecture 4 - FBT
Thursday, 26 March 2015 10:05 AM
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TV = (ABC/D) - E
(If car is held for 4+ years, at the beginning of the FBT year, base value is is reduced by 33%) A = Base value: generally cost of car
A flat rate of 0.2 rate applies since 1 April 2014, previously it was based off the number of KMs travelled
B = Statutory fraction: 0.2
C = Number of days during the FBT year the benefit was provided D = Number in the FBT year = 365/366
E = Amount of recipient's payment (if employee contributed to the cost of the car)
Statutory method applies unless specified by the employer, if the operating costs is elected but the statutory formula gives a lower TV, than the statutory method will override and be used s10(s)
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TV = [ C * (100% - BP ) ]- R
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Registration, insurance
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Owned by provider? Dep'n, deemed interest
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Leased by provider? Include lease expenses but not dep'n as interestb
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Car neither leased nor owned by provider? Include deemed depreciation and interest
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Deemed dep'n = 25%
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y/e 31 March 2014 = 2014 6.45%
Deemed interest: FBT year ending 31 march 2015 = 2015 5.95%
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C = operating cost of car (GST inclusive)
BP = Business use percentage R = Amount of recipient's payment Operating Costs FBTAA s10
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Example:
Purchased on 1 Dec 2014
In the period to 31 March 2015 (121 days), travelled 8000KMs (5000 for business) Car cost $40,000 incl. Gst
Costs incurred = $4500 Statutory method TV = ABC/D - E
TV = (40000 * 0.2 * 121 / 365) - 1000 = 1652.0548 Operating method
TV = [ C * ( 100% - BP ) - R C = actual costs + depn. + interest
Deemed depreciation = 40000 * .25 * 121/365 = 3315.0685 Deemed interest = 40000 * 5.95% * 121/365 = 788.9863 BP = 5000/8000=0.625
R = $1000
TV = ( (4500 + 3315 + 789) * ( 1-0.625 ) ) -1000 = 2226.5 Alex paid $1000 towards costs
Determine the Taxable Value -
Generally TV is the amount reimbursed or paid by the employer, Recipients contribution
- OR!
If a teacher is given a textbook that is required for her work, the TV would be deductible as if the teacher had brought it themselves.
The taxable value of the benefit could have been deductible if it the employee had incurred the expense yourself -
Expense payment benefits
During FBT y/e 31 March 2015, employer pays for a phone bill each month totalling $1,290 TV is $1,290.
EG. If 30% of calls made were work-related, the TV would be reduced by 30% to $903 If a portion of the calls had been work-related and deductible the taxable value will be reduced.
However TV can be reduced through 2 primary things
Calculate the FBT amount and FBT liability
Already had GST included on the price s5C (3) Type 1
FBT year ending 31 March 2015: 2.0802 FBT year ending 31 March 2016: 2.1463 Type 2
You first have to indentify if the FB is a Type 1 or Type 2
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Not a type 1 s5C (4) Type 2
FBT year ending 31 March 2015: 1.8868 FBT year ending 31 March 2016: 1.9608 FBT year ending 31 March 2015: 47%
FBT year ending 31 March 2016: 49%
Example
Amount of FBT liability = ( Type 1 TV + Type 2 TV ) * FBT Rate 14000 TV type 1 FB
8000 TV type 2 FB
What is the FBT payable for y/e 31 March 2015 and y/e 31 March 2016 2015
FBT Payable ((14000 * 2.0802) + ( 8000 * 1.8868)) * 47% = 20782.084 2016
FBT Payable = ( (14000 * 2.1463 ) + ( 8000 * 1.9608) ) * 49% = 22409.954
Reconciliation with other tax laws
For employers FBT liabilities as well as the cost of providing a fringe benefit is deductible For employees fringe benefits are non-assessable, non-exempt income ITAA36 s32L (1) However they may have a impact on the Medicare levy surcharge/HELP repayments
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