Fringe Benefits Tax

1. Overview

2. Principles of Fringe Benefits Tax

3. Motor Vehicle Fringe Benefit

4. Housing Fringe Benefit

5. Expense Payment Fringe Benefit

6. Entertainment Fringe Benefit

7. Residual Fringe Benefit

 

 

1.  Overview

 

The University is subject to Fringe Benefits Tax (FBT) legislation, as found in Fringe Benefits Tax Assessment Act 1986.

 

FBT is a tax levied on the value of certain benefits, known as “fringe benefits”, provided by the University to employees.  FBT is payable by the University not the employee.

 

The FBT rate is currently 48.5% of the grossed up taxable value of fringe benefits provided.  The University is eligible to claim a 48% FBT rebate, to the extent that the grossed up taxable value per employee does not exceed $30,000.

 

 

2.  Principles of Fringe Benefits Tax (FBT)

 

The principles of FBT can be summarised as follows:-

 

“Fringe benefit”

 

A fringe benefit is effectively any form of employee remuneration other than salary or wages or other payments which are subject to income tax.  It is essentially a benefit provided to an employee by the University or an associate of the University in respect of that employment. 

 

The University mainly provides the following categories of fringe benefits:-

For further information click on links above.

 

“Employee”

 

Employees are defined as current, future or former employees as well as their associates (eg: spouse, child).  Generally, a person is an employee if they receive salary or wages or any other benefit which would constitute salary or wages had the benefit been provided as cash.

 

“Grossed Up Taxable Value”

 

The grossed up taxable value is calculated by multiplying the taxable value of the fringe benefit by:-

  • 2.1292, where an input tax credit (ITC) can be claimed by the University (ie: Type 1 benefit)
  • 1.9417, where an ITC cannot be claimed by the University (ie: Type 2 benefit)

“Reportable Fringe Benefits”

 

Reportable fringe benefits are the grossed up value of certain fringe benefits provided to an employee by the University during the FBT year.  The gross up factor to be applied is 1.9417, irrespective of whether an ITC can be claimed by the University.

 

The University is required to include the value of reportable fringe benefits on the payment summary of an employee, where the value of reportable fringe benefits exceeds $1,000.

 

FBT Administration

 

The FBT year runs from 1 April to 31 March the following year.  FBT is based on a self-assessment system, with an annual FBT return due for lodgement by 21 May.  FBT is payable by the University in four quarterly instalments via the Business Activity Statement (BAS).

 

 

3.  Motor Vehicle Fringe Benefit

 

A motor vehicle fringe benefit arises when a motor vehicle, which is owned or leased by the University, is made available for the private use of an employee.  Actual private use is not necessary.

 

Private Use

 

A motor vehicle is deemed to be available for private use in the following situations:-

  • When the motor vehicle is garaged at or near the employee’s place of residence; or
  • When the motor vehicle is not on University premises and the employee has the use, custody or control of the motor vehicle, whilst not performing employment duties.

It should also be noted that a motor vehicle garaged at an employee’s residence overnight is deemed to be available for private use for two consecutive days.

 

Calculation of taxable value

 

The University adopts the statutory formula method to calculate the taxable value of a motor vehicle fringe benefit.  Under this method, the taxable value is essentially based on the actual availability of the vehicle for private use, the base value of the car and the total kilometres travelled in a FBT year.

 

The statutory formula is:    [(A x B x C) / D] – E

 

where:

 

A = base value of motor vehicle

B = relevant statutory fraction

C = number of days during FBT year in which the motor vehicle was available for private use

D = number of days in FBT year

E = amount of any employee’s contribution

 

Base value

 

The base value of the motor vehicle is dependent on the mode of motor vehicle acquisition:-

  • Where the motor vehicle is purchased, the base value is the GST inclusive amount actually paid for the motor vehicle.
  • Where the motor vehicle is leased, the base value is the GST inclusive leased motor vehicle value.

The base value of the motor vehicle includes all non-business accessories (eg: air-conditioning, car phone) but excludes registration costs.

 

Statutory fraction

 

The statutory fraction to be applied is based on the total annualised kilometres travelled by the motor vehicle.  If the motor vehicle is held for only part of the FBT year, the annualised kilometres are the total kilometres travelled during the period  held, multiplied by the number of days in the FBT year and then divided by the number of days held.

 

The current statutory fractions are as follows:-

 

Annualised number of whole kilometres

Statutory fraction

Less than 15,000

0.26

15,000 to 24,999

0.20

25,000 to 40,000

0.11

More than 40,000

0.07

 

Odometer readings

 

Odometer readings of all University owned or leased vehicles are required as at 31 March each year. 

 

 

4.  Housing Fringe Benefit

 

A housing fringe benefit arises where the University grants an employee a right to use or occupy a unit of accommodation as their usual place of residence.  

 

Calculation of taxable value

 

For non-remote accommodation in the first year accommodation is provided, the taxable value of the benefit is based on the market rental value of the accommodation, less any amount paid by the employee.

 

For each subsequent year, the annual state housing index factor is applied to the market value in the previous year.  However, indexing can only be continued for a maximum of nine years, with a new valuation required at least every 10 years.

 

 

5.  Expense Payment Fringe Benefit

 

An expense payment fringe benefit arises where the University either reimburses the employee or another person, for private expenses incurred by the employee.

 

This differs from the payment of an allowance, which is treated as income to the employee and appears on the employee’s payment summary.

 

Calculation of taxable value

 

The taxable value of an expense payment fringe benefit is the GST inclusive amount of expenditure incurred by the employee, which the University reimburses to the employee or another person. 

 

The taxable value may be reduced by the following:-

  • The amount of any employee contribution to the University in respect of the benefit.
  • The extent to which the expenditure would have been an income tax deduction to the employee (ie: the otherwise deductible rule).

 

6.  Entertainment Fringe Benefit

 

An entertainment fringe benefit arises where the University or related party provides entertainment to an employee or associate, in the form of food, drink or recreation.  However, entertainment provided to non-employees is not subject to FBT. 

 

Common examples of entertainment fringe benefits include business lunches, cocktail parties and staff social functions.  

 

Morning and afternoon tea, and light meals on a working day are not regarded as entertainment, except where alcohol is provided. If this occurs, the cost of both the meal and the alcohol is subject to FBT.

 

Calculation of taxable value

 

The taxable value of an entertainment fringe benefit is the GST inclusive amount of expenditure incurred in providing the entertainment to the employee.  Where the entertainment is provided to both employees and non-employees, expenditure is allocated on a per-head basis.  Thus, all entertainment invoices submitted to Accounts Payable must include details of both number of employees and total number of attendees for the function. 

 

Seminars

 

The provision of food and drink incidental to attendance at an eligible seminar, is not subject to FBT. 

 

To qualify as an eligible seminar, the seminar:-

  • must be a conference, lecture, training session, educational course or speech
  • must have a  duration of 4 hours (excluding breaks)
  • must not be a business discussion in the normal course of business
  • must be held on the premises of a specific conference organiser, if the seminar is organised specifically to discuss general policy issues
  • the sole or dominant purpose of the seminar must not be promotion or advertising of the University
  • the sole or dominant purpose must not be the provision of entertainment

 

7.  Residual Fringe Benefit

 

A residual fringe benefit arises where a benefit is provided to an employee, which does not fall within any other fringe benefit category.

 

Calculation of taxable value

 

The taxable value of a residual fringe benefit is the GST inclusive amount of expenditure incurred in providing the benefit to the employee.

 

 

 

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