2012 FBT Update
1
What is new in 2012
1.1
There are no changes to the 2012 FBT return
1.2
ATO Interpretative Decisions – examples:
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1.3
ATO Tax Determinations – examples:
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1.4
ATO ID 2011/28: Fringe Benefits Tax – Car fringe benefits: car
destroyed in natural disaster
ATO ID 2011/47: Fringe Benefits Tax – Car fringe benefits: nonbusiness accessory
ATO ID 2011/54: Fringe Benefits Tax – Expense payment fringe
benefit: employee loan from a trust repaid by employer
ATO ID 2011/56: Fringe Benefits Tax – Reduction of taxable value:
education of children of overseas employees – tutor
ATO ID 2011/57: Fringe Benefits Tax – Housing fringe benefits:
house destroyed in natural disaster
ATO ID 2011/59: Fringe Benefits Tax – Housing fringe benefits:
house damaged in natural disaster
ATO ID 2011/60: Fringe Benefits Tax – Emergency Assistance –
cash payment to victim of natural disaster to provide immediate
relief
ATO TD 2011/2: Annual changes – FBT Record keeping exemption
threshold
ATO TD 2011/3: Annual changes – Indexation factors for valuing
non – remote housing
ATO TD 2011/4: Annual changes – Living away from home
allowance
ATO TD 2011/5: Annual changes – Cents per kilometre rates for
motor vehicles other than cars
ATO TD 2011/6: Annual changes – Benchmark interest rate
ATO TD 2011/14: Annual changes – Car parking threshold
Recent legislation
Major reforms to the Statutory Formula Method
The Government has announced major changes to the statutory
Formula method for calculating the taxable value of car fringe benefits.
The major changes include the change in Statutory rate that can be
applied to new contracts – the Government aims to apply the same
rate of 20% regardless of the amount of km’s a car has travelled. The
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new rates will be phased in over a period of 4 years and are
summarised below:
FBT Statutory Formula Method
Distance
travelled (km)
0-15,000
15,000 – 24,999
25,000 – 40,000
> 40,000
Existing
Contracts
26%
20%
11%
7%
Statutory rate for new contracts entered into
after 7:30 pm (AEST) on May 10, 2011
from May from April from April from April
10, 2011
1, 2012
1, 2013
1, 2014
20%
20%
20%
20%
20%
20%
20%
20%
14%
17%
20%
20%
10%
13%
17%
20%
Note that there is no change to the Operating Cost Method.
TR 2011/3: FBT amendments to define the meaning of ‘cost price’ of
a car, for calculating the taxable value of car fringe benefits.
The ‘cost price’ of a car currently used to calculate the taxable
value using both the Statutory Formula and the Operating Cost
methods. The new taxation ruling contains comments addressing
common arrangements that are used to reduce the ‘cost price’ of a car
for FBT purposes. The ruling is expected to benefit many employers
and employees looking to increase the tax effectiveness of for example
salary packaging car fringe benefits.
NTLG Minutes – February 2011
FBT implications of Queensland floods and other natural disasters
The ATO is preparing a draft practice statement to provide
guidance to tax officers helping with taxpayers affected by a disaster to
reconstruct records and calculate reasonable estimates where
appropriate – guidance on these records includes FBT on car benefits,
housing and emergency assistance.
NTLG Minutes – May 2011
50/50 method for entertainment facility leasing expenses, FBT
treatment of a “signage” placed on a car, advance LAFH declarations
and employer obligations workforce.
The ATO has released minutes that clarify that the 50/50
method for entertainment facility leasing expenses is to be applied in
the same manner as meal entertainment expenses, where the
expenditure was incurred prior to the beginning of the FBT year when
the benefit was provided.
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relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
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The minutes also clarified that where a “signage” that is placed on a
car is a form of advertising and used for business operations, it would
not form part of the base value of the car.
Furthermore it is made clear that there can be no “advance” LAFH
declarations for future years as these are meant to be a declaration of
what has happened, and not what may happen in the future.
Lastly it is clear from the minutes that the Tax Office has informed the
Employer Obligations Workforce that it has almost completed FBT
training and will start to further scrutinise employer FBT obligations.
NTLG Minutes – August 2011
Lodgment concessions, FBT car reforms, residential cleaning costs
and exemptions for portable electronic devices and internet download
charges on a mobile phone.
From the November 2011 minutes it is clear that the ATO has
decided not to extend the lodgment date for FBT returns in 2011/12 for
larger tax agent firms.
There is also a commitment to update the interpretation of reforms for
car FBT legislation to emphasise that any change of employer will
constitute a new application and may attract the new statutory rate of
20%, depending on the number of kilometres travelled in 2011/12.
In addition, the ATO has indicated that where professional cleaning is
paid for, or reimbursed by, the employer in respect of exempt
accommodation fringe benefits, it might constitute a separate benefit
depending on the type of contractual arrangements in place – for
example where a cleaner is engaged on a weekly or fortnightly basis it
would likely constitute a separate fringe benefit.
Lastly the ATO has clarified that provided the provision of a mobile
phone satisfies the 58X requirements, any use of the mobile phone
with associated internet charges will not be considered to be a
separate fringe benefit and is therefore exempt.
1.5
ATO releases
 A fact sheet on when a fringe benefit provided by an employer to
address security concerns relating to the personal security of an
employee or associate of the employee is exempt.
 A fact sheet on whether a benefit provided in respect of the
employment of an employee is exempt where the employer is a
public benevolent institution and is endorsed as a public
benevolent institution.
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disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
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distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.

A fact sheet on road and bridge tolls to address the concept of
exempt ancillary car expenses for FBT purposes and that it
doesn’t include road and bridge tolls.
1.6
Benchmark rate for 2012 FBT year
- The benchmark interest rate for the 2012 FBT year has been
increased from 6.65% to 7.80%;
- The car-parking threshold for the 2012 FBT year has been
increased from $7.46 to $7.71 a day.
2
FBT audit activities and traps for 2012
2.1
ATO audit focus for 2012:
 Employers failing to identify taxable fringe benefits;
 Employers failing to correctly value fringe benefits;
 Employers failing to lodge fringe benefits tax returns; and
 Employers inappropriately accessing concessions
exemptions.
and
2.2
FBT focus by the ATO in 2012:
 The ATO will contact around 5,000 employers regarding
concerns over incorrectly identifying their FBT liabilities;
 The ATO will start contacting employers who have stopped
lodging FBT returns to determine whether non-lodgment is
appropriate;
 The ATO will focus on taxpayers who mistakenly assume their
motor vehicle is exempt from FBT without considering private
use of the vehicle;
 The ATO will further scrutinise the increasing use of exempt
living-away-from-home allowances used to remunerate
employees;
 The ATO will also focus on taxpayers who appear to be claiming
excessive exempt amounts of FBT exempt income by using
audits and reviews.
2.3
Employee contribution for fringe benefits
 Employee contributions are assessable income to employers
and subject to GST;
 The amount should have been included at Item 6, label “I” of the
2012 Company return.
 Employee contributions processed by journal entries must be
correctly documented and processed at an appropriate time.
 Employers should receive declarations from their employees to
substantiate fuel and oil paid by employees.
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disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
2.4
Employers paying an employee’s car hire purchase (HP) instalments
 Such HP payments are treated as expense payment fringe
benefits and not as car fringe benefits;
 The “once-only” deductions only apply to the interest component
of the HP instalment;
 The principal component of each HP instalment is not reduced
by the “once-only” deduction.
 Employers cannot use type 2 gross-up rate on such HP
Payments.
2.5
Tips in relation to car fringe benefits
 Cars garaged at an employee’s residence may be a car fringe
benefit.
 Ensure Logbooks are kept when using the operating cost
method.
 The luxury car tax threshold does not apply when calculating the
deemed interest and depreciation under the operating cost
method.
2.6
Errors with expense payment fringe benefits (EPFB)
 Treating an EPFB as a taxable allowance;
EPFB – subject to FBT, treated as exempt income for
employees;
Allowance – subject to PAYG-W; taxed as income to
employees;
 Failing to comply with substantiation requirements in applying
the “otherwise deductible rule” to reduce the taxable value of an
EPFB;
Employees need to provide written evidence, e.g. original
receipts, and declaration to ensure the expenses were incurred
by the employees and had the nexus with the employees’
incoming-earning activities if the “otherwise deductible” rule is
applicable;
 Travel diary for “extended travel EPFB” (more than 5 continuous
nights) inside and outside Australia
 Private expenses paid through business bank accounts
Many small family-owned businesses are paying for private
expense items and fail to account for all these benefits for FBT
purposes;
 Reimbursement of internet expenses for employees working
from home
An employer may pay the whole amount of an employee’s home
internet costs without verifying the business portion of the
usage;
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disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
2.7
Errors with employer provided computers to employees
 Notebook or laptop computers to employees are an exempt FBT
benefit provided they are used predominantly for work.
 Desktop computers taken home by employees are subject to
FBT, though the “otherwise deductible rule” can reduce the
taxable value of the benefit;
2.8
Problems with the reportable fringe benefit amounts
 An employer will only need to record reportable fringe benefits
on an employee’s payment summary where the total taxable
value received by the particular employee exceeds $2,000 per
year;
 Once the threshold has been exceeded, all reportable benefits,
including the $2,000 threshold, must be recorded on an
employee’s payment summary;
 FBT-exempt employers are still required to disclose reportable
fringe benefits on their employees’ payment summaries;
2.9
Fringe benefits that are excluded from the reporting requirements
Some benefits do not count towards the $2,000 threshold and are not
reported on an employee’s payment summary. The more common
examples are:
 Car parking;
 Meal entertainment:
 Pooled cars
 Remote Area Housing
 Entertainment Facility Leasing Costs
2.10
Allocating shared benefits among employees
Shared benefits, e.g. pool cars, need to be allocated among employees
by either:
 portion of tax payable method;
- determined by annualising the km travelled by each
employee; complicated and error-prone;
 equal apportionment method;
- the taxable value of the benefit shared equally among users;
 overnight rate calculation method;
- the benefit is allocated to employees on the basis of the
number of nights the shared car was taken home by the
employee;
3
Problems associated with 2012 FBT Return
3.1
Classifying benefits as Type 1 or Type 2
 Type 1 benefits are those that allow the employers to claim a
GST input tax credit;
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disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
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3.2
The taxable value of the benefit provided is grossed up at
2.0647;
Employers not holding valid tax invoices or choosing not to claim
the GST input tax credit are still required to use the higher
gross-up rate;
Type 2 benefits are those benefits that are not Type 1;
Certain in-house benefits are always Type 2 benefits, e.g. inhouse property benefits, and are grossed up at 1.8692.
Recording entertainment related benefits at Item 23
 Meal entertainment related benefits calculated using the actual
method should be reported according to the type of benefits
provided:
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Fringe benefit types
Label code at Item 23
Expenses payment
E
Airline transport
H
Property
K
Tax-exempt body entertainment
L
Residual
M
Entertainment facility leasing expenses, e.g. hiring of corporate
box for sporting event, should be recorded at Item 23M of the
2010 FBT return (residual benefits), not 23P (meal
entertainment).
3.3
Recording “value of reduction” at Item 23 (c)
 A reduction amount for certain benefits can be recorded at Item
23 (c);
 Though most of such reductions are claimed under the
“otherwise deductible rule”, there are other reductions that may
apply:
- a maximum of $1,000 reduction for in-house fringe benefits
and airline transport benefits;
- 50% reduction to benefits that relate to housing assistance to
employees in remote areas;
- 50% reduction to benefits that relate to holiday transport for
expatriates working in Australia.
3.4
FBT exempt hospitals and PBIs – capping problems with FBT return
 Where the total grossed-up taxable value of benefits provided to
an employee exceeds the relevant capping threshold, i.e.
$17,000 for a hospital employee or $30,000 for a PBI employee,
the employer must lodge a FBT return and pay FBT;
 Only car parking fringe benefit is excluded from the threshold.
Car parking expense fringe benefit, i.e. reimbursed employees
with car parking fee, is not excluded;
 Where the threshold has been exceeded by an employee, the
employer should record all benefits at Item 23, including those
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disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
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
that are not counted towards the capping threshold, e.g. meal
entertainment;
Only the gross-up taxable value of benefits in excess of the
capping amount per employee must be aggregated and
recorded at Item 14.
4
Car Fringe Benefits
4.1
Circumstances where car fringe benefit rules do not apply
 The vehicle provided is not a ‘Car” and the private use is
basically limited to the following:
- Home to work travel; and
- Other minor, infrequent and irregular travel.
 The car is not held by the provider e.g. it is held by the
employee and the employee receives a fixed car allowance.
 Hire cars – where the hire period is less than 12 weeks.- this
benefit is treated as residual fringe benefits and is subject to the
‘Otherwise deductible rule”.
 Taxis, panel vans, utility trucks and other commercial
vehicles(designed to carry a load of less than 1 tonne) which are
not principally designed to carry passengers and their private
use is limited in the way described at (a) above.
4.2
Statutory formula method
 Taxable value = A x B x C/D – E
where:
A
= the base value of the car
B
= the statutory fraction
C
= days during the FBT year the car fringe benefit was
provided
D
= number of days in the FBT year and
E
= the amount of the employee contribution
 The base value of the car is the price of the car, including GST,
delivery charges, but not registration and stamp duty charges.
The base value of the car can be reduced by one-third from 1
April after the fourth anniversary of the date on which the car
was acquired.
 In the 2012 FBT year the statutory fraction is based on the
mileage done in the FBT year
-
For contracts entered into before April 1, 2011
Kilometres during the FBT year
Fraction
Statutory
Less than 15,000
15,000 to 24,999
.26
.20
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25,000 to 40,000
Over 40,000
-
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.11
.07
For contracts entered into between April 1, 2011 and March
31, 2012
Kilometres during the FBT year
Fraction
Statutory
Less than 15,000
15,000 to 24,999
25,000 to 40,000
Over 40,000
.20
.20
.14
.10
Employers and employees also have the option to “by-pass” the
transitional rules in 2011/12 and elect to use the new statutory
fraction of 0.20 going forward to simplify the calculations.
Employers do not need to make an election, but it needs to be
done with the consent of the employee to avoid leaving the
employee worse off.
Number of days available for private use is calculated after taking
into consideration following situations.
- Cars garaged at the employee’s place of residence are deemed
to be available for private use, regardless of how the car is
actually used by the employee;
- Cars garaged at the employer’s business premises, will only be
considered available for private use where the employee
actually uses the car for private purposes;
- Cars that are not covered by either A or B above, will be
deemed to be available for private use, where the employee is
entitled to private use, or has custody and control of, the car.
Note:
 The car is deemed to be available for private use where it is
provided to an employee for overnight business trip.
 A car garaged overnight on a business premises is deemed
to be available for private use where the home is attached to
the business premises.
 Days available for private use can be reduced for cars being
repaired at panel beaters or mechanics.

An employee can make an “employee contribution” that reduces the
taxable value of a car fringe benefit in two ways, namely:
 the employee personally incurs car expenses during the FBT
year, for which they receive no reimbursement: or
 the employee makes an after-tax contribution to the employer.
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disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.

4.3
The following car expenses can be considered as employee
contribution:
- the registration of, or insurance in respect of , the car;
- repairs to or maintenance of the car or
- fuel for the car.
Operating cost method
 Car fringe benefit under the operating cost method is calculated
with the following formula:
Taxable value = (C x (100% - BP)) – R
Where:
C = the total GST inclusive operating cost for the
car during the FBT year
BP
= the business percentage of the car
determined by the log book; and
R
= the amount of recipient’s payment (i.e.,
employee contribution)
 The operating costs include the actual running costs incurred by
the employer and deemed running costs (i.e., where the car is
owned or hire purchased by the employer. Dealer delivery
charges are included in the cost base of the car).
Note:
Deemed running costs i.e., deemed depreciation and interest, are
included in calculation where the employer either owns or has
financed the acquisition of car via a hire purchase agreement;
If the car is leased, the GST inclusive value of lease payments is
included in the calculation irrespective of the fact that the car is a
luxury car;
If during an FBT year an employer pays out a lease contract then
the employer will need to include:
- the relevant lease charges until the lease residual was paid
out; and
- deemed depreciation and interest from the time the employer
paid out the lease residual. i.e., the deemed depreciation and
interest are based upon the lease payout figure and not the
original value of the car.
 The taxable value of a car fringe benefit under this method is
limited to the private use percentage of the car during the FBT
year. In order to estimate the number of business kilometres an
employer must take into consideration all relevant matters,
including:
- information contained in log book which must be maintained
for a continuous period of at least 12 weeks.
- odometer records which must be kept every year; and
- any variation in the pattern of business use of the car
throughout the FBT year.
Disclaimer: These notes are intended to be a guide only. Business Intranet Systems Pty. Ltd. (BIS), its directors, employees and consultants expressly
disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
4.4
Which gross-up rate is to be used
 An employer must apply the correct gross-up rate once the
taxable value of a car fringe benefit has been calculated. A car
fringe benefit will be a Type 1 benefit where the employer is
entitled to claim input tax credits with respect to the acquisition
of the car. It does not matter whether a valid tax invoice is
available or the employer chooses not to claim the input tax
credit.
 Type 2 gross-up rate has to be used for benefits that are not
grossed up by Type 1 gross-up rate.
4.5
Preparing the 2012 FBT return for car fringe benefits
 For cars fringe benefits using the statutory formula method, the
gross amount of the taxable value provided is to be recorded in
Item 23A (a);
 For cars fringe benefits using the operating cost method, the
gross amount of the taxable value provided is to be recorded in
Item 23B (a);
 All employers are assumed to have used the statutory formula
method unless they have elected to use the operating cost
method by using Item 23B (a);
 An employer can elect the most appropriate valuation method
on a “car-by-car” basis for a particular FBT year.
4.6
FBT planning for car fringe benefits
 An employer will not be liable for FBT in relation to a car where
the car is not deemed to be available for the private use of an
employee. When an employee is absent from work, the
employee can garage the car at the business premises of the
employer.
 Employees can sell their cars to their employers at market value
and the employers can then provide them back to their
employees as car fringe benefits. This way, the base value of
the car will be reduced as the original cost of the car to the
employee is ignored.
5
Meal Entertainment Fringe Benefits
5.1
What is a meal entertainment fringe benefit
 Entertainment is defined by S.32-10 of ITAA 1997 as:
- entertainment by way of food, drink or recreation; or
- accommodation or travel to do with providing entertainment
by way of food, drink or recreation.
 ‘Recreation’ is defined as any form of amusement, sport or
leisure-time pursuit, such as:
 an entertainer(e.g. a musician, band or comedian);
 a game of golf or tennis;
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disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.




5.2
tickets to a movie, theatre or sporting event; and
Sightseeing tours, harbour cruises, etc.
Recreation generally cannot be valued for FBT purposes using
the meal entertainment valuation methods because ‘recreation’
is not included in the definition of ‘meal entertainment’ for FBT
purposes. It should be treated as an expense payment fringe
benefit as the expense is reimbursed by the employer;
Recreation expenditure may need to be reported on an
employee’s payment summary while meal entertainment benefit
is not a reportable fringe benefit.
Meal entertainment valuation method
Actual entertainment expenditure method
 Employers using this method need to determine meal
entertainment expenditure on the basis of either:
- the exact cost attributable to each employee and associate;
or
- a ‘per head’ apportionment, where an exact allocation cannot
be easily made from available information.
 Meal entertainment calculated under actual method must be
separately recorded at item 23 according to the type of fringe
benefit provided.
 Expense payment fringe benefit
- item 23E
 Airline transport fringe benefit
- item 23H
 Property fringe benefit
- item 23K; and
 Residual fringe benefits
- item 23M
 Under the actual method, an income tax deduction is generally
only allowed on that portion of meal entertainment expenditure
that is subject to FBT. GST input tax credits can only be claimed
on that portion of meal entertainment that is deductible.
 Advantages of using the actual method
- access to FBT exemptions
- the property benefit exemption will apply when food and
drink is provided to, and consumed by, a current employee,
on a working day, on the employer’s business premises.
- the minor benefit exemption under Sec58P will apply where
the GST inclusive cost of food and drink is less than $300
per employee.
- the exemption for taxi travel under Sec 58Z will apply where
taxi travel is provided with meal entertainment and the travel
is a single trip that begins or ends at the employee’s place of
work.
However, if under this method the company is not subject to
FBT, it cannot claim a deduction or a GST input tax credit in
respect of this meal entertainment expenditure.
- access to meal entertainment deduction with no FBT.
Disclaimer: These notes are intended to be a guide only. Business Intranet Systems Pty. Ltd. (BIS), its directors, employees and consultants expressly
disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
-

providing meal entertainment to employees in an in-house
dining facility and property fringe benefit; and
- cash flow benefits for employers with higher proportion of
meal entertainment related to non-employees the expenses
of which is not subject to FBT under S. 41 but not deductible.
Disadvantages of using the actual method
- high compliance/record keeping cost;
- cash flow disadvantages for employers with higher
proportion of meal entertainment related to employees and
their associates.
50/50 split method
 FBT is only payable on 50% of the employer’s total meal
entertainment expenditure. However, irrespective of whom is being
entertained (i.e., employees, associates, clients, contractors etc.),
only 50% of an employer’s total meal entertainment expenditure is:
- deductible; and
- eligible for GST input tax credits.
 Advantages of using the 50/50 split method
- simple to use;
- reduces compliance costs;
- cash flow advantages with higher proportion of meal
entertainment related to employees the expenses of which
are subject to FBT.
 Disadvantages of using the 50/50 split method
- No FBT exemptions;
- The taxable value of an employer’s meal entertainment
fringe benefit cannot be reduced by the contributions made
by employees or their associates;
- cash flow benefits for employers with higher proportion of
meal entertainment related to non-employees the expenses
of which is not subject to FBT under S. 41 but not deductible.
12-week register method
 Under this method, the taxable value of the fringe benefit is
calculated by multiplying the employers’ total meal entertainment
expense for a FBT year by the employer’s register percentage
calculated as:
Taxable value = Total meal entertainment expense x register
percentage
 The register percentage is calculated on the basis of a register
continuously maintained for a period of 12 weeks as follows:
A/B x 100%
where:
A = Total value of meal entertainment provided to employees during
the 12 week period
B = Total value of meal entertainment provided to all persons during
the 12 week period
Disclaimer: These notes are intended to be a guide only. Business Intranet Systems Pty. Ltd. (BIS), its directors, employees and consultants expressly
disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.




Taxable value of meal entertainment calculated under this method
is to be recorded at item 23P of 2012 FBT return.
GST input tax credits can only be claimed in respect of the meal
entertainment on which FBT is being paid.
Advantages of using the 12-week register method
- reduces compliance costs;
- FBT exemptions and the minor benefit exemption are
applicable.
Disadvantages of using the 12-week register method
- Finding a representative 12 week period truly reflective of a
normal entertainment pattern for the whole year may not be
that easy;
- Where an employer’s total meal entertainment expenditure is
20% higher than the amount incurred in the first FBT year
the register was kept, the register ceases to be “valid”.
6
Salary Packaging
6.1
Employees earning less than $180,000 can still benefit from salary
packaging by limiting their salary packaging to the following benefits:
additional superannuation up to an employee’s concessional cap;
exempt FBT benefits, e.g. laptop computers, briefcase etc.;
benefits with no taxable value, e.g. through “otherwise deductible rule”;
concessionally taxed benefits, e.g. cars under the statutory method.
6.2
Salary packaging benefits subject to “otherwise deductible rule”
 An employee can claim an immediate depreciation deduction for the
asset if :
- the asset does not exceed $300;
- the asset is for producing assessable income; and
- the asset is not used to produce assessable income in a
business.
 Examples of these items include investment rental property assets
of employees that are less than $300 each.
6.3
Using associate leases
 An “associate lease” arrangement normally involves:
- an associate of an employee purchases a car from an arm’s
length party by hire purchase or finance;
- the associate leases the car to the employee’s employer
- the employer provides the car to the employee who earns more
than $180,000 as a car fringe benefit;
 If all the above transactions are done at arms length, it is likely that
Part IVA will not apply;
 The lease payments received by the associates may affect
payments from Centrelink or other government entitlements.
Disclaimer: These notes are intended to be a guide only. Business Intranet Systems Pty. Ltd. (BIS), its directors, employees and consultants expressly
disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
6.4
Benefits of salary packaging meal entertainment
 Employees earning more than $180,000 will benefit from packaging
meal entertainment using 50/50 method because:
 50% of the expenditure is not subject to FBT (though nondeductible to the employer); and
 the adjustment to the employee’s salary sacrifice amount for this
non-deductible portion is calculated on the basis of the company
tax rate of 30% instead of the employee’s marginal tax rate of
46.5%;
 if the employer is a FBT-exempt or rebatable employer, the
benefit, being a non-reportable fringe amount, is not taken into
account when determining whether the $17,000 and $30,000
ceilings have been exceeded.
6.5
Employees earning less than $180,000 packaging cars
 In general, an employee can benefit from such packaging if
- the car is not more than $30,000;
- the car benefit is calculated using the statutory method;
- the employee travels more than 15,000 Km during the FBT year;
- the employee makes an after-tax contribution to reduce the
taxable value of the benefit to nil.
- Compared to the 2010/11 FBT year, the FBT changes will
effectively reduce the benefit that can be derived by people who
drive over 25,000 kilometres in the 2011/12 FBT year, if they
entered into a contract after April 1, 2011.
- Employees entered into a contract before April 1, 2011 will be
able to continue to make use of the same benefits as in 2011.
6.6
Tax planning and superannuation
 Splitting spouse superannuation contributions
- Taxpayers can only split any superannuation contribution they
made on or after 1 January 2006;
- A taxpayer can generally only split up to 85% of their deductible
superannuation contributions with their spouse;

Benefits of using the superannuation co-contribution concession
- A taxpayer can make an eligible personal superannuation
contribution to a complying superannuation fund before getting
the concession;
- The level of matching under the co-contribution scheme is $1.00
for each dollar of personal superannuation contribution made,
with the maximum amount from Government capped at $1,000;
- The co-contribution entitlement is reduced by 3.33 cents for
every dollar above the lower income threshold of $31,920.
Disclaimer: These notes are intended to be a guide only. Business Intranet Systems Pty. Ltd. (BIS), its directors, employees and consultants expressly
disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
7
Distinction between travelling, Living away from home or relocation
7.1
Summary of FBT implications for benefits provided to an employee
when:
 travelling on work – benefits provided are not normally subject to
FBT under the “otherwise deductible rule”;
 living away from home – benefits provided are subject to FBT
concessions (e.g. allowance for food) and exemptions (e.g.
accommodation);
 relocated – benefits provided are subject to FBT exemptions and
concessions (e.g. temporary accommodation, storage of household
effects).
7.2
Factors to consider for employees travelling on work, living away from
home (LAFH) or relocating – deciding whether an employee has
relocated or not is determined by a collective consideration of all the
factors below:
Factors to consider
The employee’s existing work location
continues to be the employee’s
regular place of work
The employee retains his/her original
residence and intends using it once
he/she return to his/her usual place of
employment
Use of temporary accommodation
while away from home (e.g. motel or
hotel)
Family members do not accompany
the employee
The employee has established an
alternative work location
Family members accompany the
employee
The employee has a clear intention to
return home after ceasing work at the
new location
The employee secondment is for a
limited or finite period of time
If the employee is an expatriate, they
have applied for permanent residence
The employee has disposed of his/her
original usual place of residence
The employee has purchased or
agreed to take on long-term
accommodation
Travel
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LAFH
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Relocating
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Disclaimer: These notes are intended to be a guide only. Business Intranet Systems Pty. Ltd. (BIS), its directors, employees and consultants expressly
disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.
7.3
Types of benefits available to employees travelling on work
 Benefits provided to employees travelling on work are deductible
under the “otherwise deductible rule”;
 Different documentation requirements for travel within Australia and
overseas.
7.4
Types of benefits available to employees living away from home
 Employees should salary package benefits if they are required to
work living away from home. Benefits qualify for concessional FBT
treatment includes:
- LAFH Allowance – taxable value is reduced by exempt food and
exempt accommodation;
- Overseas employment holiday transport – taxable value is
reduced by 50% of actual cost when the travel is to the home
country;
- LAFH meals – taxable value is $42 per week for adult and $21
per week for children under 12.
7.5
Types of benefits available to employees being relocated
 Salary packaging of relocation benefits that qualify for concessional
FBT treatment will be very tax effective;
 Examples of such benefits include:
- temporary accommodation (exempt up to 6 months or 12
months if the employees sell their former home);
- temporary accommodation meals (taxable value is $2 per meal
for adult and $1 for children under 12).
Disclaimer: These notes are intended to be a guide only. Business Intranet Systems Pty. Ltd. (BIS), its directors, employees and consultants expressly
disclaim any and all liability to any person, whether a purchaser or not, for the consequences of anything done or omitted to be done by any such person
relying on a part or the whole of the contents. Do not act on the information without first obtaining specific advice regarding your particular circumstances
from a tax professional.
© 2012 `Business Intranet Systems Pty Ltd. This document is protected by international copyright laws. It is for your internal use only. Unauthorised
distribution or reproduction of this information, or any part of it, may result in severe civil and criminal penalties, and will be prosecuted to the maximum
extent possible under the law.