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Fringe Benefits Tax (Wk 11), Tax is levied of the employer, FBT year is…
Fringe Benefits Tax (Wk 11)
STEP 1: Definition of fringe benefit
s 136(1)
A benefit
any right, privilege, service of facility provided
monetary or non-monetary
Provided during the year of tax
allow, confer, give, grant or perform
if prohibited by not enforced
s 148(3)
By an employer, associate or third party arranger
future, current, former
To an employee or an associate
future, current, former
In respect of the employment of the employee
by reason of, by virtue of or in relation directly or indirectly to that employment
nexus requirement subject to judicial consideration
Exclusions
Salary or wages (including allowance)
Superannuation contributions
Payments from super funds
Benefits under employee share scheme
Payments on termination
STEP 2: Determining the taxable value of a fringe benefit
Categories (13)
Car
Provides a car for private use
s 7(1)
Actual use is irrelevant, only if it is available for use
If private use is prohibited by not strictly enforced
TD 94/16
Exempt car fringe benefits
Two methods to calculate taxable value
Statutory formula method
s 9
Cost basis
s 10
Statutory formula applies automatically unless cost basis is elected
s 10(1)
Election to use cost basis is disregarded if statutory results in lower taxable value
s 10(5)
Cost basis required records
ss 10A and 10B
Debt waiver
s 14
Arises where an employee (or associate) owes to amount to employer but they are released from obligation to repay all or some
Taxable value
s 15
= amount that no longer needs to be repaid
Loan
s 16
Benefits is essentially the interest "saved" by the employee
Exempt loan benefit
s 17
when the employer ordinarily provides loans
Taxable values calculated under
s 18
Statutory interest rate is 5.37% for FBT year ending 31 March 2020
TD 2019/6
Expense payment s 20
Occurs when:
Employer pays an expense incurred by the employee OR
Employer reimburses an employee for expenditure
External expense v in-house expense
Meal entertainment
Entertainment by food or drink TR 97/17
Accomodation of travel by food or drink
Reimbursement of expense incurred by employee in relation to above
Two methods:
50/50 split method s 37BA
12-week register method ss 37CA & 37CB
Reductions in taxable value
Recipients contribution
Otherwise deductible rule
-Taxable value is reduced to the extent the amount would have deductible to the employee has the employee incurred the expense directly
Exempt fringe benefits
Div 13
Minor benefits
s 136(1)
Notional taxable value < $300
Work-related items
s 58X
limit one item of each type per employee per year
Membership fees & subscriptions
s 58Y
Single-trip taxi travel
s 58Z
beginning or ending at work
STEP 3: Fringe benefit tax liability
Classify the benefit
Type 1 - employer is entitled to GST input tax credts
Type 2 - if not type 1
Calculate the 'fringe benefits taxable amount'
s 5B
Type 1:
FBT rate 47% (year ending 31 Mar 20) and GST rate 10%
Total taxable value or all Type 1 FB x 2.0802
Type 2:
FBT rate of 47%
Total taxable value of all Type 2 FB x 1.8868
Calculate the FBT liability based on the FBT rate
ss 5B(1A) and 66
Type 1 FB taxable amount + Type 2 FB taxable amount x FBT rate 47%
STEP 4: Interaction with other taxes
Income Tax
Employer
costs of providing the FB is deductible as ordinary business expense
s 8-1
Costs of FBT liability is deductible
s 8-1
Certain expenses are deductible under income tax, but are if provided as a FB such as meal entertainment s
s 32-5
and
32-30
and eduction
s 26-20(2)
Employee
Fringe benefits constitute non-assessable non-exempt income (NANE)
s 23L
Payment summary reporting is required when taxable value of FB exceeds $2,000
GST
Employer
Acquisitions of FB may constitute a credible acquisition for GST purposes
Tax is levied of the employer
FBT year is from 1 April to 31 March