BUSINESS
SMALL BUSINESS
GUIDE
NAT 8164-06.2004
SEGMENT
AUDIENCE
FORMAT
PRODUCT ID
Fringe benefits tax
for small business
A guide to the most commonly provided fringe
benefits for small business
MORE INFORMATION
Visit www.ato.gov.au
OUR COMMITMENT TO YOU
The information in this publication is current at June 2004 and we have made every
effort to ensure it is accurate. However, if something in the publication is wrong or
misleading and you make a mistake as a result, you will not be charged a penalty. You
may have to pay interest, depending on the circumstances of your case.
You are protected under GST law if you have acted on any GST information in this
publication. If you have relied on GST advice in this Tax Office publication and that
advice has later changed, you will not have to pay any extra GST for the period up to
the date of this change. Similarly, you will not have to pay any penalties or interest.
If you feel this publication does not fully cover your circumstances, please seek help
from the Tax Office or a professional tax adviser. Since we regularly revise our
publications to take account of any changes to the law, you should make sure this
edition is the latest. The easiest way to do this is by checking for a more recent version
on our website at www.ato.gov.au
© COMMONWEALTH OF AUSTRALIA 2004
This work is copyright. Apart from any use as permitted under the Copyright Act 1968,
no part may be reproduced by any process without prior written permission from the
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Technology and the Arts. Requests and enquiries concerning reproduction and rights
should be addressed to the Commonwealth Copyright Administration, Intellectual
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CONTENTS
Quick guide to fringe benefits tax for business
iii
01 HOW FRINGE BENEFITS TAX WORKS
01
02 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
03
1. Calculate how much FBT you have to pay
04
2. Keep the necessary FBT records
05
3. Register for FBT
05
4. Report fringe benefits on employees’ payment summaries
06
5. Lodge a return and pay FBT to the Tax Office
07
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
09
Car fringe benefits
10
How to calculate the taxable value of a car fringe benefit
10
How to calculate the taxable value of a benefit provided as a vehicle
other than a car
22
Special records you need to keep for car fringe benefits
23
Special records you need to keep for vehicles other than cars
27
04 DO YOU PROVIDE EXPENSE PAYMENT FRINGE BENEFITS?
29
Expense payment fringe benefits
30
How to calculate the taxable value of an expense payment fringe benefit
30
Reducing the taxable value of an expense payment fringe benefit
31
Special records you need to keep for expense payment fringe benefits
32
05 DO YOU PROVIDE ENTERTAINMENT?
33
Benefits arising from providing entertainment
34
Summary
34
How to calculate the taxable value of a meal entertainment fringe benefit
35
Special records you need to keep for meal entertainment fringe benefits
36
06 DO YOU PROVIDE OTHER FRINGE BENEFITS?
Other fringe benefits
07 ARE SOME BENEFITS EXEMPT FROM FBT?
37
38
41
Certain work-related items
42
Minor benefits
42
Relocation expenses
43
Definitions
More information
Index
FRINGE BENEFITS TAX FOR SMALL BUSINESS
44
45
46
i
ABOUT FRINGE BENEFITS
TAX FOR SMALL BUSINESS
This guide helps small business employers who provide fringe
benefits decide whether they have a fringe benefits tax (FBT)
obligation and, if so, how to calculate how much tax they need
to pay.
The guide:
c gives an overview of how FBT works
c looks at the fringe benefits most commonly provided by
employers and explains how to calculate the FBT payable
for these benefits and what records you need to keep, and
c gives an overview of the less commonly provided benefits.
Although the guide generally refers only to fringe
benefits provided to employees by an employer, please
note that fringe benefits can also be provided to employees’
associates (such as a family member). Further, fringe
benefits can also be provided by an associate of the
employer or a third party by arrangement with the employer.
Fringe benefits provided by public and non-profit hospitals and
other public benevolent institutions are treated differently and are
not generally covered in this guide. If you need information about
non-profit organisations and FBT, phone 13 28 66.
Some technical terms used in this guide may be new to you.
They are shown in bold when first used and are explained in
the definitions list on page 44.
ii
FRINGE BENEFITS TAX FOR SMALL BUSINESS
QUICK GUIDE TO FRINGE BENEFITS TAX FOR BUSINESS
c
What is fringe benefits tax?
see page 02
IF YOUR BUSINESS PROVIDES FRINGE BENEFITS TO EMPLOYEES YOU NEED TO…
c
calculate how much FBT you have to pay
see page 04
c
keep the necessary FBT records
see page 05
c
register for FBT
see page 05
c
report fringe benefits on your employees’ payment summaries
see page 06
c
lodge a return and pay FBT to the Tax Office
see page 07
c
understand which benefits are exempt from FBT
see page 41
IF YOU:
c
c
c
c
make a car or other vehicle you own or lease available for the private use of an employee, you need to:
– calculate the taxable value of car fringe benefits for vehicles that qualify as cars
see page 10
– calculate the taxable value of benefits provided as vehicles other than cars (residual fringe benefit)
see page 22
– keep special records for car fringe benefits
see page 23
– keep special records for vehicles other than cars (residual fringe benefits)
see page 27
pay for, or reimburse, an expense incurred by an employee, you need to:
– calculate the taxable value of the benefits
see page 30
– know how to reduce the taxable value of the benefits
see page 31
– keep special records for expense payment fringe benefits
see page 32
provide entertainment by way of food, drink or recreation, you need to:
– know when you can provide meal entertainment fringe benefits
see page 34
– calculate the taxable value of the benefits
see page 35
– keep special records for meal entertainment fringe benefits
see page 36
provide other benefits, you need to…
– understand the other types of benefits
FRINGE BENEFITS TAX FOR SMALL BUSINESS
see page 37
iii
iv
FRINGE BENEFITS TAX FOR SMALL BUSINESS
HOW FRINGE
BENEFITS TAX
WORKS
FRINGE BENEFITS TAX FOR SMALL BUSINESS
01
01
01 HOW FRINGE BENEFITS TAX WORKS
WHAT IS FRINGE BENEFITS TAX?
Fringe benefits tax (FBT) is a tax paid on certain benefits
employers provide to their employees or their employees’
associates (typically family members). FBT is separate from
income tax and is based on the taxable value of the various
fringe benefits provided.
The FBT year runs from 1 April to 31 March.
WHAT IS A FRINGE BENEFIT?
Basically, a fringe benefit is a benefit provided to an employee
(or their associate) because that person is an employee. Benefits
can be provided by an employer, an associate of the employer,
or by a third party under an arrangement with the employer. An
employee can be a current, future or former employee.
You can generally claim an income tax deduction for the
cost of providing fringe benefits and for the FBT you pay.
REDUCING THE FBT YOU PAY
You can reduce the amount of FBT you pay by:
c replacing fringe benefits with cash salary
c providing benefits that your employees would be entitled
to claim as an income tax deduction if they had paid for
the benefits themselves
c providing benefits that are exempt from FBT, or
c using employee contributions.
MORE INFORMATION
BUSINESS TIP: to decide if a benefit is provided in relation
to employment, ask yourself whether you would have
provided the benefit if the recipient had not been an
employee.
Benefits include rights, privileges or services. For example,
you provide a fringe benefit when you:
c allow an employee to use a work car for private purposes
c give an employee a cheap loan, or
c pay an employee’s private health insurance costs.
Some benefits such as laptop computers (one per employee
each FBT year) and mobile phones that are primarily used for
work are exempt from FBT.
The following are not fringe benefits:
c payments of salary or wages
c shares acquired under approved employee share
acquisition schemes
c employer contributions to complying superannuation funds
c eligible termination payments (for example, a company
car given or sold to an employee on termination), or
c certain benefits provided by religious institutions to their
religious practitioners.
c
FBT AND SALARY SACRIFICE
A salary sacrifice arrangement is an arrangement between the
employer and the employee, where the employee agrees to
forgo part of their future entitlement (such as salary or wages) in
return for the employer providing benefits of a similar cost to the
employer. The employee is likely to place greater value on the
benefit than its cost to the employer.
Under an effective salary sacrifice arrangement:
c the employee pays income tax on the reduced salary
or wages
c the employer may be liable to pay FBT on the fringe benefits
provided, and
c if the salary sacrifice arrangement involves receiving
superannuation contributions in lieu of forgone benefits,
these contributions are classified as employer superannuation
contributions (rather than employee contributions) and are
taxed in the superannuation fund.
An effective salary sacrifice arrangement is an arrangement
between the employer and the employee detailing the amount
of income to be sacrificed, and must be entered into before the
employee becomes entitled to be paid.
WHO PAYS FBT?
As an employer, you have to pay FBT, even if the benefit
is provided by an associate or by a third party under an
arrangement with you. For example, you may deal with a
supplier who, in turn, provides free goods to your employees.
It makes no difference whether you are a sole trader,
partnership, trust, corporation, unincorporated association
or government body, or whether you have to pay other taxes
such as income tax.
02
How can I reduce my fringe benefits tax liability? (NAT 3476)
MORE INFORMATION
c
c
Fringe benefits tax and salary sacrifice arrangements
(NAT 7424)
Taxation Ruling 2001/10: Income tax: fringe benefits
tax and superannuation guarantee: salary sacrifice
arrangements
FRINGE BENEFITS TAX FOR SMALL BUSINESS
WHAT TO DO IF
YOU PROVIDE
FRINGE BENEFITS
1
Calculate how much FBT you have to pay
4
As an employer, you must self-assess and calculate how
much FBT you must pay each FBT year. For the steps
you need to take, see page 04.
2
Keep the necessary FBT records
The FBT law requires you to keep certain records relating
to the fringe benefits you provide, see page 05. The
specific records required vary from one type of fringe
benefit to another and are explained later in this guide.
3
02
Report fringe benefits on employees’
payment summaries
You have to report certain fringe benefits on employees’
payment summaries, see page 06.
5
Lodge a return and pay FBT to the
Tax Office
You have to lodge a return and pay FBT to the
Tax Office. For details of when and how you lodge
and pay, see page 07.
Register for FBT
We recommend that you register once you have
established that you have to pay FBT, see page 05.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03
02 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
1. CALCULATE HOW MUCH
FBT YOU HAVE TO PAY
The Tax Office does not usually notify you of how much FBT you
have to pay. Rather, you self-assess your FBT payable when you
lodge your FBT return.
Step 4. Then calculate the total taxable value of all those
benefits you provide that you can’t claim a GST credit for (for
example, the supply to you was either GST-free or input taxed).
If you realise after lodging your return that there is a mistake in it,
write as soon as possible to:
Australian Taxation Office
PO Box 9831
Townsville QLD 4810
The Commissioner of Taxation may amend your FBT
assessment if:
c you wrongly value or don’t disclose benefits, or
c you request an amendment to your FBT payable (for
example, because you discover you’ve overpaid or
underpaid FBT).
Step 5. Take the total taxable value of all the fringe benefits you
can claim a GST credit for (from step 3) and multiply it by
2.1292. This ‘grosses up’ the taxable value of the benefits.
If you request an amendment you must:
c explain why you are making the amendment and provide
sufficient information about the changes to the taxable
value of the benefits affected
c sign the request, and
c make the amendment within three years of lodging your
FBT return.
You may find the following steps useful in calculating how
much FBT you have to pay.
Step 1. Determine what type of fringe benefits you provide.
Box 1 on this page contains a list of the different types of fringe
benefits identified by the FBT law, and they are described later
in this guide.
Grossing up means increasing the taxable value of
benefits you provide to reflect the gross salary employees
would have to earn at the highest marginal tax rate
(including Medicare levy) to buy the benefits after paying tax.
Step 6. Take the total taxable value of all the fringe benefits
you can’t claim a GST credit for (from step 4) and multiply it
by 1.9417. This gives you a grossed-up taxable amount.
Step 7. Add the grossed-up amounts from steps 5 and 6.
This is your total fringe benefits taxable amount.
Step 8. Finally, multiply the total fringe benefits taxable amount
(from step 7) by the FBT rate to get your FBT payable. The
current FBT rate is 48.5%, but this can change from time to
time. If you are registered for FBT, the Tax Office will notify you
if the rate changes.
When calculating your FBT payable, remember to
include any excluded benefits, that is, those benefits you
don’t have to report on employees’ payment summaries.
Step 2. Calculate the taxable value of each fringe benefit you
provide to each employee (including those benefits you don’t
have to report on payment summaries). The rules for calculating
the taxable value of a fringe benefit vary according to the type of
benefit. Later sections of this guide explain how to calculate the
taxable value for the most commonly provided fringe benefits.
1
Car fringe benefits
2
Loan fringe benefits
Step 3. Calculate the total taxable value of all the fringe benefits
you provide that you can claim a GST credit for (this will be only
for fringe benefits provided since 1 July 2000).
3
Debt waiver fringe benefits
4
Expense payment fringe benefits
5
Housing fringe benefits
6
Board (meal) fringe benefits
7
Airline transport fringe benefits
8
Living away from home allowance fringe benefits
9
Entertainment provided by a tax-exempt organisation
In this guide we use the term ‘GST credits’ to describe
the term ‘input tax credits’.
MORE INFORMATION
c
c
c
04
Goods and Services Tax Ruling GSTR 2001/3 – Goods
and services tax: GST and how it applies to supplies of
fringe benefits
Goods and Services Tax Ruling GSTR 2001/3 –
Addendum
Fringe benefits tax reform – the interaction between
FBT and GST (NAT 3516)
Box 1: Types of fringe benefits
10 Meal entertainment fringe benefits
11 Car parking fringe benefits
12 Property fringe benefits
13 Residual fringe benefits
FRINGE BENEFITS TAX FOR SMALL BUSINESS
02 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
2. KEEP THE NECESSARY
FBT RECORDS
3. REGISTER FOR FBT
Under tax law, you must keep sufficient records to enable
your FBT liability to be assessed. You must keep your records
in writing in English. If your records are not in a written form (for
example, you keep electronic computer records), they must be
in a form that is readily accessible and easily convertible into
English. Generally, you must keep your records for at least
five years.
We recommend you register once you have established
that you have to pay FBT.
You must also keep specific records if you want to take
advantage of various exemptions or concessions to reduce
the FBT you need to pay. These include all documents you are
required to obtain from employees, such as declarations, original
invoices and/or receipts, travel diaries, copies of logbooks and
odometer records. Invoices and receipts should show the date
of the receipt or invoice, the date of the expense, the name of
the supplier, what was bought and the amount paid.
Once you are registered, we will send you additional information
to help you lodge your return. We will also notify you if there is a
change to any of the rates you need to calculate the FBT you
have to pay.
To register for FBT you complete an Application for registration –
fringe benefits tax (NAT 1055) and send it to the Tax Office. The
application is available on our website at www.ato.gov.au or by
phoning 13 28 66.
Your FBT number is the same as your tax file number.
Generally, you must make any elections and declarations,
and obtain any employee declarations, before the due date
for lodging your FBT return or, if you are not required to lodge
a return, by 21 May. You don’t have to notify the Tax Office of
elections or declarations but you need to keep a record of them.
Later sections of this guide explain what special records you
need to keep for the most commonly provided fringe benefits.
Since 9 April 1999 certain employers have been able
to use an alternative way of calculating how much FBT they
have to pay, rather than keep full FBT records. You will find
more information about these record keeping exemption
arrangements in Fringe benefits tax: A guide for employers
(NAT 1054).
FRINGE BENEFITS TAX FOR SMALL BUSINESS
05
02 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
4. REPORT FRINGE BENEFITS
ON EMPLOYEES’ PAYMENT
SUMMARIES
REPORTABLE BENEFITS
EXCLUDED BENEFITS
From 1 April 1999, if you provide fringe benefits with a total
taxable value of more than $1,000 to an employee in an FBT
year, you must report the grossed-up taxable value of the fringe
benefits on the employee’s payment summary for the
corresponding income year (1 July to 30 June). These are called
reportable fringe benefits.
There are certain benefits you don’t have to report on
employees’ payment summaries. They are called excluded
benefits and include:
c entertainment provided as food and drink, and benefits
associated with that entertainment, such as travel and
accommodation
c car parking fringe benefits, apart from eligible car parking
expense payments
c costs of hiring or leasing entertainment facilities such as
corporate boxes
c costs of occasional travel to a major Australian population
centre by employees and their families living in a remote
area, and
c freight costs for food provided to employees living in a
remote area.
You must allocate benefits to the relevant employee and include
any fringe benefits provided to associates of the employee. If
employees share a benefit, you have to allocate the respective
share of the benefit to individual employees. The total value of
all benefits provided to a particular employee in an FBT year is
known as their individual fringe benefits amount.
The grossed-up amount you show on the payment summary is:
Total taxable value x gross-up rate income
To gross up amounts on an employee’s payment summary you
use the gross-up rate of 1.9417. For example, if you provide
benefits with a total taxable value of $1,500 to an employee
during the FBT year 1 April 2004 to 31 March 2005, you would
show the grossed-up taxable value of $2,912 ($1,500 x 1.9417)
on their payment summary for the year ended 30 June 2005.
MORE INFORMATION
c
Reportable fringe benefits – Facts for employees
(NAT 2836)
MORE INFORMATION
c
Fringe benefits tax: A guide for employers (NAT 1054)
Even though you don’t have to report excluded benefits
on payment summaries, the benefits are still subject to FBT
and you must take them into account when calculating how
much FBT you have to pay.
Don’t forget to issue a payment summary to everyone
you provide reportable fringe benefits to, even if you don’t
pay them any salary or wages. For example, if you provide
a caretaker of a block of flats with free accommodation
instead of a salary, you have to give them a payment
summary if the value of the fringe benefit is more than $1,000.
06
FRINGE BENEFITS TAX FOR SMALL BUSINESS
02 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
5. LODGE A RETURN AND
PAY FBT TO THE TAX OFFICE
If you have not previously paid FBT or if the amount of FBT you
had to pay in the previous year was less than the instalment
threshold (currently $3,000), you are required to pay the tax
once a year when you lodge your annual FBT return.
ACTIVITY STATEMENTS
If you had to pay FBT of $3,000 or more in the previous year,
you must pay the tax quarterly with your activity statement. This
is the case even if you estimate you will pay less than $3,000
FBT in the current year.
The instalment amount is a quarter of the FBT you had to pay
for the previous year. For example, if you had to pay $20,000
FBT for the year 1 April 2004 to 31 March 2005, your quarterly
instalments for the following year would be $5,000 each.
ANNUAL RETURN
You must lodge your FBT annual return with the Tax Office
by 21 May each year if you have calculated that you have an
FBT liability.
If you don’t need to lodge an FBT return for the year ending
31 March, complete a Notice of non-lodgment (Nat 3094) and
send it to:
Australian Taxation Office
PO Box 9831
Townsville QLD 4810
You show on your annual return:
c the amount of FBT you have to pay, and
c other brief details, such as the different categories of fringe
benefit you provided, the total taxable value of each category,
and the total employee contributions for some categories.
If you have to pay your FBT liability in quarterly instalments,
the Tax Office will send you an activity statement with your
instalment amount pre-printed on it.
If your instalments are not enough to cover your annual FBT
payable, you pay the difference when you lodge your annual
return. If your instalments are more than your annual liability and
you have no other taxes outstanding, the Tax Office will refund
you the difference.
If you estimate that your FBT payable will be less than for the
previous year, you may vary your quarterly instalments on your
activity statement. However, you may vary an FBT instalment
only if you lodge your activity statement by the due date.
Be careful when varying your instalment amount as you
may incur a general interest charge if you underpay your
FBT liability for the year.
MORE INFORMATION
c
Activity statement instructions FBT (NAT 7389)
Mail your completed, signed return to the address shown on the
form or take it to any tax office. You can also lodge your FBT
return over the internet.
PENALTIES
Requests for deferral of time to lodge
There are penalties for lodging incorrect returns and failing to
lodge returns or activity statements on time.
If you need additional time to lodge your return, write to:
Australian Taxation Office
PO Box 9820
Dandenong VIC 3175
Deferrals will be granted only where there are
extenuating circumstances.
The Tax Office imposes a general interest charge on all
outstanding amounts of FBT, including instalments of FBT. If you
have varied an FBT instalment on an activity statement, you may
also be liable for a general interest charge if you underestimated
the instalment amount.
In addition, there are substantial penalties for underpayments of
tax arising from false and misleading statements.
BUSINESS TIP: make sure you’re registered for FBT so that
the Tax Office can send you an annual FBT return and the
FBT return guide (NAT 2376), which contains instructions on
how to complete your FBT annual return.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
07
08
FRINGE BENEFITS TAX FOR SMALL BUSINESS
DO YOU PROVIDE
A CAR OR OTHER
VEHICLE AS A
FRINGE BENEFIT?
If you provide a car or other vehicle as a fringe benefit you must:
■
calculate the taxable value of the car fringe benefit
– using the statutory formula method, see page 10
or
– using the operating cost method, see page 16
■
calculate the taxable value of a residual fringe
benefit provided as a vehicle other than a car
– using the operating cost method, see page 22
or
– using the cents-per-kilometre method, see page 22
■
keep special records for car fringe benefits
– employee contribution records, see page 23
– percentage of business use records see page 24
■
keep special records for vehicles other than cars,
see page 27
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03
09
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
CAR FRINGE BENEFITS
Box 2: What is a car?
For FBT purposes, a ‘car’ is:
c a sedan, station wagon, panel van or utility (including fourwheel drive vehicles)
c any other goods-carrying vehicle with a carrying capacity
of less than one tonne, or
c any other passenger-carrying vehicle designed to carry
fewer than nine passengers.
You may provide a car fringe benefit if you make a car you
own or lease available for the private use of an employee.
A car is taken to be made available for private use by an
employee on any day when:
c it is actually used for private purposes by the employee or
associate, or
c the car is available for the private use of the employee
or associate.
If a car is garaged at or near an employee’s home, it is taken
to be available for the employee’s private use, regardless
of whether or not the employee has permission to use the
car privately.
As a general rule, travel to and from work is private use
of a vehicle.
EXEMPT CAR FRINGE BENEFITS
There are circumstances in which private use of a car may
be exempt from FBT.
An employee’s private use of a taxi, panel van, utility or other
commercial vehicle (that is, one not designed principally to
carry passengers) is exempt if the employee’s private use of
such a vehicle is limited to:
c travel between home and work
c travel that is incidental to travel in the course of duties
of employment, and
c non-work-related use that is minor, infrequent and irregular
(for example, occasional use of the vehicle to remove
domestic rubbish).
10
HOW TO CALCULATE THE
TAXABLE VALUE OF A CAR
FRINGE BENEFIT
To calculate a car fringe benefit you first must calculate the
taxable value of the benefit. You can do this using either:
c the statutory formula method (based on the car’s cost price),
or
c the operating cost method (based on the costs of operating
the car).
Both methods assume the vehicle is provided on a fully
maintained basis, including fuel.
If you want to use the operating cost method, you have to
decide to do so by 21 May. You can use this method for any
of your cars, regardless of which method you used in
previous years.
BUSINESS TIP: work out which method gives you the lower
taxable value and use that to calculate your FBT payable.
CALCULATING THE TAXABLE VALUE OF A
CAR FRINGE BENEFIT USING THE STATUTORY
FORMULA METHOD
Under this method, the taxable value of the car fringe benefit is
a percentage of the car’s cost price, and is calculated using the
following formula:
(A x B x C ) – E
D
Where:
A = the base value of the car
B = the statutory percentage
C = the number of days in the FBT year when the car was
used or available for private use of employees
D = the number of days in the FBT year
E = the employee contribution
The greater the total distance the car travels (business and
private), the lower the taxable value.
Base value, statutory percentage and employee contribution
are explained below.
Base value of a car
The base value of a car that is purchased includes:
c the original purchase price you paid (excluding registration
and stamp duty)
c the cost of any fitted accessories not required for business
use of the car (for example, a car stereo), and
c dealer delivery charges.
All costs and charges include GST, and luxury car tax where
appropriate.
Any non-business accessories added after the car is purchased
increase the base value of the car for the year in which they are
added and for subsequent years. An example of a non-business
accessory is a car stereo or air conditioner, while an example of
a business accessory is a two-way radio in a salesman’s car.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
The base value of a car that is leased includes:
c the cost price to the lessor (including GST but excluding
registration and stamp duty)
c the cost of any fitted accessories not required for business
use of the car (for example, a car stereo), and
c dealer delivery charges.
If you own or lease a car for only part of an FBT year, use
the following formula to work out how many kilometres the
car would have travelled if you had owned or leased it for the
whole year:
AxC
B
Where:
A = the number of kilometres travelled in the period during
the year when you owned or leased the car
B = the number of days in that period
C = the number of days in the FBT year
For example, where you acquire a car halfway through the year,
and it travels 12,000 kilometres, the annual distance would be
24,000 kilometres (that is, 12,000/183 x 365).
Sales tax and customs duty exemptions for cars
purchased before 1 July 2000
Where the purchaser, lessor or lessee of the vehicles
obtained sales tax or customs duty exemptions for cars
purchased before 1 July 2000, the base value is the amount
you would reasonably have expected to pay if those
concessions were not available.
Employee contribution
Ask the supplier of the car for the amount of the exemption,
or calculate the sales tax component using Taxation
Determination TD 96/34, which is available on our website
at www.ato.gov.au
c
c
c
c
c
c
An employee contribution may be an amount paid directly to
you by an employee for use of the car or a contribution for some
of the car’s operating costs, such as fuel.
When calculating the base value for each car:
check that you have included non-business accessories,
GST, dealer delivery charges and sales tax or customs
duty where applicable
exclude registration and stamp duty
make sure the vehicle has been owned or leased for
more than the minimum required period before reducing
the base value by one-third
ascertain the number of kilometres travelled by the car
during the FBT year, and annualise kilometres if the car
was not held for the full year
establish the number of days the car was available for the
private use of employees, paying special attention to cars
bought or sold during the FBT year, and
make sure you have obtained all necessary declarations
and records, such as receipts and invoices.
If you are using expenses paid for by an employee as an
employee contribution, you must have documentary evidence
of the expenditure (for example, receipts or invoices). In the case
of petrol and oil costs, the employee can give you a declaration
(see page 23 for a sample declaration). Where such a
declaration is made, receipts are not required.
c
c
c
c
Statutory percentage
The statutory percentage depends on the total kilometres the
car travels, as follows:
Total kilometres travelled
during the FBT year
c
Statutory
percentage
Less than 15,000
26
15,000 to 24,999
20
25,000 to 40,000
11
Over 40,000
FRINGE BENEFITS TAX FOR SMALL BUSINESS
c
When calculating employee contributions for each car:
identify any employee contributions that reduce a car’s
taxable value (noting that employee contributions may be
made only from an employee’s after-tax income and that
salary sacrifice amounts don’t count as employee
contributions)
verify any employee contributions and that they have not
been reimbursed
make sure that any employee contribution includes GST
paid by the employer
make sure that any employee contributions are
supported by a declaration from the employee, or other
records as appropriate
add any employee contributions to your assessable
income, where appropriate
do not use any excess employee contributions to reduce
the taxable value of other fringe benefits.
7
11
12
# You don’t have to complete the ‘Carry forward
details’ section to calculate the taxable value of the
car fringe benefits in the adjacent sections of the
worksheet. But you may wish to record these details
for cars you still own to make it easier to calculate
the taxable value of car fringe benefits for the
following year.
B
A
D
Number
of days
in the
FBT
year
(A x B x
C)/D
Gross
taxable
value
E
Employee
contribution
(GSTinclusive
as
appropriate)
$
c recording ‘Closing odometer reading (km)’ may
help you work out the number of kilometres
travelled for the following year.
F
Number
of
kilometres
travelled
(FxH)/G
Annualised
kilometres
26
20
11
7
15,000 to 24,999
25,000 to 40,000
Over 40,000
Closing
odometer
reading
(km)
Less than 15,000
Date
car first
held
Statutory percentage
J
Statutory
%
#Carry forward
details
Total kilometres travelled during the FBT year
Statutory percentage table
H
Number
of
days in
the
FBT year
Use the GST-inclusive employee contribution when
calculating the taxable value of a fringe benefit.
Use the GST-inclusive base value for cars purchased
or leased from 1 July 2000.
G
Number
of
days in
period
Statutory % calculation block
GST may affect your FBT liability.
((A x B x
C)/D) - E
Statutory
formula
method
taxable
value
$
FBT year ended 31 March
For example:
c recording ‘Date car first held’ details may help you
work out when the base value of the car can be
reduced by one-third, and
Totals to be transferred
to FBT return
C
Number
of days
available
for
private use
Statutory %
(F x H)/G
yields
Base
value
(GSTinclusive
as
appropriate)
$
Registration
or reference
number
Make and
model
Taxable value calculation block
Car details
Employer name
Statutory formula method worksheet
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
SAMPLE WORKSHEET — STATUTORY FORMULA METHOD
Here is a worksheet that you may wish to photocopy and use to calculate the taxable value of car fringe benefits
if you use the statutory formula method. There is a worked example of how to use the worksheet on page 14.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
NOTES TO WORKSHEET
A
Base value
Details of what amounts to include in the base value are
explained on pages 10–11. Records you can use to work
out the base value include invoices/tax invoices, receipts,
journal entries, bills of sale and lease documents (for a
leased car). If the car was originally leased, the base
value is usually the purchase price (including GST as
appropriate) paid by the lessor. The lease contract should
show the amount.
If a car was purchased before 1 July 2000, you may
need to include an amount for sales tax or customs duty in
the base value (see page 11).
B, J Statutory percentage
Records you can use to work out what statutory
percentage applies include odometer records (see page
26), travel diaries and fleet management records. If you
don’t keep odometer records, you need some other way
of identifying the distance travelled by each car and a
record of how you calculated the distance.
If a car is replaced during the year, record the kilometres
travelled by each car separately – don’t add the kilometres
travelled by each car together.
C
Number of days the car was available for private use
Records you can use to work out how many days the car
was available for private use include logbooks, diaries and
fleet management records.
There are several methods you can use, including referring
to the pattern of use, for example, where a car is garaged
each night. This information may be available from an
employee’s work records, such as a diary of work-related
business trips.
D, H Number of days in the FBT year
This is either 365 or 366.
E
Employee contribution
Records you can use to work out the amount of any
employee contributions include receipts, declarations,
invoices/tax invoices, journal entries and cheque butts.
F
Number of kilometres travelled in the period during the
year when you owned or leased the car
G
Number of days in the period during the year when you
owned or leased the car
FRINGE BENEFITS TAX FOR SMALL BUSINESS
13
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
14
117,000
1-Oct-04
11%
30,082
365
Andrew is a bookkeeper and has gathered the following
information for his employer about a car the employer
provides to Vicki, a company employee.
c The car, a Mercedes sport convertible, with number plate
ZZZ 999, was purchased by the employer on 1 October
2004. Its base value is $88,000 (including GST).
c For the whole of the period 1 October 2004 to 31 March
2005 (182 days) the car was available for Vicki’s private
use. During that time Vicki travels 15,000 kilometres.
c Vicki pays fuel costs of $1,100 (including GST) to third
parties and provides her employer with the necessary
declaration.
Andrew uses the information to complete the worksheet.
Mercedes
sports
88,000
11%
182
365
4,826
1,100
3,726
15,000
182
EXAMPLE
ZZZ 999
C
B
A
D
(A x B x
C)/D
E
((A x B x
C)/D) - E
F
G
H
(FxH)/G
J
Closing
odometer
reading
(km)
Date
car first
held
Number
of
days in
the
FBT year
Number
of
days in
period
Number
of
kilometres
travelled
Number
of days
available
for
private use
Statutory %
(F x H)/G
yields
Base
value
(GSTinclusive
as
appropriate)
$
Registration
or reference
number
Make and
model
Taxable value calculation block
Car details
Employer name
Statutory formula method worksheet
Number
of days
in the
FBT
year
Gross
taxable
value
Employee
contribution
(GSTinclusive
as
appropriate)
$
Statutory
formula
method
taxable
value
$
FBT year ended 31 March 2005
Statutory % calculation block
Annualised
kilometres
Statutory
%
#Carry forward
details
WORKED EXAMPLE – STATUTORY FORMULA METHOD
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
Andrew then uses the information in the worksheet to calculate the value of the car fringe benefit provided to Vicki for the year,
as follows:
Step
Action
Result
1. If the car is
owned or leased
for only part of
the FBT year,
calculate the
annualised
kilometres
Use the following formula to calculate how many
kilometres the car would have travelled if you had
owned or leased it for the whole year:
If the car was acquired on 1 October 2004 (owned
for 182 days in the FBT year) and travelled 15,000
kilometres in the six months,
the annualised kilometres would be 30,082
kilometres (that is, 15,000 x 365)/182).
AxC
B
Where:
A = number of kilometres travelled in the
period during the year when you owned or
leased the car
Based on the total kilometres the car would have
travelled during the year, the relevant statutory
percentage is 11%.
B = number of days in that period
C = number of days in the FBT year
2. Calculate the
taxable value
Use the following formula and the relevant data from
the worksheet to calculate the taxable value of the
car fringe benefit:
(A x B x C ) – E
D
($88,000 x 11% x 182) – $1,100
365
Where:
=$4,826 – $1,100
A = base value of the car
= $3,726 taxable value.
B = statutory percentage
The base value of the car is the purchase price,
including the cost of fitted accessories. The luxury
car depreciation limit does not affect the calculation
of FBT. For FBT purposes, the amount of $88,000
(including GST) is used to determine the taxable
value.
C = number of days in the FBT year when
the car was used or available for private
use of employees
D = number of days in the FBT year
E = employee contribution
3. Gross up the
taxable value to
obtain the fringe
benefits taxable
amount
Use the following formula to gross up the fringe
benefits amount:
AxB
Where:
As this car was purchased after 1 July 2000, the
fringe benefits taxable amount is calculated using
the type 1 higher gross-up rate, as follows:
$3,726 x 2.1292 = $7,933 taxable amount
A = taxable value
B = type 1 or type 2 amount
4. Calculate the
tax payable
The tax payable on this amount is calculated
using the following formula:
Taxable amount x FBT rate
FRINGE BENEFITS TAX FOR SMALL BUSINESS
$7,933 x 48.5% = $3,847.50
15
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
CALCULATING THE TAXABLE VALUE OF A
CAR FRINGE BENEFIT USING THE OPERATING
COST METHOD
You may use the operating cost method only if you
have kept a logbook and other necessary FBT records.
See Fringe benefits tax: A guide for employers (NAT 1054)
for more details.
Under this method, the taxable value of the car fringe benefit is
a percentage of the total costs of operating the car during the
FBT year, and is calculated using the following formula:
Deemed operating costs are relevant only if the car is owned
(rather than leased). They are depreciation and interest expenses
deemed to be incurred. If the car was not used to provide fringe
benefits for the full year, apportion the depreciation and interest
to reflect the period it was so used.
To calculate:
c deemed depreciation, multiply the depreciated value of the
car at the start of the FBT year by 18.75% for cars purchased
on or after 1 July 2002. For cars purchased before 1 July
2002, multiply the depreciated value of the car at the start of
the FBT year by 22.5%.
The depreciated value of a car for the year in which it is
acquired is the cost of the car, including the cost of nonbusiness accessories. For cars bought before 1 July 2000,
the cost of the car is the amount the employer would
reasonably have expected to pay if sales tax or customs duty
concessions were not available. From 1 July 2000, the cost
of the car includes GST, and luxury car tax where appropriate.
(A x B) – C
Where:
A = the total operating costs
B = the percentage of private use
C = the employee contribution
In a subsequent year the depreciated value of a car is the
cost of the car reduced by the deemed depreciation rate of
22.5% (or 18.75% if acquired on or after 1 July 2002) a year
over the period of ownership. Note that the income tax
depreciation cost limit doesn’t apply for FBT purposes.
Total operating costs
For this particular purpose, the operating costs of a car include:
c actual costs, and
c deemed costs (that is, certain costs that are considered to
have been incurred even if they have not).
Note that this is different from the costs you use for income
tax purposes.
Actual operating costs (including GST) are costs you (or the
employee or an associate) pay for:
c repairs, but not crash repair expenses met by an insurance
company or another person legally responsible for the
damage to the car
c maintenance
c fuel
c registration and insurance (for the year or part of the year
when the car was used to provide fringe benefits), and
c leasing, if the car is leased rather than owned (for the year
or part of the year when the car was used to provide fringe
benefits). For cars bought before 1 July 2000, add any sales
tax or customs duty concessions you received. From 1 July
2000 the lease includes GST, and luxury car tax where
appropriate.
16
c
deemed interest, multiply the depreciated value of the car
by the statutory interest rate. The statutory interest rate for
the FBT year ended 31 March 2004 is 6.55%. The statutory
interest rate for the FBT year ended 31 March 2005 is 7.05%.
The interest rate usually changes from year to year and is
published annually in a Tax Determination and also in the
annual FBT return form instructions.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
Percentage of private use
Employee contribution
You can calculate your percentage of private use using the
following formula:
This is explained on page 11.
A x 100
B
MORE INFORMATION
c
Fringe benefits tax: A guide for employers (NAT 1054)
Where:
A = your estimate of business kilometres travelled by the car
during the FBT year (or part-year, as the case may be)
B = the total kilometres (both business and private) actually
travelled by the car during the same period
You use information from logbook and odometer records, as
well as any variations in the pattern of business use throughout
the year, to estimate the percentage of business use.
You use different methods to estimate the business kilometres
travelled in a logbook year and in a year that is not a logbook
year. Also, if you replace a car during the year, you may be able
to transfer the percentage of business use to the new car. There
is more information about logbook years on page 24.
When calculating the percentage of private use
for each car:
c verify all costs, such as those associated with fuel, repairs
and maintenance
c make sure you include sales tax or customs duty, the
correct depreciation rate (22.5% for cars purchased
before 1 July 2002 and 18.75% for cars purchased on or
after 1 July 2002), and the deemed interest component
for cars that are owned
c if the car was not used to provide fringe benefits for the
full FBT year, apportion the deemed depreciation and
deemed interest component to reflect the period it was
used to provide benefits
c include GST and lease costs, and add a sales tax or
customs duty component if applicable
c obtain logbooks and odometer records and make sure
they meet the requirements. Ensure odometer records
are maintained in both logbook and non-logbook years
c obtain all necessary declarations and copies of
documents such as receipts and invoices.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
17
18
Make and
model
A
b
a
c
Fuel
and
oil
$
d
Registration
and
insurance
$
e
Leasing
costs
$
f
Other
misc.
costs
$
g
h
Deemed
interest
$
A
(a + b +
c+d+
e+f+g
+ h) =
Total
operating
costs
$
B
i km
j km
Total km
this year
B
Estimated
private
% of use
Totals to be transferred to FBT
return
Estimated
business
kilometres
Estimated private % of use
Use the GST-inclusive employee contribution when
calculating the taxable value of a fringe benefit.
Use the GST-inclusive base value for cars purchased
or leased from 1 July 2000.
GST may affect your FBT liability.
Deemed
depreciation
$
Deemed
operating costs
FBT year ended 31 March
For example, recording ‘Closing written down value
(CWDV) for cars still owned (S)’ details may help you
work out the ‘Deemed operating costs’ for a car for
the following year.
Maintenance
$
Repairs
$
Actual operating costs (GST-inclusive as appropriate)
# You don’t have to complete the ‘Carry forward
details’ section to calculate the taxable value of the car
fringe benefits in the adjacent sections of the
worksheet. But you may wish to record these details
for cars you still own to make it easier to calculate the
taxable value of car fringe benefits for the following year.
Registration
or reference
number
Car details
Employer name
Operating cost method worksheet
AxB
Gross
taxable
value
C
Employee
contributions
(GSTinclusive
as
appropriate)
$
C
(AxB)-C
Operating
cost
method
taxable
value
$
Closing written
down value
(CWDV) for cars
still owned (S)
‘Depreciated
value’
# Carry forward
details
Here is a worksheet that you may wish to photocopy and use to calculate the taxable value of car fringe benefits if you use the operating cost method. There is a worked
example of how to use the worksheet on page 20.
SAMPLE WORKSHEET – OPERATING COST METHOD
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
NOTES TO WORKSHEET
A
Total operating costs (comprising sub-costs a, b, c, d,
e, f, g and h)
Records you can use to work out total operating costs
include invoices/tax invoices, receipts, journal entries,
bills of sale, lease documents, declarations and fleet
management records. See page 16 for details of what to
include in total operating costs for cars that are owned
and cars that are leased.
If a car was purchased before 1 July 2000, you may
need to include an amount for sales tax or customs duty in
the base value (see page 11).
B
Estimated percentage of private use (based on number
of kilometres and amount at j)
Records you can use to work out the estimated
percentage of private use include logbook records,
odometer records and diaries. See page 24 for how
to calculate the percentage of business use, and pages
25–26 for a sample logbook and odometer record.
C
Employee contribution
Records you can use to work out the amount of any
employee contributions include receipts, declarations,
invoices/tax invoices, journal entries and cheque butts.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
19
20
16,250
1,440
1,100
25%
7,500
10,160
1,410
10,000
2,540
(AxB)-C
C
AxB
B
j km
i km
A
h
c
c
c
3,750
g
The car, a Holden Commodore with registration number
AAA 000, has an opening depreciated value of $20,000
at 1 April 2004.
Business records held by the company show that:
– the cost of repairs incurred during the period was
$1,500
- total fuel and oil costs for the period were $2,500, and
– registration and insurance costs for the period were
$1,000.
Odometer records kept by the employer for the period
1 April 2004 to 31 March 2005 show the car travelled
10,000 kilometres. Based on the logbook kept for the
car for the previous year and all other relevant factors,
the employer estimates that the number of business
kilometres travelled for the period was 7,500 kilometres.
John pays fuels costs of $1,100 and provides the
employer with the necessary declaration. (Note: the
$1,100 John paid for fuel is included in the $2,500
total fuel and oil cost noted above.)
f
AAA 000
Holden
Commodore
1,500
2,500
1,000
e
d
b
(a + b +
c+d+
e+f+g
+ h) =
a
c
Closing written
down value
(CWDV) for cars
still owned (S)
‘Depreciated
value’
Employee
contributions
(GSTinclusive
as
appropriate)
$
Estimated
private
% of use
Total km
this year
Estimated
business
kilometres
Deemed
interest
$
Deemed
depreciation
$
Leasing
costs
$
Registration
and
insurance
$
Lois is a staff clerk. She has gathered the following
information for her employer about a car the employer
provides to John, a company employee. The car was
purchased by the employer on 1 November 2002.
Lois uses the information to complete the worksheet.
Maintenance
$
Fuel
and
oil
$
EXAMPLE
c
Repairs
$
Registration
or reference
number
Car details
Make and
model
Actual operating costs (GST-inclusive as appropriate)
A
Other
misc.
costs
$
Deemed
operating costs
FBT year ended 31 March
Employer name
Operating cost method worksheet
WORKED EXAMPLE – OPERATING COST METHOD WORKSHEET
Total
operating
costs
$
Estimated private % of use
B
Gross
taxable
value
Operating
cost
method
taxable
value
$
# Carry forward
details
C
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
Lois then uses the information in the worksheet to calculate the value of the car fringe benefit provided to John for the year,
as follows:
Step
Action
Result
1. Calculate total
operating costs – A
Work out the total operating costs by adding
actual and deemed costs.
$5,000 actual costs
($2,500 + $1,500 +
$1,000) + $3,750 deemed depreciation (18.75%
of $20,000 depreciated value) +
$1,410 deemed interest (7.05% of $20,000
depreciated value) = $10,160
2. Estimate percentage
of private use – B
Use the formula and relevant information
from the worksheet to work out the
estimated percentage of private use:
A x 100
B
Where:
A = your estimate of business kilometres
travelled during the FBT year (or part-year)
B = total kilometres travelled by the car during
the same period
3. Calculate employee
contribution – C
Total all employee contributions for the year.
4. Calculate the
taxable value
Use the following formula and the relevant
information from the worksheet to calculate the
taxable value of the car fringe benefit:
(A x B) – C
7,500 x 100 = 25
10,000
So the percentage of
private use would be 25%
(2,500 kms (25%) of the
10,000 kms travelled
for the year).
$1,100
($10,160 x 25%) – $1,100
Where:
= $2,540 – $1,100
A = total operating costs
= $1,440 taxable value
B = percentage of private use
C = employee contribution
5. Gross up the taxable
value to obtain the fringe
benefits taxable amount
The fringe benefit amount is grossed
up using the formula:
AxB
Where:
As this car was purchased after 1 July 2000,
the fringe benefits taxable amount is calculated
using the type 1 higher gross-up rate, as
follows:
$1,440 x 2.1292 = $3,066 taxable amount
A = taxable value
B = type 1 or type 2 amount
6. Calculate the
tax payable
The tax payable on this amount is calculated
using the following formula:
Taxable amount x FBT rate
FRINGE BENEFITS TAX FOR SMALL BUSINESS
$3,066 x 48.5% = $1,487.01
21
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
HOW TO CALCULATE THE
TAXABLE VALUE OF A BENEFIT
PROVIDED AS A VEHICLE
OTHER THAN A CAR
If an employee has private use of a vehicle that is not classed
as a car under the FBT law, the right to use the vehicle is called
a residual fringe benefit. Other types of benefits can be
classed as residual fringe benefits. For more information see
page 39.
Box 2 on page 10 outlines what vehicles are classed as cars
for FBT purposes. Box 3 below outlines what vehicles are not
classed as cars for FBT purposes.
Box 3: Vehicles not classed as cars
For FBT purposes, a vehicle not classed as a car is:
c a motor bike
c any goods-carrying vehicle with a capacity of one tonne
or more, or
c any other passenger-carrying vehicle designed to carry
nine or more passengers.
There are two methods to calculate the taxable value of a motor
vehicle other than a car:
c operating cost method – this is the same as the calculation
for cars (see page 16), and
c cents-per-kilometre method, which is calculated by
multiplying the number of kilometres travelled by the
appropriate rate per kilometre. Use the following rates for the
2003–04 and 2004–05 FBT years:
Engine
capacity
Rate per
kilometre
2003–04
Rate per
kilometre
2004–05
0 to 2,500cc
37 cents
38 cents
Over 2,500cc
44 cents
46 cents
Motorcycles
11 cents
11 cents
MORE INFORMATION
Taxation Ruling No. MT 2034: Fringe benefits tax: private
use of motor vehicles other than cars explains which
method you can use.
EXAMPLE: CALCULATING THE TAXABLE VALUE
OF A MOTOR VEHICLE OTHER THAN A CAR
An employee takes your one-tonne utility home each day
and has private use of the vehicle in the evenings and on
weekends. The employee estimates that his home to work,
evening and weekend travel is 100 kilometres a week, and
has given you a declaration.
The vehicle travelled 52,000 kilometres during the FBT year
ending 31 March 2005 and the operating costs (including
deemed interest and depreciation) were $20,080. The
employee didn’t make any contributions.
Using the operating cost method
Taxable value = [$20,080 (total operating costs) x 10%
(percentage of private use] – $0 (employee direct
contribution, not including fuel)
= $2,080
Using the cents-per-kilometre method
Taxable value = [5,200 km (number of private kilometres
travelled) x 46 cents per km (rate per kilometre)] – $0
(employee direct contribution, not including fuel)
= $2,392
Once you have calculated the taxable value of a residual fringe
benefit using either the operating cost method or the cents-perkilometre method, you have to gross up the taxable value and
multiply it by the FBT rate to get your FBT payable. The steps on
page 04 explain how to do this.
Both methods assume the vehicle is provided on a fully
maintained basis, including fuel.
If the employee provides fuel, don’t include fuel costs in the
operating cost. If using the cents-per-kilometre method, you
could multiply the number of private kilometres travelled by
estimated fuel costs per kilometre based on average fuel costs
and average fuel consumption of the vehicle, and then deduct
this amount.
22
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
SPECIAL RECORDS YOU NEED
TO KEEP FOR CAR FRINGE
BENEFITS
EMPLOYEE CONTRIBUTION RECORDS
Record any contributions the employee has made during the year towards the cost of running the car.
If you are using expenses paid for by an employee as an employee contribution, you must have documentary evidence of the
expenditure (for example, receipts, invoices or tax invoices, journal entries or cheque butts). In the case of petrol and oil costs,
the employee can give you a declaration in the following format. You must obtain any declarations by 21 May.
Fuel expenses declaration
I
declare that
(name of the employee)
expenses of $
(state whether fuel and/or oil)
were incurred by me during the period from
in respect of
(amount in figures)
20
to
20
registration number
(make and model of car)
Signed
Date
If the employee is responsible for all fuel and/or oil costs, you can accept a declaration based on a reasonable estimate based on
the total kilometres travelled, average fuel costs and fuel consumption. In these cases, the employee should add the following to the
declaration:
I also declare that the total kilometres travelled during the period was
If the employee makes cash payments to you towards the running costs of the car, you will need to record these payments
for each employee in such a way that they can be totalled easily at the end of the year.
Details of cash payments are usually recorded in a business’s cash receipts book, as these payments are assessable business
income for income tax purposes. There is an example of a cash receipts book in Record keeping for small business (NAT 3029).
FRINGE BENEFITS TAX FOR SMALL BUSINESS
23
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
PERCENTAGE OF BUSINESS USE RECORDS
All costs associated with running each car need to be
recorded in such a way that the cost for each car can be
totalled at the end of the FBT year.
If you use the operating cost method to calculate the taxable
value of a car fringe benefit, you have to keep:
c logbook records, and
c odometer records.
Logbook records contain a record of business use and are
usually maintained for a continuous 12-week period. Odometer
records are a record of the total distance travelled during the
same 12 weeks the logbook records are maintained, and also
of the total distance travelled each year.
In a logbook year, you have to keep both types of records. In a
year other than a logbook year, you keep odometer records.
A year is a logbook year if:
c none of the previous four years was a logbook year of tax for
that car
c you choose to treat the year as a logbook year (for example,
to increase the nominated percentage of business travel), or
c the Commissioner of Taxation, by written notice, requires you
to treat the year as a logbook year.
What information to record in logbooks
The Tax Office doesn’t produce an official logbook but we have
provided a sample one on the next page that you can use. If you
prefer, you can design your own logbook or buy one of the
commercial products available. Regardless of which type of
logbook you use, you must keep a record of the following details
for each business journey during the 12-week logbook period:
c the dates on which the journey began and ended
c the odometer readings at the start and end of each journey
c the kilometres travelled, and
c the purpose of the journey.
The logbook records must be in English and entries must be
made at the end of the journey or as soon as reasonably
practicable afterwards.
Where two or more business journeys are undertaken
consecutively in any day, only one entry for the series needs
to be recorded in the logbook. For example, a salesman who
called on 10 customers while working in the Bathurst–Orange
area of New South Wales could record the odometer readings
at the start and end of the consecutive journeys and describe
the purpose of the travel as ‘10 customer calls, Bathurst–
Orange area’.
The 12-week continuous period during which the logbook
is kept must be specified, but may overlap two tax years.
A logbook year commonly occurs when you use the
operating cost method to value a car fringe benefit for the
first time.
As part of your business records you should also record
additional information such as the car’s make, model and
registration number.
You have to keep records of the percentage of business use
only if the car was not available for private use every day of
the year.
24
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
SAMPLE CAR LOGBOOK
Employer name
Make:
Date trip
began
FBT year ended 31 March
Model:
Date trip
ended
Odometer
start
Odometer
end
Engine type:
Registration number:
Kilometres travelled
Purpose of journey
Business
km
Private
km*
* You don’t have to record private travel, but it may help with your calculations.
You need to keep a separate logbook for each car.
WORKED EXAMPLE – CAR LOGBOOK
EXAMPLE
Employer name
Make: Ford
Date trip
began
Date trip
ended
FBT year ended 31 March 2005
Model: Falcon
Engine type: 3,800cc
Registration number: AAA 999
Odometer
start
Kilometres travelled
Purpose of journey
Odometer
end
Business km
Private km*
06.06.04
06.06.04
118,500km
118,570km
70 km
0 km
Visit mechanic, tax agent
07.06.04
07.06.04
118,570km
118,580km
0 km
10 km
Private travel
FRINGE BENEFITS TAX FOR SMALL BUSINESS
25
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
What information to record in odometer records
Odometer records are a record of the total kilometres travelled
by the car during the whole FBT year, or for that part of the year
it was used to provide fringe benefits. Odometer records should
also be kept for the 12 weeks for which a logbook is kept.
As with logbooks, the Tax Office doesn’t produce an official
odometer record form but we have provided a sample one
below that you can use. If you prefer, you can design your own
form or buy one of the commercial products available.
Regardless of which type of odometer record form you use,
SAMPLE ODOMETER RECORD
Employer name
Car make
the following details must be entered for each period (that is,
year, part-year or logbook period):
c the date the period began and ended, and
c the odometer reading at the start and end of the period.
The odometer records must be in English, and the entries
should be made at, or as soon as reasonably practicable after,
the times to which the readings relate.
If you replace a car during the year and transfer the business
percentage to the new car, the odometer records must show
odometer readings for the replaced car and the new car on
the replacement date.
FBT year ended 31 March
Model
Registration
number
Start
Date
End
Odometer
reading
Date
Odometer reading
You can record details for more than one car on the same odometer record.
Don’t add together kilometres travelled by old and replacement cars.
WORKED EXAMPLE – SAMPLE ODOMETER RECORD
EXAMPLE
Employer name
Car make
Mitsubishi
26
FBT year ended 31 March 2005
Model
Magna
Registration
number
XXX 999
Start
End
Date
Odometer
reading
Date
Odometer reading
01.04.04
116,000
31.03.05
126,000
FRINGE BENEFITS TAX FOR SMALL BUSINESS
03 DO YOU PROVIDE A CAR OR OTHER VEHICLE AS A FRINGE BENEFIT?
SPECIAL RECORDS YOU NEED
TO KEEP FOR VEHICLES OTHER
THAN CARS
You don’t have to keep such detailed records as you do for car
fringe benefits. However, if you do keep logbook records, use
these to determine the extent of private use of the vehicle.
Otherwise, you can estimate the number of private kilometres
travelled. For example, you could determine the home to work
component of private use by multiplying the number of journeys
during the year by the distance between the employee’s
residence and place of employment.
If you are making a reduction for business travel, you must
obtain a declaration from the employee, in an approved format,
specifying the deductible percentage of the operating costs. If
using the cents-per-kilometre method, the declaration could
state the number of private kilometres travelled rather than the
deductible percentage.
Here is an approved format for an employee declaration for a
vehicle other than a car:
Residual benefit declaration – Vehicles other than cars
declare that
I
(name of the employee)
during the period
20
to
20
(show details of vehicle)
was provided to me by or on behalf of my employer.
The total number of private kilometres travelled was
or
I would have been entitled to claim an income tax deduction equal to
% of the operating costs.
Signed
Date
FRINGE BENEFITS TAX FOR SMALL BUSINESS
27
28
FRINGE BENEFITS TAX FOR SMALL BUSINESS
DO YOU PROVIDE
EXPENSE PAYMENT
FRINGE BENEFITS?
If you provide expense payment fringe benefits, you must:
■
calculate the taxable value of the benefits,
see page 30
■
know how you may reduce the taxable value
of certain benefits, see page 31
■
keep special records, see page 32
FRINGE BENEFITS TAX FOR SMALL BUSINESS
04
29
04 DO YOU PROVIDE EXPENSE PAYMENT FRINGE BENEFITS?
EXPENSE PAYMENT
FRINGE BENEFITS
You may provide an expense payment fringe benefit
if an employee incurs expenses and:
c you reimburse them for the expenses, or
c you pay a third party for the expenses.
The expenses can be business or private expenses,
or a combination of both, but they must be incurred by
the employee.
If you incur the expense, for example through a corporate
credit card, you don’t have an expense payment fringe benefit.
You could, however, have a property, residual or entertainment
fringe benefit, depending upon what is paid for.
EXEMPT EXPENSE PAYMENT BENEFITS
You don’t have to pay FBT on certain expense payment fringe
benefits. They include benefits such as taxi travel and
newspapers and periodicals. For more details see page 42.
30
HOW TO CALCULATE
THE TAXABLE VALUE OF
AN EXPENSE PAYMENT
FRINGE BENEFIT
The taxable value of an expense payment fringe benefit
is the amount of payment or reimbursement you make.
However, you use different rules for calculating the taxable value
of a benefit where you pay or reimburse an employee for goods
or services you (or an associate) sell to customers or clients in
the ordinary course of your business. For more information
about calculating the taxable value of these expense payment
fringe benefits, see Fringe benefits tax: A guide for employers
(NAT 1054).
Once you have calculated the taxable value of an expense
payment fringe benefit (after reducing it where applicable —
see the next page), you have to gross up the taxable value
and multiply it by the FBT rate to get your FBT payable. The
steps on page 04 explain how to do this.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
04 DO YOU PROVIDE EXPENSE PAYMENT FRINGE BENEFITS?
REDUCING THE TAXABLE
VALUE OF AN EXPENSE
PAYMENT FRINGE BENEFIT
You may be able to reduce the taxable value of certain
expense payment fringe benefits, as explained below.
REDUCTION WHERE EXPENSE WOULD HAVE
BEEN DEDUCTIBLE TO EMPLOYEE (OTHERWISE
DEDUCTIBLE RULE)
If you provide something as a benefit to an employee that they
would normally be able to claim as an income tax deduction,
you can reduce the taxable value of the benefit by the amount
they would have been able to claim. This is called the ‘otherwise
deductible’ rule.
For example, if an employee incurred a work expense, it
would be wholly deductible for income tax purposes. Under
the otherwise deductible rule, if you reimburse the employee
for all or part of this expense, the taxable value of the expense
payment fringe benefit would be zero.
Use these steps to reduce the taxable value using the otherwise
deductible rule:
Step 1. Write down the employee’s expense before you
reimburse them.
Step 2. Work out how much of the expense the employee
could normally claim as a deduction.
Step 3. Determine how much the employee can actually claim
as an income tax deduction:
c if you reimburse all or part of the business component of
the employee’s expense, the employee’s tax deduction is
the amount of their expense multiplied by the business
percentage, reduced by the amount of the reimbursement
c if you don’t take into account the business component of the
expense, the employee’s income tax deduction is the amount
of their expense, reduced by the amount of the
reimbursement, then multiplied by the business percentage.
Step 4. Subtract the actual deductible amount (step 3) from
the hypothetical deductible amount (step 2). The result is the
amount by which you can reduce the taxable value of the
fringe benefit.
EXAMPLE
An employee incurred expenditure of $500, of which 80%
was employment-related (and income tax deductible) and
20% private. You reimburse them $250, without regard to
whether their expenditure was for business or private
purposes. The taxable value of the expense payment fringe
benefit (without the otherwise deductible rule) is $250.
Step 1. The employee’s gross expense is $500.
Step 2. The employee would normally be entitled to an
income tax deduction of $400 for the expense (that is, 80% x
$500).
Step 3. In fact, the employee can claim the following as an
income tax deduction:
[$500 (employee’s expense) – $250 (reimbursement)] × 80%
(business percentage)
= $250 × 80%
= $200
Step 4. Subtract the actual deductible amount (step 3) from
the hypothetical deductible amount (step 2) to see by how
much the taxable value of the fringe benefit can be reduced.
$400 – $200 = $200
The taxable value of $250 can be reduced by $200 to $50.
Where an expense payment fringe benefit is provided in relation
to a car owned or leased by the employee, there are special
rules for determining how much, if any, of the employer’s
expenditure would have been otherwise deductible to the
employee.
OTHER REDUCTIONS
In certain instances you can further reduce the taxable value of
an expense payment fringe benefit that has been reduced under
the otherwise deductible rule. This further reduction applies to
benefits such as remote area housing assistance, relocation
travel by employee’s car, and transport to employment
interviews and selection tests by employee’s car. Sometimes
there may be special conditions (such as keeping certain
records) you must satisfy before you can further reduce the
value.
MORE INFORMATION
c
FRINGE BENEFITS TAX FOR SMALL BUSINESS
Fringe benefits tax: A guide for employers (NAT 1054)
31
04 DO YOU PROVIDE EXPENSE PAYMENT FRINGE BENEFITS?
SPECIAL RECORDS YOU NEED
TO KEEP FOR EXPENSE
PAYMENT FRINGE BENEFITS
Make sure you obtain any declaration from employees
before the due date for lodging your FBT return or, if you are
not required to lodge a return, by 21 May.
If you use the otherwise deductible rule to reduce the taxable
value of a fringe benefit, you must have documentation to
show how much of the purchase price of the property would
have been otherwise deductible to the employee. If the
documentation is a declaration by the employee, it must
be in an approved format (see below).
EMPLOYEE DECLARATION
You have to obtain an employee declaration in all cases
except where:
c the employee’s expense (other than an expense incurred
in respect of a car owned or leased by the employee) is
incurred exclusively as part of their employment (for example,
protective clothing, tools of trade)
c there is a requirement to keep a travel diary
c the requirement to keep a travel diary is waived because
the employee is a member of an international aircrew, or
c the provision of the fringe benefit is covered by a recurring
fringe benefit declaration.
Here is an example of an approved format for an employee
declaration.
Expense payment benefit declaration
I
declare that
(name of the employee)
(show nature of expense eg. telephone rental and/or calls)
were provided to me by or on behalf of my employer during the period from
20
to
20
and the expenses were incurred
by me for the following purpose(s)
(Please give sufficient information to demonstrate the extent to which the expenses
were incurred by you for the purpose of earning your assessable income.)
I also declare that the percentage of those expenses incurred in earning my assessable income was
%
Signed
Date
MORE INFORMATION
c
32
Fringe benefits tax: A guide for employers (NAT 1054)
FRINGE BENEFITS TAX FOR SMALL BUSINESS
DO YOU PROVIDE
ENTERTAINMENT?
If you provide entertainment by way of food and drink to
employees, their associates and/or clients, you must:
■
decide whether to value it as a meal
entertainment fringe benefit, see page 34
■
calculate the value of the fringe benefits
using the:
– 50-50 split method, see page 35
or
– 12-week register method, see page 35
■
keep special records, see page 36
FRINGE BENEFITS TAX FOR SMALL BUSINESS
05
33
05 DO YOU PROVIDE ENTERTAINMENT?
BENEFITS ARISING FROM
PROVIDING ENTERTAINMENT
Providing entertainment means providing entertainment by way
of food, drink or recreation, or providing accommodation or
travel in connection with such entertainment.
Generally, when you provide entertainment to both employees
and non-employees (for example, clients), only that part of the
entertainment that relates to employees and their associates is
subject to FBT. Where you cannot easily work out the value of
the entertainment that relates to employees from the available
information, you can apportion costs on a ‘per head’ basis.
SUMMARY
The following table gives a simplified summary of the FBT
results that generally arise from employers (other than those
exempt from income tax) providing entertainment to employees
and others.
SITUATION
FBT
Employee takes two clients to
lunch at a restaurant – cost $150
Employee’s portion
$50 fringe benefit
Client’s portion
No FBT
EXAMPLE
An employee entertained two clients of her employer by taking
them to lunch at a restaurant. The meal cost $150 and was
paid for by the employer. The meal provided to the employee
is a property fringe benefit. The taxable value of the fringe
benefit, per head, is one-third of the total cost of the meal
(that is, $50).
There is no category of fringe benefit called an entertainment
fringe benefit, but the following different types of fringe benefit
may arise from providing entertainment:
c an expense payment fringe benefit, for example, the cost
of theatre tickets purchased by an employee and reimbursed
by the employer
c a property fringe benefit, for example, providing food
and drink
c a residual fringe benefit, for example, providing
accommodation or transport, or
c a tax-exempt body entertainment fringe benefit (only
employers who are exempt from income tax).
Employee has meal in restaurant
while travelling on business trip
No FBT (otherwise
deductible rule)
Employee has meal in an
in-house canteen.
Exempt from FBT
You provide sandwiches and
juice for working lunch in office
(not entertainment)
Exempt from FBT
You provide substantial lunch
with wine for employees in office
Exempt from FBT
You provide social function for
employees in office
Exempt from FBT
You reimburse employee for
cost of private party
Taxable fringe benefit
You provide employee and
associates with theatre tickets
Taxable fringe benefit
Where you provide entertainment by way of food or drink
(but not recreation), you can choose to classify it as a ‘meal
entertainment fringe benefit’ instead of one of the above.
Specifically, providing meal entertainment fringe benefits means:
c providing entertainment by way of food or drink
c providing accommodation or travel connected with such
entertainment, or
c paying or reimbursing expenses incurred in obtaining
something covered by the above points.
You can’t classify a fringe benefit as a meal entertainment
fringe benefit if someone other than you provides the meal
entertainment.
If you choose to classify a fringe benefit as a meal entertainment
fringe benefit, you have to classify all fringe benefits arising from
the provision of meal entertainment during the FBT year as such.
34
FRINGE BENEFITS TAX FOR SMALL BUSINESS
05 DO YOU PROVIDE ENTERTAINMENT?
HOW TO CALCULATE THE
TAXABLE VALUE OF A MEAL
ENTERTAINMENT FRINGE
BENEFIT
There are two methods for calculating the taxable value of
meal entertainment fringe benefits:
c the 50-50 split method, and
c the 12-week register method.
Both methods are based on your total meal entertainment
expenditure. This includes expenditure that might otherwise
be exempt from FBT or not normally subject to FBT, for
example, providing food and drink to employees on your
business premises.
USING THE 50-50 SPLIT METHOD
Under this method, the total taxable value of meal entertainment
fringe benefits is 50% of the total expenses you incur in
providing meal entertainment to all persons (whether employees,
clients or otherwise) during the FBT year.
USING THE 12-WEEK REGISTER METHOD
Under this method, the total taxable value of meal entertainment
fringe benefits is the total expenses you incur in providing meal
entertainment to all persons (whether employees, clients or
otherwise) during the FBT year multiplied by the ‘register
percentage’. You work out the register percentage using the
following formula:
A x 100
B
Where:
A = total value of meal entertainment fringe benefits
provided to employees and their associates during
the 12-week register period
DO YOU PROVIDE FOOD AND DRINK ON
BUSINESS PREMISES?
If you provide food and drink to current employees on your
business premises on a working day, this is exempt from FBT,
regardless of whether the food and drink are prepared on your
business premises. This exemption generally does not apply
to employers that are exempt from income tax. (Note that a
corporate box is not considered part of an employer’s
business premises.)
But food and drink provided on your business premises
to associates of employees (for example, spouses) are not
exempt from FBT. Where you provide food and drink on the
same occasion to both employees and their associates, you
may have to apportion the expenditure on a per head basis.
EXAMPLE
You provided drinks and a buffet meal for 10 employees and
their spouses on business premises. The cost was $500. On
a per head basis the cost of the entertainment provided to
employees was $250, which is exempt from FBT. The cost
relating to entertainment of the associates ($250) is not
exempt from FBT.
Note that if you classify the provision of the food and drink as
a meal entertainment fringe benefit, you would include all of the
$500 expenditure (in the above example) when calculating your
total meal entertainment expenditure for the FBT year.
B = total value of meal entertainment provided to all persons
during the 12-week register period
If you use this method, you must keep the register for a
continuous period of 12 weeks.
Once you have calculated the taxable value of a meal
entertainment fringe benefit using either the 50-50 split method
or the 12-week register method, you have to gross up the
taxable value and multiply it by the FBT rate to get your FBT
payable. The steps on page 04 explain how to do this.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
35
05 DO YOU PROVIDE ENTERTAINMENT?
SPECIAL RECORDS YOU
NEED TO KEEP FOR MEAL
ENTERTAINMENT FRINGE
BENEFITS
If you use the register method, you must include the following
details in your 12-week register:
c the date you provide meal entertainment
c whether each recipient of meal entertainment is an employee
or an associate of the employee
c the cost of the meal entertainment
c the kind of meal entertainment provided
c where the meal entertainment is provided, and
c if the meal entertainment is provided on your premises,
whether it is provided in an in-house dining facility. (Note that
a corporate box is not part of an employer’s premises.)
MORE INFORMATION
c
36
Fringe benefits tax: A guide for employers (NAT 1054)
FRINGE BENEFITS TAX FOR SMALL BUSINESS
DO YOU PROVIDE
OTHER FRINGE
BENEFITS?
This section gives an overview of the types of
fringe benefits not already covered in this guide.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
06
37
06 DO YOU PROVIDE OTHER FRINGE BENEFITS?
OTHER FRINGE BENEFITS
MORE INFORMATION
For details of how to calculate the taxable value of these
fringe benefits, refer to the relevant chapters in Fringe
benefits tax: A guide for employers (NAT 1054).
AIRLINE TRANSPORT FRINGE BENEFIT
An airline transport fringe benefit arises where employees
of airlines or travel agents are provided with free or discounted
air travel on a stand-by basis.
BOARD FRINGE BENEFIT
Where you provide a meal to an employee, it is a board fringe
benefit if the employee is entitled to have accommodation
provided and:
c they are entitled to be provided with at least two meals a day
under an industrial award or their employment arrangement
c you supply the meal (if the employer is a company, the meal
may be supplied by a related company in a wholly-owned
group)
c the meal is cooked or prepared on your (or a related
company’s) premises or on a worksite or place adjacent to
a worksite, and
c the meal is supplied on your premises (or worksite) or those
of a related company.
Meals supplied to family members living with an employee who
is entitled to meals under the employment agreement or award
are also treated as board meals.
Some common examples are:
c meals provided in a dining facility located on a remote
construction site, oil rig or ship, and
c meals provided to a live-in housekeeper or to resident
teachers in a boarding school.
CAR PARKING FRINGE BENEFIT
Broadly, you provide a car parking fringe benefit when you
provide car parking facilities for an employee at or near their
place of employment and there is a commercial parking station
available for all-day parking within a one-kilometre radius of
where the car is parked.
For FBT years commencing on or after 1 April 1997, car parking
benefits provided by small business employers are exempt if:
c the parking is not provided in a commercial car park
c the employer is not a government body, listed public
company, or a subsidiary of a listed public company
c the employer’s total gross income (before any deductions) for
the last income year before the relevant FBT year is less than
$10 million.
DEBT WAIVER FRINGE BENEFIT
You provide a debt waiver fringe benefit if you waive or forgive
an employee’s debt. For example, if you sell goods to an
employee and later tell them not to bother about paying the
invoiced amount, you have provided a debt waiver fringe benefit.
However, an employee debt that you write off as a genuine
bad debt is not a debt waiver fringe benefit.
HOUSING FRINGE BENEFIT
If you give an employee the right to use a unit of
accommodation and that unit of accommodation is where the
employee usually lives, the right to use the unit of
accommodation is a housing fringe benefit.
A unit of accommodation includes:
c a house, flat or apartment
c accommodation in a hotel, motel, guesthouse, bunkhouse or
other living quarters
c a caravan or mobile home, or
c accommodation on a ship or other floating structure.
The employee doesn’t have to have exclusive use of the
accommodation.
38
FRINGE BENEFITS TAX FOR SMALL BUSINESS
06 DO YOU PROVIDE OTHER FRINGE BENEFITS?
LOAN FRINGE BENEFIT
RESIDUAL FRINGE BENEFIT
You provide a loan fringe benefit if you give an employee a loan
and charge no interest or a low rate of interest. A low rate of
interest is one that is less than the statutory rate of interest (this
rate is published each year, usually in April).
Any fringe benefit that is not subject to any of the other rules
is called a residual fringe benefit.
The use of the term ‘loan’ is quite broad. For example, if an
employee owes you a debt but you don’t enforce payment after
the debt becomes due, the unpaid amount is treated as a loan
to the employee. Such a loan starts immediately after the due
date at the rate of interest, if any, at which the interest accrues
on the unpaid amount.
If an employee owes money to you or to the business, you
may be providing a loan fringe benefit. This does not apply if
the employee owes the money under the same terms and
conditions as an ordinary customer.
If you release an employee from the obligation to repay the
loan, you may be providing a debt waiver fringe benefit.
LIVING AWAY FROM HOME ALLOWANCE
FRINGE BENEFIT
If you pay an employee a living away from home allowance, you
are providing a living away from home allowance fringe benefit.
For FBT purposes, a living away from home allowance is an
allowance you pay to an employee to compensate them for any
additional expenses they incur and disadvantages they suffer
because they are required to live away from home to do their
work. Additional expenses do not include expenses the
employee could claim as an income tax deduction.
PROPERTY FRINGE BENEFIT
A property fringe benefit arises when you provide an employee
with property, free or at a discount. For FBT purposes, property
includes:
c all goods, including gas and electricity (unless provided
through a reticulation system) and animals
c real property such as land and buildings, and
c choses in action, such as shares or bonds.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
Residual fringe benefits could include providing services (such
as travel, or the performance of professional or manual work)
and the use of property. They could also include providing
insurance cover, for example, health insurance cover under a
group policy you take out for the benefit of your employees. If
an employee has private use of a vehicle that is not classed as
a car under the FBT law, the right to use the vehicle is a residual
benefit.
Generally where a benefit consists of both goods and services,
the goods component (property fringe benefit) and the services
component (residual fringe benefit) are valued separately.
However, when the person providing the benefit is in a business
where goods and services are supplied together, for example,
carrying out repairs that entail the supply of spare parts, and
the benefit is of that kind, it is a residual fringe benefit.
TAX-EXEMPT BODY ENTERTAINMENT
FRINGE BENEFIT
A tax-exempt body entertainment fringe benefit may arise
from entertainment expenses incurred by an employer who is
wholly or partially exempt from income tax, or who does not
derive assessable income from the activities to which the
entertainment relates.
Entertainment expenses are expenses for providing
entertainment in the form of food, drink or recreation.
They may include related accommodation or travel expenses.
From 1 April 1994, non-deductible entertainment expenditure
is deductible entertainment expenditure if it is incurred in the
course of providing a fringe benefit. However, for the purpose
of identifying a tax-exempt body entertainment fringe benefit,
this expenditure continues to be non-deductible entertainment
expenditure.
Only entertainment expenditure that is non-deductible for
income tax purposes can give rise to a tax-exempt body
entertainment fringe benefit.
39
40
FRINGE BENEFITS TAX FOR SMALL BUSINESS
ARE SOME
BENEFITS EXEMPT
FROM FBT?
Some benefits you provide to employees are exempt from FBT.
This section looks at certain work-related items, minor benefits
and relocation expenses.
07
Fringe benefits tax: A guide for employers (NAT 1054) contains
information about other exempt benefits.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
41
07 ARE SOME BENEFITS EXEMPT FROM FBT?
CERTAIN WORKRELATED ITEMS
If you provide the following items to employees you don’t have
to pay FBT on them:
c a mobile phone or a car phone (only if the phone is mainly
used in the employee’s employment)
c an item of protective clothing required for the employee’s
employment
c a briefcase
c a calculator
c a tool of trade
c an item of computer software for use in the employee’s
employment
c an electronic diary or similar item, or
c a notebook computer, a laptop computer or a similar portable
computer (limited to the purchase or reimbursement of one
computer for each employee a year).
MINOR BENEFITS
Some minor benefits you provide may be exempt from FBT.
This is the case where the value of the benefit is less than $100
and it would be unreasonable to treat it as a fringe benefit.
It would be unreasonable to treat a minor benefit as a fringe
benefit where:
c you provide the benefit infrequently and irregularly
c the taxable value of the minor benefit and other similar or
identical benefits (if they were treated as fringe benefits) is low
c the likely total taxable value of the minor benefit and other
associated benefits is low – associated benefits are those
provided in conjunction with the minor benefit, for example,
accommodation, board, electricity and telephone benefits
provided as part of an accommodation package
c it is difficult to calculate the taxable value of the benefit and
any associated benefits
c the benefit is provided as a result of a contingency (for
example, unexpected overtime).
Employers commonly give employees gifts at Christmas time.
A single gift to each employee of, say, a bottle of whisky or
perfume would be an exempt minor benefit, provided the value
of each was modest. However, if some employees were given
a range of gifts that included, for example, expensive art works,
food hampers and wine, you would have to look at the package
of associated benefits rather than each individual item.
The occasional use of an employer’s vehicle by an employee for
a special purpose, such as rubbish removal or for travel from
home to work during a transport strike, is an exempt benefit
provided the employee in question didn’t have a general
entitlement to use the vehicle for private purposes. However, in
some cases, the benefit would be of sufficient value to override
considerations of irregularity or lack of frequency. For example,
a one-off loan of a four-wheel drive vehicle to an employee to
travel cross-country during an extended annual holiday break
may not be exempt because the actual value of such a benefit
is not small.
42
FRINGE BENEFITS TAX FOR SMALL BUSINESS
07 ARE SOME BENEFITS EXEMPT FROM FBT?
RELOCATION EXPENSES
REMOVALS AND STORAGE OF HOUSEHOLD EFFECTS
Where you pay for removal and storage of household effects of
employees (both new and existing) who have to live away from
home because of a change in their job location, the benefit is
exempt. The exemption includes the costs of removal, storage,
packing, unpacking and insurance of household effects
(including pets) kept primarily for the personal use of the
employee or their family. Similarly, the exemption also applies
where the employee’s usual place of residence changes to
another location if the removal takes place, or the storage
commences, not more than 12 months after the employee
begins employment duties at the new location.
SALE OR ACQUISITION OF DWELLING
Where you provide relocation expenses that are incidental
to an employee’s sale and/or purchase of a home, the expenses
may be exempt benefits. Such incidental costs include stamp
duty, advertising, legal fees, agent commission, discharge of
a mortgage, expenses of borrowing or any similar capital
expenses.
Costs associated with the connection or reconnection of
gas, electricity and telephone services to the new home are
also exempt.
MORE INFORMATION
c
Fringe benefits tax: A guide for employers (NAT 1054)
FRINGE BENEFITS TAX FOR SMALL BUSINESS
CONNECTION OR RECONNECTION OF
CERTAIN UTILITIES
Where an employee is required to live away from home in
order to perform employment duties, the costs of connecting or
reconnecting gas, electricity and telephone services to the new
place of residence may be exempt benefits. Similarly, where
there is a change in the employee’s usual place of residence,
these costs may be exempt benefits.
LIVING AWAY FROM HOME – LEASING OF
HOUSEHOLD GOODS
A benefit that consists of the lease of household goods used
primarily for domestic purposes while an employee is living away
from home may be an exempt benefit.
TRANSPORT
Where an employee is required to live away from home in order
to perform employment duties, or is similarly required to relocate
their usual place of residence, the costs of providing relocation
transport (and any meals and accommodation en route) to the
employee (and family members) are exempt benefits. The
exemption also applies where the employee is returning to
their usual place of residence after working at another location.
The exemption does not apply to a reimbursement of the
employee’s car expenses where the reimbursement is calculated
according to the distance the car travels. However, the taxable
value may be able to be reduced.
43
DEFINITIONS
DEFINITIONS
Activity statement
You use an activity statement to report your FBT instalments,
along with other tax obligations including GST, pay as you go
(PAYG) instalments and withheld amounts.
Associates
Associates include people and entities closely associated with
you (or your employees), such as relatives.
Employee contribution
An employee contribution may be assessable income in the
hands of the employer. (As a general rule, the costs incurred by
the employer in providing fringe benefits are income tax
deductible.)
Excluded benefits
Excluded fringe benefits are certain fringe benefits you don’t
have to report on employees’ payment summaries.
Exempt benefits
Exempt benefits are those benefits you provide for which you
don’t have to pay FBT.
Fringe benefit
Basically, a fringe benefit is a benefit provided to an employee
(or their associate, such as a family member) because that
person is an employee. Benefits can be provided by an
employer, an associate of the employer, or by a third party
under an arrangement with the employer. An employee can
be a current, future or former employee.
Fringe benefits tax
Fringe benefits tax (FBT) is a tax paid on certain benefits
employers provide to their employees or their employees’
associates (typically family members). FBT is separate from
income tax and is based on the taxable value of the various
fringe benefits provided.
44
Grossing up
Grossing up means increasing the taxable value of benefits you
provide to reflect the gross salary employees would have to
earn at the highest marginal tax rate (including Medicare levy) to
buy the benefits after paying tax.
Individual fringe benefits amount
This is the total value of all benefits (other than excluded fringe
benefits) provided to a particular employee in an FBT year.
Instalment threshold
This is the amount at which you have to start paying your
FBT liability to the Tax Office in quarterly instalments using
your activity statement. The threshold is currently $3,000.
Payment summary
Under the PAYG withholding system, payers are required to
provide payees with a payment summary, which shows total
payments made and the amount of tax withheld during the
financial year.
Reportable fringe benefits
From 1 April 1999, if you provide fringe benefits with a total
taxable value of more than $1,000 to an employee in an FBT
year (1 April to 31 March), you must report the grossed-up
taxable value of the benefits on the employee’s payment
summary for the corresponding income year (1 July to 30 June).
These are called reportable fringe benefits.
Residual fringe benefit
Any fringe benefit that does not fit into one of the other
12 categories of fringe benefits is called a residual benefit.
Taxable value
This is the value of fringe benefits that you use as a basis
for calculating your FBT liability. There are different rules
for calculating the taxable value of the different types of
fringe benefits.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
MORE INFORMATION
INTERNET
c
c
Visit www.ato.gov.au – download publications, rulings
and other general tax information for small businesses.
Business Entry Point: www.business.gov.au – this is
an interactive service providing easy access to business
information and transactions with government. It can be
used to register for an ABN and GST, or to apply for a
tax file number.
PHONE
c
c
c
General business enquiries phone 13 28 66 – most small
business tax issues, including GST rulings, ABN, pay as
you go (PAYG) instalments, deductions from employees’
wages, business deductions, preparation of activity
statements, account information for activity statement
lodgment and payment, wine equalisation tax, luxury
car tax, fringe benefits tax and issues for non-profit
organisations.
Superannuation enquiries phone 13 10 20.
Personal enquiries phone 13 28 61 – individual income
tax and general personal enquiries.
FRINGE BENEFITS TAX FOR SMALL BUSINESS
FAX
c
Get information faxed to you about business and
individual taxes, superannuation and the Higher Education
Contribution Scheme (HECS). Phone 13 28 60 and
follow the instructions to order a catalogue or to be
sent information.
FREE SEMINARS
c
Seminars for small business – these include sessions
on GST, PAYG, activity statements and record keeping.
For more information, visit our website at www.ato.gov.au
or phone 1300 661 104.
OTHER SERVICES
c
c
If you do not speak English and want to talk to a tax officer,
phone the Translating and Interpreting Service on 13 14 50
for help with your call.
If you have a hearing or speech impairment and have
access to appropriate TTY or modem equipment, phone
13 36 77. If you do not have access to TTY or modem
equipment, phone the Speech to Speech Relay Service
on 1300 555 727.
45
INDEX
accessories in cars, 10, 11
phones, 42
accommodation, see housing and accommodation
acquisitions, see purchases
activity statements, 07
actual operating costs, 16
advertising costs, 43
agent commissions, 43
air conditioners in cars, 10
airline transport, 32, 38
amendments of FBT payable, 04
animals, 39, 43
annual returns, 04, 07
apartments, 38
Application for registration – fringe benefits tax, 05
assessments, 04
associates, 02, 35, 36, 38, 43
Australian Taxation Office, see Tax Office
bad debts, 38
base value of cars, 10–11
board, 38, 42
bonds, 39
borrowings, see loans
briefcases, 42
buildings, 39
sale or acquisition, 43
bunkhouse accommodation, 38
business accessories in cars, 10
business premises, food and drink on, 35, 36, 38
business vehicles, see cars
cabs, 30
private use of, 10
calculating payments, 04
see also taxable value
calculators, 42
car accessories, 10, 11
car parking, 06, 38
car phones, 42
caravan accommodation, 38
cars, 10–27
exempt benefits, 10, 42, 43
reductions, 31
cents per kilometre method, 22, 27
choses in action, 39
Christmas gifts, 42
client meals, 35
clothing, 42
commercial car parks, 38
commercial vehicles, 10, 22, 27
computer records, 05
computers and computer software, 42
corporate boxes, 06, 35
corporate credit cards, 30
cost price of cars, 10–15
46
crash repairs, 16
customs duties exemptions, 11, 16
dates, see time
dealer delivery charges, 10, 11
debts, 38, 39
declarations, 05
expense payment, 32
fuel expenses, 23
vehicles other than cars, 27
deemed operating costs, 16
deferral of time to lodge, 07
definitions, 44
delivery charges for cars, 10, 11
depreciation of cars, 16
diaries
electronic, 42
travel, 32
dining, see meals
distance travelled, see kilometres travelled
domestic rubbish removal, 10
drinks, see meals
dwelling sales/purchases, 43
electricity connection and supply, 39, 42, 43
electronic diaries, 42
employee contributions, 02, 44
cars, 10, 11, 23
employee declarations, see declarations
employee food and drink, 35, 36, 38
employee payment summaries, 06
employer superannuation contributions, 02
employment, travel associated with, 10, 31, 32, 38, 43
entertainment, 06, 34–36, 39
see also meals
entertainment facilities (corporate boxes), 06, 35
errors in assessment/returns, 04, 07
excluded benefits, 06
exemptions/exempt benefits, 05, 42–43
car parking, 38
cars, 10, 42, 43
expense payments, 30
food and drink on premises, 35
expense payments, 30–32, 34
family members (associates), 02, 35, 36, 38, 43
FBT numbers, 05
50-50 split method, 35
fitted accessories in cars, 10, 11
flats, 38
floating structures, 38
freight costs for food, 06
food, see meals
four-wheel drives, 10, 42
fuel and oil costs, 11, 16, 22, 23
FRINGE BENEFITS TAX FOR SMALL BUSINESS
garaging cars at/near home, 10
gas connection and supply, 39, 43
general interest charge, 07
gifts, 42
goods-carrying vehicles, 10, 22, 27
grossed up taxable amount, 04, 06
GST, 10, 11, 16
credits, 04
guesthouse accommodation, 38
health insurance, 39
hired entertainment facilities, 06
hired household goods, 43
hired vehicles, see cars
home, travel to and from, 10, 42
home-garaged cars, 10
home sales/purchases, 43
hotel accommodation, 38
household goods, leasing of, 43
household removals and storage, 43
housekeepers, live-in, 38
housing and accommodation, 38, 39
excluded benefits, 06
exempt benefits, 42, 43
living-away-from home, 39, 43
for meal entertainment, 34
remote areas, 31
income tax, 02
otherwise deductible rule, 31, 32
individual fringe benefits amount, 06
input taxed supplies (GST credits), 04
instalments and instalment threshold, 07
insurance, 16, 39, 43
interest, 16
on loans, 39
general interest charge, 07
international aircrews, 32
interviews, transport to, 31
kilometres travelled
cents per kilometre method, 22, 27
percentage of private/business use, 17, 24–6, 27
statutory percentage, 11, 13
land, 39
laptop computers, 42
late returns, 07
leased entertainment facilities, 06
leased household goods, 43
leased vehicles, see cars
legal fees, 43
live-in housekeepers, 38
living-away-from-home, 39, 43
living quarters, see housing and accommodation
FRINGE BENEFITS TAX FOR SMALL BUSINESS
loans, 39
mortgages, discharge of, 43
of vehicles, 42
lodgment, 07
logbook records, 24–25, 27
luxury car tax, 10, 16
maintenance of cars, costs of, 16
meals (food and drink), 34–36, 38, 39
excluded benefits, 06
exempt benefits, 43
minor benefits, 42
mistakes in returns, 04, 07
mobile home accommodation, 38
mobile phones, 42
mortgages, discharge of, 43
motel accommodation, 38
motor bikes, 22, 27
motor vehicles, see cars
newspapers, 30
non-business car accessories, 10, 11, 16
non-work related use of vehicles, see cars
notebook computers, 42
odometer records, 26
office food and drink, 35, 36, 38
oil and fuel costs, 11, 16, 22, 23
oil rigs, 38
operating cost method, 10, 16–21, 24–6
otherwise deductible rule, 31, 32
overpayments, 04
panel vans, 10
parking, 06, 38
part-year use of cars, 11
passenger vehicles, 10, 22, 27
see also cars
payment, 02, 07
payment summaries, 06
penalties, 07
percentage of private/business use, 17, 24–26
statutory percentage, 11, 13
periodicals, 30
petrol costs, 11, 16, 22, 23
pets, 43
phones, 42, 43
portable computers, 42
power connection and supply, 39, 42, 43
premises, food and drink on, 35, 36, 38
price of cars, 10–15
private health insurance, 39
private use, cars for, 10–27, 42, 43
see cars
property fringe benefit, 34, 39
protective clothing, 42
purchase price of cars, 10
47
purchases, 30–32, 34
cars, during year, 26
dwellings, 43
quarterly instalments, 07
rates, 04
cents per kilometre method, 22
deemed car depreciation, 16
interest on loans, 39
real property, 39
sale or acquisition of dwellings, 43
records, 05
cars and other motor vehicles, 23–27
expense payments, 32
meal entertainment, 36
reduction of FBT, 02, 05
expense payments, 31
vehicles other than cars, 27
register method, 35, 36
registration, 05
registration of cars, costs of, 16
reimbursement of expense payments, 30–32, 34
relatives (associates), 02, 35, 36, 38, 43
relocation expenses, 31, 43
remote areas, 06, 31, 38
removals and storage, 43
repairs, 39
to cars, 16
repayment of loans, 39
replaced cars, 26
reportable benefits, 06
resident teachers, 38
residual fringe benefits, 22, 27, 39
restaurant meals, 34–36
returns, 04, 07
rubbish removal, 10
salary sacrifice, 02
sale of dwellings, 43
sales tax exemption, 11, 16
salesmen’s cars, 10, 24
sedans, 10
selection tests, travel to, 31
shared benefits, 06
shares, 02, 39
ships, 38
software, 42
stamp duty, 43
station wagons, 10
statutory formula method, 10–15
statutory percentage, 11, 13
stereos in cars, 10, 11
storage and removals, 43
strikes, 42
superannuation, 02
48
tax-exempt body entertainment, 39
tax file numbers, 05
Tax Office addresses and enquiry numbers, 45
lodgment of returns, 07
mistakes in returns, 04
taxable value, 04, 06
cars and other vehicles, 10–22
expense payment, 30–31
meal entertainment, 35
minor benefits, 42
taxis, 30
private use of, 10
teachers in boarding schools, 38
telephones, 42, 43
theatre tickets, 34
time, 07
amendments to FBT payable, 04
of car travel, 24, 26
FBT year, 02
logbook use/logbook year, 24
of meal entertainment, 36
meal entertainment register kept, 35
operating cost method decision, 10
part-year use of cars, 11
records to be kept, 05
relocation expenses, 43
tools of trade, 42
total operating costs, 16
transport strikes, 42
travel agents, 38
travel and transport, 39
airline/travel agent employees, 32, 38
to employment interviews/selection tests, 31
excluded benefits, 06
for meal entertainment, 34
see also cars
travel diaries, 32
12-week register method, 35, 36
two-way radios, 10
underpayments, 04, 07
unpaid debts, 38, 39
utilities (cars), 10
utilities (public), connection to, 39, 42, 43
vehicles other than cars, 22, 27, 42
wages or salary, 02
waiver of debts, 38
waste removal, domestic, 10
work, travel to and from, 10, 42
work-related items, 42
work vehicles, see cars
worksheets, 18–21, 12–15
year, see time
FRINGE BENEFITS TAX FOR SMALL BUSINESS