FRINGE BENEFITS TAX
A GUIDE FOR SCHOOLS
A Description of Fringe Benefits
& Exemptions
This manual is published and circulated to schools on the condition
and understanding that none of the authors, consultants, publishers or
editors are engaged in providing legal, financial or other professional
advice or services. This manual should not be relied upon without first
obtaining advice from a qualified professional. All liability and
responsibility for any action taken or omission made on the basis
(wholly or partly) of this manual is expressly disclaimed.
Copyright 2001 Victorian Government, Department of Education.
All rights reserved.
1
FRINGE BENEFITS TAX A GUIDE FOR SCHOOLS
A DESCRIPTION OF FRINGE BENEFITS
AND EXEMPTIONS
This Manual reflects the Fringe Benefits Tax Assessment Act 1986
and other applicable laws as at 5 February 2001.
This Manual is published and circulated to schools on the condition
and understanding that none of the authors, consultants, publishers
and editors are engaged in providing legal, financial or other
professional advice or services. This Manual should not be relied
upon without first obtaining advice from a qualified professional. All
liability and responsibility for any action taken or omission made on
the basis (wholly or partly) of this Manual is expressly disclaimed.
Copyright 2001 Victorian Government, Department of Education.
All rights reserved.
2
CONTENTS
PART 1 OVERVIEW ............................................................................................................. 4
WHAT IS A FRINGE BENEFIT?
WHAT IS NOT A FRINGE BENEFIT?
WHEN IS A FRINGE BENEFIT LIABLE TO FRINGE BENEFITS TAX?
WHO IS LIABLE FOR FBT?
HOW IS FBT ASSESSED?
WHAT IS A REPORTABLE FRINGE BENEFIT?
4
5
5
5
6
6
PART 2 RESPONSIBILITIES OF A SCHOOL COUNCIL .............................................. 6
IDENTIFY EMPLOYEES
RECORD KEEPING AND SELF ASSESSMENT REQUIREMENTS
RESPONSIBILITY
6
7
8
PART 3 - CATEGORISING YOUR FRINGE BENEFITS ................................................ 8
CATEGORIES OF BENEFITS
BENEFIT TO BE CLASSIFIED UNDER ONE CATEGORY ONLY
EXEMPTIONS
LOAN FRINGE BENEFITS
DEBT WAIVER FRINGE BENEFITS
EXPENSE PAYMENT FRINGE BENEFITS
PROPERTY FRINGE BENEFITS
"ENTERTAINMENT" BENEFITS
TAX-EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
LIVING AWAY FROM HOME ALLOWANCE" FRINGE BENEFITS
HOUSING FRINGE BENEFITS
AIRLINE TRANSPORT FRINGE BENEFITS
BOARD FRINGE BENEFITS
CAR PARKING FRINGE BENEFITS
RESIDUAL FRINGE BENEFITS
8
9
9
10
10
11
15
16
20
21
21
22
22
22
22
PART 4 – GENERAL EXEMPTIONS................................................................................ 27
ELIGIBLE WORK RELATED ITEMS
OTHERWISE DEDUCTIBLE" RULE
THE "MINOR BENEFITS" EXCEPTION
TAXI TRAVEL
EMPLOYMENT INTERVIEWS AND SELECTION TESTS
BENEFITS RELATING TO RELOCATION
LEASING OF HOUSEHOLD GOODS WHILE LIVING AWAY FROM HOME
NEWSPAPERS AND PERIODICALS USED FOR BUSINESS PURPOSES
COMPENSABLE WORK-RELATED INJURY
IN-HOUSE HEALTH CARE FACILITIES
CERTAIN TRAVEL TO OBTAIN MEDICAL TREATMENT
COMPASSIONATE TRAVEL BENEFITS
WORK RELATED MEDICAL EXAMINATIONS
WORK-RELATED MEDICAL SCREENING
WORK-RELATED PREVENTATIVE HEALTH CARE
WORK-RELATED COUNSELLING
MIGRANT LANGUAGE TRAINING
EMERGENCY ASSISTANCE
LONG SERVICE AWARDS
1
28
30
31
32
33
33
34
34
35
35
36
36
37
37
38
39
40
40
41
SAFETY AWARDS
MEMBERSHIP FEES AND SUBSCRIPTIONS
41
42
PART 5 – REPORTABLE FRINGE BENEFITS .............................................................. 44
PART 6 – GST AND FBT ..................................................................................................... 46
APPENDICES
APPENDIX A
APPENDIX B
APPENDIX C
46
46
46
47
BENEFIT FINDING LIST
Subject
Item in
Accommodation
Awards
Board
Briefcase
Calculator
Car expenses
Car Parking
Child care
Christmas parties
Computers (desktop/non-portable)
Computers (portable)
Counselling
Credit cards
Education expenses
Emergency assistance
Entertainment
Frequent Flyer / Fly Buys
Government Housing Scheme
GST
Health care facilities
HECS fees
Household goods
Housing
Interviews and selection
Light refreshments
Membership fees & subscriptions
Meal entertainment
Medical examinations/care
Minor benefits
Mobile phone
Morning and afternoon tea
Newspapers and periodicals4.8
"No Private Use" declarations
"Otherwise Deductible" reduction
Property
Protective clothing
Recreation facilities
Relocation expenses
Reportable Benefits
Salary Overpayment
Software
3.6, 3.10, 3.11, 3.15
4.19, 4.20
3.13
4.1
4.1
3.6
3.14
3.15
3.8
3.15
4.1
4.16
3.6
3.6
4.18
3.8, 3.9
3.15
3.11
6
4.10
3.6
4.7
3.11
4.5
4.3
3.6, 4.21
3.8
4.13, 4.14, 4.15
3.8, 3.15, 4.3
4.1
3.8
3.6, 3.15
3.6, 4.2
3.7
4.1
3.15
4.6
5
3.5
4.1
2
Memorandum
Taxis
Travel
Workers' Compensation
4.4
3.15, 4.9
4.6
3
PART 1 – OVERVIEW
A.
WHAT IS A FRINGE BENEFIT?
For a fringe benefits tax ("FBT") liability to arise, there must first of all be a
"fringe benefit". At its most basic, a fringe benefit is a non-cash benefit
provided:
•
•
•
by an employer
to an employee
in respect of the employee's employment.
"Benefit"
The concept of a "benefit" is very broad. It includes any right (including a
property right), privilege, service or facility. Certain things that would
otherwise fall within this definition are specifically excluded: see below,
under the heading, "What is not a Fringe Benefit?".
"By an employer"
A fringe benefit may be provided not only by the employer, but also by an
"associate" of the employer or by a third person under an
"arrangement" with the employer.
An example of such an "arrangement" is where an employer (or an
associate of the employer) arranges with a bank to provide its employees
with reduced interest loans. In such a case, the employer will be liable for
the benefit provided to the employee by the bank.
An "arrangement" in this context does not need to be a formal one. It does
not need to be expressly stated nor legally enforceable.
Where school councils provide Department employees with benefits as
part of their employment, that benefit can usually be regarded as being
provided under an arrangement between the Department (as employer)
and the school council. On this basis, the Department is liable to the Tax
Office for any FBT on such benefits. That is why the school council must
reimburse the Department accordingly.
For a discussion of the meaning of "associate", see further below.
"To an employee"
A fringe benefit may have been provided to a current, former or future
employee.
Fringe benefits, in most cases, are liable to FBT not only when they are
provided to an employee, but also to one or more "associates" of that
employee. However, while this is true as a general rule, in some
categories (especially exemptions), the rule does not apply. Where this is
the case, an indication has been made in this Manual.
In this context, an "associate" includes:
4
•
•
•
•
•
a relative (including a de facto spouse);
a partner;
a spouse or child of a partner;
a trustee of a trust under which the employee (or an
associate of the employee) is a beneficiary;
a company effectively controlled by the employee (or an
associate of the employee).
"In respect of the employee's employment"
A benefit provided by an employer to an employee cannot be assessed as
a fringe benefit unless it is provided "in respect of employment". When is
this the case?
The benefit must be provided "by reason of, by virtue of, for or in relation
to (either directly or indirectly) the employee's employment". Essentially, it
is necessary to look for some connection between the benefit and the
employment.
B.
WHAT IS NOT A FRINGE BENEFIT?
Aside from exempt benefits (which are covered throughout this Manual),
the concept of a fringe benefit specifically excludes certain types of
'benefits'. In relation to Department and school council employees, the
relevant excluded categories are as follows:
C.
•
salary or wages;
•
employer superannuation contributions or contributions into
a retirement savings account;
•
eligible termination payments; and
•
capital payments in relation to personal injury.
WHEN IS A FRINGE BENEFIT LIABLE TO FRINGE BENEFITS
TAX?
In order to be liable to FBT, a benefit must fall within one of 13 categories
of fringe benefit. These categories are discussed in detail under Part 3 of
this Manual.
Even where a benefit falls under one of the categories of assessable
fringe benefits, it may nonetheless avoid FBT liability if it falls within one
or more of several exemptions. There are two types of exemption
covered in this Manual: specific exemptions and general exemptions.
Specific exemptions are dealt with under the discussion in Part 3 of each
separate category of fringe benefit. General exemptions are discussed
under Part 4 of this Manual.
D.
WHO IS LIABLE FOR FBT?
5
The employer. This is the case regardless of whether the benefit is
provided by the employer itself, an associate of the employer or by a third
person under an arrangement with the employer.
Section 2.1 of this Manual explains more fully the circumstances in which
a school council has FBT-related responsibilities. However, liability for
FBT can be summarised as follows:
School council employees
School council is required by law to
file a return with the Tax Office.
Department employees - where
fringe benefits are provided by the
school council
School council to notify (and
reimburse) the Department.
Department employees - where
fringe benefits are provided by the
Department
School council has no responsibility
here.
Therefore, where a Department employee is provided with a benefit by the
school council in respect of the employee's employment (with or without
the Department's knowledge), it is the Department which is liable to pay
FBT to the Tax Office. The school council will then be required to
reimburse the Department for that amount of FBT.
E.
HOW IS FBT ASSESSED?
Like income tax, FBT is calculated upon self-assessment.
The
Department, in lodging its return, therefore relies upon accurate and
truthful record-keeping by individual school councils in respect of benefits
provided to Department employees.
F.
WHAT IS A REPORTABLE FRINGE BENEFIT?
While employers are required to pay FBT on benefits provided to
employees, the grossed-up value of benefits provided to an employee will
also be reported on his or her Payment Summary (previously Group
Certificate), wherever the employee has received fringe benefits of more
than $1,000.00 in value in any year. For this reason, it is imperative that
School Councils have accurate records of all benefits provided to
Department and School Council employees alike, to ensure that each of
their Payment Summary obligations are met.
A more detailed explanation of Reportable Fringe Benefits is set out in
Section 5 of this manual.
PART 2 – RESPONSIBILITIES OF A SCHOOL COUNCIL
A.
IDENTIFY EMPLOYEES
6
For the purposes of FBT assessment, school councils must distinguish
between:
•
those staff working in their school who are employed by the
Department of Education; and
•
those staff who are employed by the school council under the
Education Act.
It is important to understand that, from the Tax Office's perspective, the
liability for FBT on any fringe benefits provided to these two categories of
staff lies with different people. However, in both cases, records kept by
school councils will provide the basis for any assessment.
Employees of the Department
In the case of Department employees, it is the Department of Education
that is responsible for all FBT on fringe benefits provided to those
employees. This is the case regardless of whether the benefit is provided
to the employee by the Department, by an "associate" of the Department,
or by a third person under an arrangement with the Department (ie. a
school council).
In order for the Department to accurately assess its liability for FBT in
respect of its employees working in schools, the Department relies on the
records kept by individual school councils.
Employees of School Councils
In the case of people employed by school councils under the Victorian
Education Act, it is the individual school councils that are liable and
responsible for the payment of all FBT in respect of fringe benefits
provided to such employees.
Obviously, therefore, a school council's ability to properly assess its
liability in this regard will depend on its own record keeping.
B.
RECORD KEEPING & SELF ASSESSMENT REQUIREMENTS
School councils must comply with the following requirements:
•
In respect of both school council and Department employees:
keep records (either written or on computer) that identify and
explain all transactions and acts relevant for the purpose of
ascertaining the employer's fringe benefits tax liability in respect of
those benefits provided by the school council only. Benefits
provided to Department employees by the Department do not need
to be considered by the school council.
•
In respect of school council employees only: schools must
register as fringe benefit taxpayers with the Australian Tax Office
("ATO"), so that they can lodge an annual FBT return with the ATO
no later than 28 April in each year (or later if through a tax agent)
and pay, as the employer, all FBT due, direct to the ATO.
7
•
In respect of Department employees only: inform the Department
of all fringe benefits provided to these employees by the school
council only in the format required by the Department from year to
year. This must be by a date advised by the Department at the end
of each FBT year.
(The FBT payable on fringe benefits provided by school councils to
Department employees will be paid, at first instance, by the
Department. However, school councils will then be required to
reimburse the Department for the FBT incurred on benefits
provided by them.)
C.
RESPONSIBILITY
In preparing either an FBT return (in the case of school council
employees) or an FBT pro forma provided by the Department (in the case
of Department employees), school councils are responsible for ensuring
that all information is accurate, complete and correct.
FBT can be a complex and confusing area. For this reason, school
councils are encouraged to seek specialist assistance wherever required
and to engage the services of a tax accountant in preparing returns.
Any penalties incurred by the Department as a result of the school
council's actions in relation to FBT will be payable by that school
council.
PART 3 – CATEGORISING YOUR FRINGE BENEFITS
A.
CATEGORIES OF BENEFITS
There are 13 categories of fringe benefits in the FBT legislation. These
are:
•
Loan fringe benefits.
•
Debt waiver fringe benefits.
•
Expense payment fringe benefits.
•
Property fringe benefits.
•
Meal entertainment fringe benefits.
•
Tax-exempt body entertainment fringe benefits.
•
Living away from home allowance fringe benefits.
•
Housing fringe benefits.
•
Airline transport fringe benefits.
•
Board fringe benefits.
•
Car parking fringe benefits.
•
Residual fringe benefits.
8
•
B.
Car fringe benefits (not discussed in this Manual)
BENEFIT TO BE CLASSIFIED UNDER ONE CATEGORY ONLY
A benefit cannot be classified under more than one category.
Only one amount of tax is payable even if, on the face of it, a benefit
appears to fall within two or more categories. The method of calculating
the tax may change according to the category of benefit. Therefore, it is
important that benefits are allocated to the correct category.
Example
The provision of entertainment to an employee may give rise
to any one of the following fringe benefits, depending on the
circumstances in which the benefit is provided:
•
an expense payment fringe benefit - eg.
reimbursement by an employer of expenditure by an
employee on entertainment;
•
a property fringe benefit - eg. an entertainment
dinner provided to an employee in a restaurant;
•
a residual fringe benefit - eg. use by an employee
of sporting equipment belonging to the employer;
•
a tax exempt body entertainment benefit - eg. the
provision of an entertainment dinner by an employer
which is a tax exempt body.
It can be seen from this example that in each case it is necessary to
consider the particular circumstances of the provision of the benefit and
identify what type of benefit has arisen.
Benefit vs. Income
The FBT legislation applies, broadly, to non-cash benefits provided by
employers1 to employees2 in respect of their employment. In normal
circumstances, benefits paid in cash to an employee (eg. a performance
bonus) do not attract FBT. However, they do attract a liability for income
tax in the hands of the employee.
C.
EXEMPTIONS
1
Throughout this Manual, the reference to a fringe benefit provided by an employer should also
be read to include a benefit provided by an associate of that employer or by a third person
under an arrangement with that employer or their associate, unless otherwise indicated (see
Part 1.1, "What is a Fringe Benefit?").
2
Throughout this Manual, any reference to an employer should also be read as a reference to
the employee's associates, unless otherwise indicated (see Part 1.1, "What is a Fringe
Benefit?").
9
Once a fringe benefit has been classified into one of the 13 available
categories, it is necessary to consider whether the benefit is in fact exempt
from FBT.
Exemptions are generally dealt with under Part 4 of this Manual.
However, a number of specific exemptions are covered in the discussion
of each category.
D.
LOAN FRINGE BENEFITS
An interest free, or low interest, loan provided to an employee is a loan
fringe benefit. FBT is payable on the difference between interest at a rate
prescribed by the FBT legislation and the interest rate (if any) charged by
the lender.
Example
An employer lends his employee $1,000 free of interest.
FBT is payable on an amount representing interest on the
loan at the rate prescribed by the FBT legislation. (This rate
is reviewed from time to time).
This type of fringe benefit is unlikely to arise in the case of school councils
because the making of loans is against Department policy and beyond the
legal power of school councils.
Exemptions
Loan fringe benefits do not include any of the following:
•
Loans to employees on commercial terms made by money lenders.
•
Loans made to an employee to meet employment-related
expenses anticipated to be incurred by the employee in the next six
months.
•
Advances for temporary relocation expenses such as
accommodation bonds and connection fees to utilities, but only if
the employee is relocated by the employer.
•
Temporary short term advances against salary.
Overpayments of salary
As regards the overpayment of salary, the Australian Taxation Office takes
the view that a loan fringe benefit does not arise if an employee is given
time to pay back the overpayment free of interest or at a rate of interest
below that prescribed by the FBT legislation. This is because the
overpayment has the character of salary or wages and, as such, is
excluded from being a "benefit". (For a discussion of those payments that
are not capable of being classified as a "benefit", see Part 1.2 of this
Manual.)
E.
DEBT WAIVER FRINGE BENEFITS
10
If an employer forgives a debt owed to it by an employee, there is a
taxable fringe benefit equal to the amount forgiven.
Example
If an employee owes his or her employer $1,000, and the
employer cancels, waives or forgives the debt, a debt waiver
fringe benefit arises.
A debt waiver benefit only applies to a repayment of money, not to the
waiver of some other obligation.
Example
If an employer lends an employee a computer for private
use and later tells the employee that he can keep it, this
would not constitute a debt waiver fringe benefit. However,
the waiver will be classified as another type of fringe benefit,
namely a "property fringe benefit".
(It is to be noted that, in this example, if the employer has
acquired the computer exempt from sales tax (as a school
might have done), a loan or gift of the computer to an
employee would operate to negate that sales tax
exemption.)
Exemptions
The legislation does not provide for specific exemptions from this fringe
benefit.
Commentary
As in the case of a loan fringe benefit, a debt waiver fringe benefit is
unlikely to arise in the case of school councils, since a debt should not
have been created in the first place. However, a debt may arise as a
result of an overpayment of salary. If repayment of that salary by the
employee is waived, then a debt waiver fringe benefit will arise.
F.
EXPENSE PAYMENT FRINGE BENEFITS
This type of benefit arises where the personal expenses of an employee
are paid by an employer, in either of the following situations.
An employer reimburses an employee for an expense incurred by the
employee (or a family member).
Example
A principal takes out private hospital and medical insurance.
The school council agrees to reimburse the principal for the
amount of the premiums already paid by the principal. An
expense payment fringe benefit arises.
11
The employer pays a third person directly for an amount incurred by
an employee (or a family member).
Example
A principal joins a professional association and has an
obligation to pay membership fees. The school council pays
the fees on the principal's behalf. An expense payment
fringe benefit arises.
(Note, however, that a subscription to a professional journal
is exempt from FBT - see item 4.21 of this Manual.)
Credit Cards
Where employees use their own credit cards to purchase a benefit, and
the employer subsequently pays the employee's credit card account, that
will give rise to an expense payment fringe benefit provided by the
employer to the employee.
Educational Expenses & HECS
As a general rule, employers who pay or reimburse education expenses
incurred by an employee (for example, a HECS debt) are liable to fringe
benefits tax on the full amount so paid or reimbursed. This is the case
even if the employee incurs the debt in fulfilling his or her terms of
employment (for example, through continuing education or similar
schemes).
However, this rule is qualified by the important "otherwise deductible"
principle, as discussed below.
Exemptions from the Expense Payment Fringe Benefit
Exemption A: The "no-private-use" exemption.
No FBT is payable by an employer who pays or reimburses only
employment-related expenses which are not incurred for the employee's
private use.
In order to take advantage of this exemption, a school must lodge with the
Department a "no-private-use" declaration in respect of relevant expenses.
A copy of that form is contained at Appendix A to this Manual.
Example
An employee hires a computer to use at home while on
extended sick leave. The computer is to enable the
employee to work on curriculum planning and is not for any
other purpose. The employer subsequently reimburses the
employee for the computer hire and certain running costs.
This entire reimbursement would constitute an exempt
benefit, however, on the basis that the computer was used
solely for work-related purposes, such that the employee
would be able to complete a "no private use" declaration.
12
Exemption B: Accommodation expense payment.
If an employer pays or reimburses an employee for expenses incurred as
a result of the employee's need to live away from home for their
employment, an expense payment benefit will arise. However, the benefit
is an exempt one if certain conditions are fulfilled, including:
•
the benefit must be in respect of a current employee; and
•
the employee is required to live away from home for their
employment and there is no other reason for the accommodation
expenses to have been incurred.
The exemption does not include accommodation expenses incurred
during travel and it is only available if the employee provides the employer
with a declaration containing certain information. A copy of that form is
contained at Appendix B of this Manual.
Example 1
An employer has two places of business at place A and
place B, which are 1000 kilometres apart. George works at
place A and has a permanent home there. The employer
requires George to go and work at place B for 6 months,
and then return to place A.
The cost to the employer of accommodation for George and
his family while at place B is an exempt expense payment
benefit.
Example 2
Cathy is employed for a 6 month period by a school council
in Hamilton. During her employment there, the school paid
for Cathy's accommodation expenses, as she had to move
to Hamilton from Melbourne. After Cathy's term finished,
the school agreed to continue paying her expenses for
another 2 months, in case Cathy was needed again.
The school's payment of Cathy's rent for those 2 months is
an expense payment benefit which is not exempt and is
therefore fully taxable. This is because Cathy was not,
during those 2 months, a current employee of the school
council.
This exemption will rarely apply in the case of school councils, which are
usually only concerned with one place of employment.
Exemption C: Car expense payments.
a)
Employee-owned/leased cars
Employees often drive their own cars, or cars leased to them, in
carrying out their employment. In compensating employees for
13
expenses incurred in that use, employers will be liable for an
expense payment benefit unless an exemption can be claimed.
For such an exemption to be available, all of the following criteria
must be satisfied:
•
compensation must be calculated by reference to the
distance travelled by the car;
•
the car must not constitute a "car benefit" (ie where the car
is leased to the employee);
•
the benefit must not be in respect of relocation transport;
•
the benefit must not be in respect of an employment
interview or selection test;
•
the benefit must not be in respect of a work-related medical
screening or examination, work-related preventative health
care, work-related counselling or migrant language training
of the employee;
•
the car must not have been used in any way to enable the
employee to have a holiday; and
•
the use in question of the car must not have been after the
employee ceased their employment with the school council.
a)
Cars provided by school councils
If a school council provides an employee with a car and that car
constitutes a "car benefit", any reimbursement or payment by the
council of expenses in relation to the employee's use of that car will
constitute an exempt expense payment benefit.
14
G.
PROPERTY FRINGE BENEFITS
Broadly speaking, property fringe benefits arise out of the provision by
an employer of property to an employee for free or for a below-market
price. This is the case regardless of how an employee uses the property
or what subsequently happens to the property.
In this context, "property" means land as well as goods of any
description, including gas and electricity through other than a reticulated
system. "Provision" means that the employer must actually dispose of
the property in question, be that by way of gift, sale or otherwise.
This category does not include the loan or licence of property to an
employee. In such a case, if the loan is for free, the benefit will usually
constitute a residual fringe benefit (see below). If the loan is for a fee
which is waived, that waiver will generally be a debt waiver fringe
benefit.
However, if the loan is eventually forgiven, such that the employee is no
longer required to return the benefit, it will at that point become a property
fringe benefit. During the period of the loan, however, there is usually a
residual fringe benefit.
Examples
1.
A school gives a teacher a piece of equipment, such
as a computer, after the lease of the equipment has
expired. Alternatively, the school sells the equipment
to the teacher at a price below its market value. In
either case, a property fringe benefit arises.
2.
A school loans to a teacher for an indefinite period a
piece of equipment owned by the school. No rent is
payable. The teacher takes the equipment home for
private use. This is not a property benefit, since the
school has not disposed of the property by way of
sale, gift or otherwise. (However, a residual fringe
benefit does arise.)
Exemptions
The "working day" rule
Where the property benefit is provided •
to a current employee (an employee's associates do not fall within
this exception), and
•
on a working day,
it will generally be an exempt benefit provided it is consumed by the
employee at the business premises.
15
Morning and afternoon teas and light meals fall into this category. (With
regard to food and drink, reference should be made to the "Entertainment
Benefits" section of this Manual at item 3.8.) However, shoes, clothes,
books, etc. cannot be consumed, and are therefore not exempt benefits.
Work related items
The provision of certain "work related" items is also exempt.
regard, please refer to item 4.1.
H.
In this
"ENTERTAINMENT" BENEFITS
The categorisation of "entertainment benefits" can be a complex matter.
Generally speaking, however, the provision of "entertainment" to
employees or their associates will give rise to a FBT liability.
Other than "meal entertainment fringe benefits" (discussed below), a
fringe benefit consisting of entertainment does not fall into a separate
category of fringe benefit. Rather, it is to be categorised as a fringe
benefit in the normal way.
Therefore, depending on the type of entertainment provided, the benefit
could be one of a number of fringe benefits, such as an expense
payment benefit or a property fringe benefit.
Example 1
An employer reimburses an employee for the cost of the employee
taking a client to the races. The reimbursement constitutes an
expense payment fringe benefit (but only in respect of the cost of
the employee's attendance).
16
Example 2
An employee and his wife go on a river cruise at a cost of
$100. The employee uses his employer's corporate credit
card to pay for the cruise, as he is permitted to do under his
terms of employment. The $100 cruise is therefore taxed as
a property fringe benefit (in this example, both the
employee and his wife fall within the scope of fringe
benefits, such that the full $100 is assessable).
"Entertainment" means the provision of any of the following items by way
of entertainment:
•
food;
•
drink;
•
recreation (including amusements, sports or similar leisure time
pursuits generally); and
•
accommodation or travel, where to any extent they are provided in
connection with, or for the purposes of facilitating, any of the above
types of entertainment.
The above activities will be treated as entertainment notwithstanding any
actual or claimed relationship with business activities, such as a business
meeting, a seminar or the working of overtime.
Examples of activities which are not entertainment
The provision of bottled spirits or wine, groceries, games,
TV sets, VCR's, computers, crockery, swimming pools,
gardening equipment. However, just because an item of
property is not "entertainment" does not mean that it is not a
fringe benefit. Such an item will usually be a property fringe
benefit.
Examples of entertainment
The provision of theatre tickets, hot meals, glasses of wine
or spirits, holiday accommodation, hired entertainers and
hired sporting equipment.
"Meal Entertainment Fringe Benefits"
When an employer provides food or drink in a situation that can be seen
as entertainment, that will bring about a "meal entertainment fringe
benefit". The application of fringe benefits tax in this area is complicated,
and made more complex by the fact that, in some circumstances, different
rules apply to bodies that are exempt from paying income tax (such as
school councils).
17
The Australian Tax Office has issued a lengthy ruling on the subject. The
following table is based on that ruling. The part of the table set out is that
part that would relate to school councils.
TYPE OF MEAL ENTERTAINMENT
FBT
payable /X
Circumstances in which Food and Drink Provided
A.
Food and Drink consumed on the employer's premises....
(1)
at a social function
(2)
in an in-house dining facility - not a social function
(3)
in an in-house dining facility - at a social function
(4)
morning & afternoon teas & light lunches
A(ii)
...by associates
(1)
at a social function
(2)
in an in-house dining facility - not a social function
(3)
in an in-house dining facility - at a social function
(4)
morning & afternoon teas & light lunches
A(iii)
...by clients
(1)
at a social function
X
(2)
in an in-house dining facility - not a social function
X
X
(3)
in an in-house dining facility - at a social function
X
(4)
morning & afternoon teas & light lunches
X
B.
Food and drink consumed off the employer's premises
(1)
•
•
•
At a social function or business lunch
by employees
by associates
by clients
C.
Alcohol
(1)
employee travelling - wine accompanies evening meal
X
(2)
alcohol provided at the conclusion of a CPD seminar with finger foods
X
D.
Food and drink consumed by employees while travelling
(1)
employee travels and dines alone
X
(2)
two or more travelling employees dine together
X
(3)
travelling with client and dine together
X
(4)
•
•
as in (3) except employer pays for all meals
employee's meal
client's meal
X
X
(5)
dines with client who is travelling separately
X
X
X
X
18
(6)
•
•
-
dines with employee not travelling
only employee's meal provided
both employees' meals provided
travelling employee's meal
non-travelling employee's meal
(7)
•
•
-
dines with client who is not travelling
only employee's meal provided
employee's and client's meal provided
employee's meal
client's meal
X
X
X
X
X
E.
Employees dining with other employees of the same employer or
with employees of associates of the employer
(1)
employee entertains another employee and is reimbursed by the
employer
(2)
employee entertains an employee of an associated company of the
employer and is subsequently reimbursed
•
•
employer's employee (expense payment)
associate's employee (property)
F.
Meal consumed by employees while attending a seminar
(1)
provided incidental to an 'eligible seminar' not held on the employer's
premises
X
(2)
X
light breakfast provided at a CPD seminar that is not an 'eligible seminar'
(3)
light refreshments inc. moderate amount of alcohol provided
immediately after a CPD seminar that is not an 'eligible seminar'
G.
Food and drink consumed by employees at promotions
(1)
public
function not held on employer's premises and is open to the general
H.
Meals provided under an arrangement
X
(1)
employer is not aware or does not consent to employees being taken
out to dinner by clients
•
employees
•
client's employee
X
(2)
employer is not aware or does not consent to employees being taken
out to dinner by clients
•
employees
•
client's employee
X
I.
Use of corporate credit card
(1)
employees dine together at a restaurant and the meal is paid for with the
credit card
J.
Restaurant discount cards
(1)
•
•
employee who holds a restaurant discount card entertains a client
employee - ½ total discounted price
client - ½ total discounted price
K.
Meals for accompanying spouses
19
X
(1)
•
•
with employee travelling on business and employer pays for all meals
employee
spouse
L.
X
Food and drink provided by tax-exempt bodies
(1)
'non-deductible' meal entertainment provided to employees, whether or
not on employer's premises
(2)
meals provided to employees in an in-house dining facility
X
(3)
non meal entertainment provided to employees on employer's premises
X
Examples of Meal Entertainment Fringe Benefits
I.
1.
Teachers at a school have a three course lunch at a
local restaurant on curriculum day. The bill is sent to
and paid by the school council. FBT liability arises
under the category of meal entertainment.
2.
A school council provides fingerfood and soft drinks
to teachers during a lunchtime meeting held at the
school. No FBT liability arises.
3.
A school principal has a business lunch with a local
notable at a restaurant. FBT liability arises if the
school council pays or reimburses the restaurant bill,
but only in respect of that portion of the bill that
applies to the principal. (The local notable does not
come within the scope of the fringe benefits regime.)
4.
A school council provides teachers and parents at a
parent-teacher meeting with tea and biscuits. No
FBT liability arises in respect of either the teachers or
the parents.
5.
A school council hosts a social or Christmas party for
the school's teachers. FBT liability arises.
TAX-EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Certain employers, including the Department and school councils, are
exempt from paying income tax. Where such employers provide their
employees with entertainment which can be classified as a "nondeductible expense", the benefit is categorised as a tax-exempt body
entertainment benefit. As such, the tax-exempt employer will only be
liable for FBT in respect of the value of entertainment provided to
employees and their associates, but not other guests.
A "non-deductible" expense, in this context, means that the cost of the
entertainment must:
20
(a)
fall under either section 51AE(4) of the Income Tax Assessment
Act 1936 or section 32-5 of the Income Tax Assessment Act 1997;
and
(b)
apart from those provisions, the cost would be deductible under
section 51 of the 1936 Act or section 8-1 of the 1997 Act, or would
be if it were incurred in producing assessable income.
If this requirement presents difficulty to a school council, it is
recommended that specialist advice be sought.
Example
A school council holds a reception for local notables. The
principal and his wife are invited. A liability for FBT arises in
regard to so much of the relevant entertainment expenses
as is reasonably attributable to the principal and his wife, ie.
usually a proportion based on the number of persons
attending.
Schools should note that the minor benefit exemption does not apply to ax
exempt body entertainment benefits.
J.
"LIVING AWAY FROM HOME ALLOWANCE" FRINGE
BENEFITS
Where an employee, who is required to live away from home as part of
their employment, is paid an allowance to compensate for additional
expenses or disadvantages suffered as a consequence, that allowance will
attract FBT liability. The compensation element is an essential one, which
exists to distinguish this type of benefit from ordinary salary or wages.
Complex questions can arise in determining whether a liability for FBT
arises under this heading and, if so, the value of that benefit. School
councils should seek specialist advice if the issue arises.
K.
HOUSING FRINGE BENEFITS
A housing fringe benefit arises where an employer provides an employee,
in respect of their employment, with accommodation for occupation as the
employee's usual place of residence. The accommodation must be
provided under a lease or licence, regardless of the length of the
arrangement.
The arrangement does not have to be formally
documented, however.
21
Example
A school council provides a teacher with accommodation
free of charge or at a nominal rent. The taxable value of the
benefit is the market value of the right to occupy the house
(ie. the reasonable rental on the open market), less any rent
paid by the employee.
Government Housing Schemes
If a housing benefit is provided to an employee under the Government
Employee Housing Authority Scheme, or a similar scheme for the
provision of housing to government employees, the liability for FBT will
rest with the Department and not on the school council.
Exemptions
There are no specific exemptions to this category that would apply in the
case of schools.
While different rules apply in the cases of non-remote area housing and
remote area housing, the topic is too lengthy and complex to discuss in
this Manual. School councils should seek specialist advice.
L.
AIRLINE TRANSPORT FRINGE BENEFITS
This type of benefit applies only to airline or travel agency employees. It is
not relevant for the purposes of this Manual.
M.
BOARD FRINGE BENEFITS
An employee is treated as being provided with board by an employer if the
employee is entitled to the provision of accommodation and two meals a
day under an industrial award or an employment arrangement.
This type of benefit is unlikely to be provided by a school council.
N.
CAR PARKING FRINGE BENEFITS
All car parking benefits are exempt in the case of an employer which is a
public educational institution. This covers school councils and the
Department.
O.
RESIDUAL FRINGE BENEFITS
A benefit is a "residual benefit" if it is not covered by the various
categories already discussed above. This category operates to catch all
those benefits provided in an employment context that cannot be
otherwise classified.
Examples of residual benefits include the supply of free or discounted
services such as for travel or the performance of professional or manual
work, the use of property "on loan", and the provision of insurance cover.
22
Example
An employer allows an employee to keep at home one of
the employer's spare desktop computers, so that the
employee can set up a home office and do some of their
work from home. The employee also uses the computer in
their spare time to organise their finances and allows their
daughter to use it to prepare school assignments. In such a
case, this will be liable to FBT as a residual fringe benefit.
However, if the employer were to impose and enforce a
prohibition against the employee's private use of the
computer, the benefit would be exempt from FBT. (For
further detail in this regard, see the "no-private-use
exemption" below and the "otherwise deductible" exemption
at Part 4.2.)
(If the employer were subsequently to tell the employee that
they can keep the computer, this would then become a
property fringe benefit - see earlier.)
Note that in general terms, payments made to an employee in cash, such
as a performance bonus, would not qualify as fringe benefits. Such
payments would normally attract income tax in the hands of the recipient.
Consumer Reward Programs
Benefits received by employees as a result of their participation in frequent
flyer or other similar consumer reward programs do not generally
constitute fringe benefits. This is because the benefits provided under
these programs are not usually provided by employers, but by third parties
under a scheme independent of the employment relationship.
It makes no difference that an employee may accumulate reward points by
purchasing goods for his employer through the program, the price of which
is refunded by the employer to the employee.
Exempt Residual Benefits
Aside from the general exemptions discussed in Part 4 of this Manual,
there are also 7 categories of specific exempt residual benefits. These
are discussed below. However, it is important to ensure that a benefit
which appears to fall within one of these exempt categories does not in
fact fall under one of the preceding categories of taxable benefits.
The "no-private-use" exemption
If the benefit is provided only for employment related purposes, the
employer can make a declaration that the use of the property is subject to
a consistently enforced prohibition on the private use of that property
by the employee. If such a declaration is made, the benefit is exempt.
The form for this declaration is contained at Appendix C of this Manual.
To rely on this exemption, a school council must have in place effective
and enforceable policies concerning the private use of particular benefits.
23
The validity of a declaration rests on the soundness of a school's
implementation of such policies. If a school is in doubt as to the adequacy
of its policies, specialist advice should be sought.
In addition, the "otherwise deductible" rule must apply so as to make the
taxable value of the benefit nil (see further Part 4.2). Essentially, this
means that the employee must only have used the benefit for purposes
related to the earning of income. Employers should themselves obtain
declarations from employees in this regard.
Example
An employee, Gary, is given the use of his employer's car
on a regular basis in order to collect supplies for the
employer's business from a neighbouring town.
The
employer strictly prohibits Gary from using the car for any
private purpose: he must fill in the mileage log book after
each trip, and the employer periodically checks the log book
against the car's odometer. Gary makes a declaration to his
employer that the car has only been used for work-related
purposes.
In this case, the employer's prohibition is consistently
enforced and the "otherwise deductible" rule would operate
to reduce the benefit's value to nil. As a result, the employer
can make the necessary declaration and the benefit will be
exempt.
It is, of course, essential that any declaration provided to obtain this
exemption be a true and correct declaration. There are significant
penalties for a false statement.
The "Recreational and Child Care Facilities" Exemption
The provision or use of a recreational facility or the care of employees'
children in a child care facility are benefits that are not liable to FBT
where the following criteria are satisfied:
•
the facility in question must be at the employer's business premises
or, where the employer is a company, the facility is located on the
business premises of that company or of a related company (ie.
subsidiary, parent or "sister" company within a wholly-owned
group);
and
•
the employee must be a current employee. If the facility was
being used by a former employee or an "associate" of a current
employee (other than where that associate is a child under six),
that would not be an exempt benefit.
"Recreational facilities" do not include facilities for accommodation,
drinking or dining. An example of a recreational facility would be a
gymnasium provided for employees.
24
Broadly speaking, a "child care facility" is a facility where children under
the age of six are minded or provided with care and education. It does
not include the provision of residential care nor a facility at the child's
place of residence. "Child" includes adopted children, step-children and
ex-nuptial children.
"Business premises" means premises (in whole or in part) used to any
degree within the employer's business operations, but does not include
premises (in whole or in part) used as an employee's place of residence.
The term "business premises" may be interpreted as extending to
premises utilised as a child care facility.
Use of property ordinarily used at work place Exemption
The private use by an employee of property which is ordinarily used in
connection with the business operations of the employer is an exempt
benefit where the following criteria are satisfied:
•
the private use must be provided to a current employee; and
•
the benefit must involve the use of property (other than a motor
vehicle) that is ordinarily located on the employer's business
premises and is wholly or principally used directly in relation to the
employer's business operations.
For this exemption to be available, it is not required that the property in
question be used on the actual business premises on a working day. It is
only necessary that the property be normally located at those premises
(see the definition of "business premises" under the "Recreational and
Child Care Facilities" exemption, above.)
This means that where a piece of equipment, which is normally used on
the employer's business premises in connection with the employer's
business, is borrowed for the weekend by an employee, that residual
benefit would be exempt.
Examples of property that are wholly or principally used directly in
connection with the employer's business operation are computers,
modems, typewriters, calculators, reference books and telephones. Note,
however, that motor vehicles are specifically excluded from this
exemption.
Example
An employee takes home his employer's welding equipment over
the weekend to repair a steel gate at his home. The equipment is
normally kept on the employer's business premises for use in
connection with the employer's business.
A residual fringe benefit arises, but it is exempt.
The provision of certain eligible work related equipment is also exempt for a discussion of this category, please refer to Part 4.1 of this Manual.
25
Work-related travel in an "eligible motor vehicle" Exemption
Private but work-related travel by an employee using an "eligible vehicle"
provided by an employer is an exempt benefit. An "eligible vehicle" is a
panel van or utility truck or any other road vehicle designed to carry a load
of less than one tonne. Taxis and other vehicles designed for the principal
purpose of carrying passengers (such as school buses) are not "eligible
vehicles", nor are normal cars.
For the purposes of this exemption, "work-related travel" means:
•
travel by an employee between their place of residence and their
place of employment (or any other place from which the employee
performs his or her duties of employment);
or
•
travel by an employee that is incidental to travel in the course of
performing the duties of his or her employment.
For this exemption to apply:
•
the employee's only private use of the vehicle must have been
work-related travel; and
•
all other private use by the employee must have been minor,
infrequent and irregular.
Example
Where an employee who is using a motor vehicle for
employment purposes stops somewhere for lunch, there is
some private element in the use of the motor vehicle.
However, it is considered that this would be "incidental
travel". Where, in order to have lunch, the employee diverts
from the route he would otherwise take, that would also be
incidental travel.
However, if an employee has a vehicle for employment
purposes, and at some point the car is used to travel
between two places which are not on the route the
employee would otherwise take, that trip would not be travel
incidental to employment use. (Although this might be
exempt as private use that is minor, infrequent and irregular
- see further below.)
Although a home-to-work journey can be work-related travel, it would not
normally be travel in the course of carrying out employment duties. This
means that incidental travel in the course of a home-to-work journey is not
work-related travel. (Often, however, this sort of travel will fall within the
"minor, infrequent and irregular private use" exemption: see below.)
"Minor, infrequent and irregular private use" Exemption
26
Private use that is minor, infrequent and irregular applies to use of the
vehicle by an employee or an associate of the employee. Although the
FBT Act does not specify the type of private use that would come within
this exemption, the requirement that the use be minor, infrequent and
irregular suggests that only "one-off" activities (such as delivering rubbish
to the tip, substituting for a broken-down vehicle or calling in at a friend's
house) would come within the exemption.
Private use which is minor does not come within the exemption if the
vehicle is used regularly for the same purpose (for example, taking
children to lessons once a week).
It follows, therefore, that where an employee's use of a motor vehicle is
not work-related, and the private use of the vehicle is more than purely
incidental or "minor, infrequent and irregular", then this exemption cannot
apply. The residual benefit will therefore be liable to FBT.
Remote Location Transport Exemption
There is an exemption from FBT for residual benefits in relation to
transport provided to employees whose usual place of employment is at a
remote location in Australia and who are provided with residential
accommodation at or near that remote worksite.
If such employees are returned to their usual residence on their days off,
the provision of transport to and from their home is exempt from tax if, in
light of the distance between the employee's work site and their place of
residence, it would be unreasonable to expect them to travel to and from
work on a daily basis.
This exemption is probably not relevant for the great majority of school
councils. However, councils which provide accommodation in remote
areas should seek specialist advice on whether the area qualifies under
the legislation as a remote area.
Living away from home accommodation Exemption
Where an employee is provided with leased accommodation by their
employer, as part of an employment requirement that the employee live
away from home, that accommodation is an exempt benefit.
However, this benefit is not likely to be encountered by school councils.
Employee Transport Exemption
This exemption is available only to employers who operate a public
transport business. It does not apply to school councils.
PART 4 – GENERAL EXEMPTIONS
27
A number of miscellaneous benefits are specifically exempt from FBT.
Those exemptions which relate to only one category of fringe benefit have
been discussed above under each of the relevant categories. However,
those which apply more generally are discussed below.
The exemptions are as follows:
•
Eligible work related items
•
"Otherwise deductible" reductions
•
"Minor benefits"
•
Certain taxi travel
•
Employment interviews and selection tests
•
Benefits relating to relocation
•
Leasing of household goods while living away from home
•
Newspapers and periodicals used for business purposes
•
Compensable work-related injuries
•
In-house health care facilities
•
Certain travel to obtain medical treatment
•
Compassionate travel benefits
•
Work-related medical examinations, screenings, preventative
health care or counselling
•
Migrant language training
•
Emergency assistance
•
Long service awards
•
Safety awards
•
Membership fees and subscriptions
A.
ELIGIBLE WORK RELATED ITEMS
Applies to:
•
•
•
Property benefits
Expense payment benefits
Residual benefits
Effect:
These benefits are exempt from FBT if they can be classified as an
"eligible work related item".
The sort of benefits that fall within this exemption are as follows:
28
(1)
Notebook computers, laptop computers or similar portable
computers. This exemption is limited to one computer per
employee per year.
In order to fall within this exemption as a "similar portable
computer", the Tax Office has indicated that it will consider the
characteristics of the computer to determine whether they are
similar to the primary characteristics of a notebook or laptop
computer. Namely, the computer should be easily portable,
relatively small in size and operable without an external power
source.
In terms of extra hardware, only those items that are necessary for
the basic operation of the computer will be covered by the
exemption. For example, a mouse would be exempt, but a modem
or a printer would not.
As concerns software, pre-loaded software forming part of the
computer is covered by the exemption. However, separate or
subsequently purchased software must fall within its own
exemption, as discussed below.
(2)
An item of computer software for use in the employee's
employment. It is important that the software be directly and solely
related to the employment.
(3)
Mobile and car phones, provided that they are primarily for use in
the employee's employment, fall within this exemption. The
exemption also covers any additional batteries for the phone, carry
pouches, chargers and other necessary accessories.
The question of whether a phone is "primarily" for use in
employment is not an easy one to answer. A safe view is probably
that any private use made of the phone should only be incidental to
the phone's business use. It is Department policy that work-related
use should constitute at least 60% of all use of the phone.
What you need to do to obtain this exemption.
From an evidentiary point of view, school councils should obtain some
form of declaration from all those employees provided with mobile phones,
in which the employee states that they used the phone at least 60% of the
time for work-related purposes.
(4)
A briefcase.
(5)
A calculator.
(6)
Items of protective clothing that are required for the employee's
employment.
(7)
A tool of trade: this category is limited, however, to manually
operated tools, and does not include modems, printers and other
similar computer accessories.
(8)
An electronic diary or similar item.
B.
"OTHERWISE DEDUCTIBLE" RULE
29
Applies to:
Certain benefits provided to employees only (not their associates),
namely:
•
•
•
•
expense payment benefits;
loan fringe benefits;
property fringe benefits; and
residual fringe benefits.
Effect:
Essentially, the taxable value of a fringe benefit can be reduced by the
amount that an employee (to whom a benefit has been provided) would
have been able to claim as an income tax deduction if the employee were
to have borne the cost of the benefit themselves. Such a deduction is
usually available in respect of that part of the benefit used in earning
assessable income.
In the context of expense payment benefits and residual benefits, the
"otherwise deductible" exemption is an alternative to claiming the "no
private use" exemption, which is discussed under certain categories. The
differences between that exemption and this one are:
•
under the "otherwise deductible" exemption, a reduction can be
claimed in respect of whole or part of the benefit's value,
depending on the extent of its private use by the employee, if any;
•
under the "no private use" exemption, it is the employer who must
make the relevant declaration, stating that they have consistently
enforced a prohibition against the private use of the benefit, as well
as stating that the benefit was in fact fully exempt by operation of
the otherwise deductible rule. As will be seen, however, the
"otherwise deductible" exemption is based on a declaration made
by the employee instead.
Example
A school lends, at no cost, a modem to one of its teachers,
so that they can access network information after hours on
their own home computer. The modem is classifiable as a
residual fringe benefit. However, because the cost of
renting the modem would normally be an allowable
deduction to the teacher (to the extent that the modem is
used in earning assessable income) if they had incurred the
cost themselves, the school can reduce the taxable value of
the residual fringe benefit by the amount of this 'notional
deduction'.
To take advantage of this reduction, an employer will generally need to
obtain a declaration from the employee in respect of the benefit. That
declaration must be in the format provided by the Tax Office from time to
time.
30
The application of this exemption is not a straight-forward process. Any
deductions should be made with care. There are various qualifications
and exceptions to the rule, which differ depending on the category of
benefit. The calculation of the deduction is also subject to a special
formula. It is recommended that specialist accounting advice be sought in
determining whether the value of benefits provided can be reduced in
accordance with the otherwise deductible rule.
This rule only applies to benefits provided to employees, not to
employees' associates.
C.
THE "MINOR BENEFITS" EXCEPTION
Applies to:
All categories of benefit, where it can be classified as a "minor benefit".
Qualifying as a "minor benefit"
Generally speaking, a benefit must be two things before it can be regarded
as a "minor benefit":
•
it must be of less than $100 value; and
•
it must be otherwise unreasonable to treat the benefit as a fringe
benefit.
In determining whether it is reasonable to treat a minor benefit as exempt,
the provision of "associated benefits" must also be considered. A benefit
may be of only small value (for example, a box of chocolates at Eastertime). However, where the employee is given a number of small gifts
adding up to a significant total value, the benefit is no longer a "minor
benefit".
In this regard, it is necessary to also consider benefits connected with a
minor benefit, as well as benefits that are similar or identical to the minor
benefit. For example, if a benefit which is otherwise minor is repeated on
a monthly basis, the total of those identical benefits over the course of the
year would probably take the benefit outside this exemption.
Example
At Christmas time, a school council gives a gift to both the
principal and her husband. The husband is given a bottle of
wine which, on its own, could be regarded as a minor
benefit.
However, the principal is given a Christmas
hamper, filled with many small packages amounting to a
significant value.
The hamper on its own is not a minor benefit, even though
its individual components may be. This is because it is the
total value of the hamper which, in this case, would be
relevant.
31
Furthermore, the wine would not be exempt as a minor
benefit either, on the basis that it is an "associated benefit"
to the hamper.
Availability of the exemption to school councils
In the case of school councils (as tax exempt bodies), entertainment
benefits cannot be exempt from FBT through classification as a minor
benefit unless they fall within one of the following circumstances:
(a)
where the provision of entertainment to the employee or associate
is merely incidental to the provision of entertainment to outsiders
(ie. people who are neither employees or associates of employees)
and a meal is not provided to the employee or associate (other
than a meal consisting of light refreshment).
Example
A school council holds a casual drinks function for the
parents of new students at the school. The main aim of the
function is to create good relations with the parents, as well
as to entertain them. A number of teachers and school staff
attend.
In this case, the light refreshment provided to the teachers
would probably be exempt from FBT as a minor benefit, on
the basis that it is merely incidental to the entertainment of
others who are not employees and that only light
refreshments are provided.
If, however, the function was held at a restaurant where
everyone was provided with a meal, the exemption would
probably not apply. This is because, in that case, the
teachers are being provided with a "meal entertainment"
which is more than incidental, which is therefore liable to
FBT.
(b)
where an entertainment benefit is provided to an employee or their
associates on the "eligible premises of the employer" (ie in-house
premises) solely as a means of recognising the special
achievements of that employee as related to their employment.
Example
A teacher and his spouse are given a dinner by the
retiring school principal in the school's staff room, to
mark the teacher's appointment as incoming
principal.
In that case, the benefit in respect of the teacher and
his spouse may be considered a minor benefit.
D.
TAXI TRAVEL
This exemption applies to employees only.
32
The exemption for taxi travel will be extended and simplified.
Where an employer provides an employee with taxi travel consisting of a
single taxi trip to or from the employee’s place of work, that will not be a
benefit liable to FBT.
It is proposed that the exemption will no longer be restricted to taxi travel
between 7pm and 7am, nor will it be necessary for the travel to be directly
between the place of work and the employee’s home.
The amendments will apply for the FBT year starting 1 April 1997 and all
later FBT years.
The proposed changes do not affect the exemption for taxi travel as a
result of sickness or injury to an employee.
It is anticipated that the proposed changes will shortly become law. School
councils are encouraged to seeks advice from its accountant if the
commencement date of the proposals is relevant.
E.
EMPLOYMENT INTERVIEWS AND SELECTION TESTS
A benefit which is "in respect of an employment interview or selection test"
is exempt from fringe benefits tax. For a benefit to fall within this category,
however, the following conditions must be satisfied:
(1)
The benefit must be in respect of transport or accommodation and
meals en route.
(2)
The benefit must have been provided to a current employee (such
that the candidate must be successful in being employed). Benefits
provided to associates of a successful candidate or to unsuccessful
candidates are not exempt under this category.
(3)
The travel must have been undertaken solely for an interview or
selection test in connection with employment, promotion or job
transfer.
In the case of an application for new employment, the exemption
will apply irrespective of whether the benefit is provided by the
future employer (as will usually be the case) or by a former
employer (as may occur where the employee becomes redundant).
(4)
The benefit must have been provided under an arm's length
arrangement. That is, the employer must have provided the same
benefit in the same way as it would have been provided to a
stranger in the same position as the employee.
F.
BENEFITS RELATING TO RELOCATION
Where an employee moves location in the course of their employment, or
in order to take up a new job, certain costs met by the employer in this
relocation will be exempt from FBT. Those costs are ones associated
with:
33
•
the removal and storage of household effects;
•
the sale or acquisition of the employee's former dwelling;
•
the connection or reconnection of certain utilities;
•
relocation transport.
Complex conditions apply in this area.
specialist advice should this issue arise.
G.
School councils should seek
LEASING OF HOUSEHOLD GOODS WHILE LIVING AWAY
FROM HOME
This exemption complements other provisions which exempt from FBT the
provision of accommodation to employees who are required to live away
from their usual place of residence in order to fulfil their employment.
In such cases, the cost of leasing household goods is also an exempt
benefit, provided that the goods are for "domestic use". Leasing business
equipment or a personal computer does not fall within the exemption.
H.
NEWSPAPERS AND PERIODICALS USED FOR BUSINESS
PURPOSES
The cost of providing employees with newspapers or periodicals
("publications") may be exempt, but not where the benefit is provided to
someone other than the employee personally.
Such publications must be for use by the employee for purposes related to
their employment. The exemption does not apply where that work-related
connection is minimal or insignificant, nor where it is in respect of other
employment. If the publication is provided for "merely incidental"
purposes, this exemption will not be available.
Where several newspapers or periodicals are supplied to an employee,
only those which meet the "work-related" test will attract the exemption.
Example
A school council provides the head teacher in its science
department with a weekly science journal which focuses on
the latest science teaching methods. The teacher, who is a
keen computer programmer in her spare time and has some
money invested in several software companies, is also
provided with the daily financial newspaper and a magazine
on computer programming.
The provision of the science teaching journal would clearly
be an exempt benefit in this case, because it is provided to
the teacher for work-related purposes. However, the teacher
has no use for the financial review nor the computer
programming journal in the context of her job. They are
34
purely for personal interest, which is a private purpose.
These two publications are therefore not exempt benefits.
I.
COMPENSABLE WORK-RELATED INJURY
Generally, employers are not liable to pay FBT on the provision of workers'
compensation benefits to its employees. This exemption covers two key
categories:
1.
Benefits connected with a compensable work-related
trauma or injury actually suffered by an employee
In this context, the exemption is limited to benefits paid under
workers' compensation law or which are "otherwise reasonable".
It is essential that the payment be connected with a "work-related
trauma", which is defined as including the following, if they relate
to the employee's employment:
•
an injury to the employee (including the aggravation,
acceleration or recurrence of an injury);
•
where an employee contracts a disease (including the
aggravation, acceleration or recurrence of a disease);
•
where an employee develops any physiological or
psychological condition that may be harmful or dangerous to
them (including the aggravation, acceleration or recurrence
of such a condition); or
•
the loss, destruction of, or damage to an artificial limb or
other artificial substitute, a medical, surgical or similar aid or
appliance used by the employee, or clothing worn by the
employee.
2.
Benefits constituted by a contingent right under a
workers' compensation insurance policy or otherwise
This exemption does not cover contingent rights arising out of an
insurance policy that extends beyond compensation for workrelated trauma. For example, a general health insurance policy
would not fall within this exemption.
J.
IN-HOUSE HEALTH CARE FACILITIES
In providing employees with medical services and other "health care"
benefits, an employer will not be liable for FBT if the benefit is provided in
an "in-house health care facility" or by a member of the staff of such a
facility.
The exemption applies only to work-related injuries suffered by
employees. Medical services provided to students do not attract fringe
benefits tax, since students are not employees.
35
Example
A school designates a particular room in the school building
as a first-aid room. Various medical supplies are kept in the
room. This would qualify as an "in-house health care
facility". Therefore, medical care or assistance given to
school staff in the facility is an exempt benefit.
K.
CERTAIN TRAVEL TO OBTAIN MEDICAL TREATMENT
This exemption applies only to employees working at an overseas location
and is not considered relevant to school councils.
L.
COMPASSIONATE TRAVEL BENEFITS
Applies to:
•
car benefits;
•
expense payment benefits in relation to the provision of transport,
meals or accommodation;
•
property benefits comprising the provision of meals;
•
residual benefits comprising the provision of
accommodation.
transport or
Qualifying for the exemption
Firstly, the benefit must be work-related and must involve the transport of
either the employee or a close relative (defined as a spouse, a child, a
parent or parent-in-law) of the employee.
Secondly, the sole reason for the travel must be to enable the employee
(or the close relative):
•
to attend the funeral of a close relative (or, where the benefit is
provided to a close relative, to attend the funeral of either the
employee or of another close relative); or
•
to visit a close relative (or to enable a close relative to visit the
employee or another close relative), because either the employee
or the close relative is seriously ill; or
•
where the benefit is provided to a close relative, to attend the
funeral of another close relative of the employee.
Thirdly, the compassionate travel must generally have started either while
the employee was travelling for work-related reasons, or while the
employee was required to live away from home so as to fulfil his or her
employment duties. An exemption may also be granted if the travel starts
while the employee is working away from home in a "remote area".
36
Where it is the travel of a close relative which is being provided by an
employer and the purpose of the travel is to visit or attend the funeral of
another close relative (but not of the employee), the travel must begin at a
time when the traveller ordinarily resides with the employee.
M.
WORK RELATED MEDICAL EXAMINATIONS
Applies to:
•
•
•
residual benefits,
property benefits, and
expense payment benefits.
Qualifying for the exemption
Not all medical examinations that occur within the work environment are
exempt. A "work-related medical examination" is an examination or test
carried out by, or on behalf of:
•
•
•
•
•
an audiometrist;
a legally qualified medical practitioner (this includes a
psychiatrist, surgeon, general practitioner and physician);
a nurse;
a dentist; or
an optometrist.
Furthermore, the examination must be wholly or principally to ascertain the
physiological or psychological condition of the employee (and only the
employee) for any of the following purposes:
•
the commencement of the employment of the employee;
•
the confirmation of probationary employment of the employee;
•
a change in the duties or location of the employment of the
employee; or
•
the employee becoming a member of a superannuation fund.
Exempt medical examinations are confined to the above purposes.
Therefore, if an employee is medically examined, at the employer's
expense, in order to determine whether back injuries will prevent them
from continuing in their current role, this will not be an exempt benefit
because it does not fall under any of the above reasons. However, if the
medical examination was also geared at determining what new role the
injured employee may be suited to, the examination will be an exempt
benefit.
Where an examination does not fall within this category of exemption, it
may nonetheless be exempted as a work-related medical screening
(see below).
N.
WORK-RELATED MEDICAL SCREENING
Applies to:
37
•
•
•
expense payment benefits
property benefits
residual benefits
Qualifying for the exemption
Firstly, the medical examination or test must be conducted by or on behalf
of any of those persons who are required to have conducted a "workrelated medical examination".
Secondly, the purpose of the examination or test must be, wholly or
principally, to determine whether the employee has suffered, is suffering
or is at risk of suffering, a work-related trauma.
Thirdly, the examination or test must be a wide-scale screening, such that
the test is made available generally to all employees of the employer:
•
who are likely to have suffered, be suffering or be at risk of
suffering, a similar work-related trauma;
•
who perform the duties of their employment at or near the place
where the employee performs the duties of his employment; or
•
whose duties of employment are similar to those of the employee.
O.
WORK-RELATED PREVENTATIVE HEALTH CARE
Applies to:
•
•
•
expense payment benefits;
property benefits; and
residual benefits.
Qualifying for the exemption
"Work-related preventative health care" means any form of care provided
by, or on behalf of, a legally qualified medical practitioner, nurse, dentist or
optometrist wholly or principally in order to prevent the employee suffering
from work-related trauma.
"Health care" means any examination, test or form of care (whether
therapeutic, preventative or rehabilitative) that is related to the
physiological or psychological health of a person). The provision of drugs,
vaccines or other medical preparations in connection with the health care
comes within the definition. Any form of care that comes within the very
wide definition of "health care" would, it seems, come within the term
"work-related preventative health care" as long as it is work-related and
preventative.
In order to qualify for the exemption, the care being given must be made
available to all employees with similar work-related risks.
Purpose of the care
The care must be provided to an employee (and only an employee) in
order to prevent the employee from suffering work-related trauma. "Workrelated trauma" is defined widely as injuries, diseases, loss or damage to
38
artificial limbs, medical aids or clothing and conditions that are harmful to
the employee that are "related to any employment of the employee". The
aim of the care must be to prevent the employee suffering from any of
these conditions.
In order to qualify for exemption as work-related preventative health care,
a form of care provided to an employee must be available generally to all
employees of the employer:
•
who are likely to be at risk of suffering from similar work-related
trauma;
•
who perform the duties of their employment at or near the place
where the employee performs the duties of his employment; and
•
whose duties of employment are similar to those of the employee.
P.
WORK-RELATED COUNSELLING
Applies to:
Any benefit connected with the work-related counselling of an employee or
an associate of the employee.
Qualifying for the exemption
The counselling must involve the attendance of either an employee or,
alternatively, of an associate of the employee provided that the associate
is accompanied by the employee.
The attendance of the employee (or employee and associate together)
must give effect to an objective purpose, plan or policy devised, adopted
or required to be followed, by the employer to either:
•
improve or maintain the quality of the employee's performance of
his or her duties; or
•
prepare the employee for retirement.
From an employer's point of view, therefore, there must be a reason for
the counselling. The counselling may relate to:
•
•
•
•
•
•
•
•
•
•
safety;
health;
fitness;
stress management;
personal relationships;
retirement problems;
drug or alcohol abuse;
rehabilitation or prevention of work-related trauma or other disease
or injury;
first aid; or
any similar matter.
These criteria provide for a very wide interpretation of "counselling".
39
One proviso, however: if counselling is provided wholly or principally as a
reward for services rendered or to be rendered by the employee, this
cannot be an exempt benefit. In such a case, the counselling is a form of
remuneration.
Q.
MIGRANT LANGUAGE TRAINING
Applies to:
Any benefit that constitutes "migrant language training" that is provided to
an employee or an associate of the employee (usually a family member).
Qualification for the exemption
"Migrant language training" means:
•
a course attended by a person who, at the time of attending the
course, is (or intends to become) an immigrant to Australia; and
•
the course is designed to teach the English language or impart an
understanding of the rights and duties of an Australian citizen and
of the way of living of the Australian people to persons whose first
language is not English.
The training must be connected with the employee's employment in some
way.
R.
EMERGENCY ASSISTANCE
Applies to:
Any benefit provided as emergency assistance to an employee or to an
associate of the employee.
Qualification of a benefit as "Emergency Assistance"
In order to qualify as "emergency assistance", a benefit must be provided
for the sole purpose of providing immediate relief to a victim of an
emergency.
"Emergency" means any of the following:
•
•
•
•
•
•
a natural disaster;
a conflict involving an armed force;
a civil disturbance;
an accident;
a serious illness; or
any similar matter.
The assistance must be provided in respect of the employee's
employment. While this does not require that the assistance be granted
directly to the employee, there must be some connection between the
assistance and the employment.
The way in which the assistance is provided is also important in
determining whether a benefit can fall within the "emergency assistance"
40
exemption. In order to qualify, the assistance must fall within one or more
of the following descriptions:
1.
the person who is granted the assistance is, or is at
immediate risk of becoming, the victim of an emergency;
2.
the assistance is granted to the person solely in order to
provide immediate relief (therefore, long-term benefits
granted to a victim of an emergency do not qualify for an
exemption under this category);
3.
the assistance must be in the form of one or more of the
following:
•
first aid or other emergency health care;
•
emergency meals, food supplies, clothing,
accommodation or use of household goods;
•
temporary repairs; or
•
any similar matter.
transport,
Where emergency assistance is provided as "first aid or other emergency
health care", the exemption is limited to treatment provided by another
employee of the employer (or of a related company):
•
on the employer's premises; or
•
at (or adjacent to) a site at which the employer's employees
perform their employment duties.
On this basis, the exemption cannot apply in cases where the employer
pays for an accident victim's hospital costs.
S.
LONG SERVICE AWARDS
An award made to recognise long service (15 years or more) may be
exempt from fringe benefits tax. This exemption is limited to awards of
$500 plus an extra $50 for every year of service after the 15th year.
T.
SAFETY AWARDS
An employer may award an employee in recognition of their special
achievements in the area of occupational health and safety as related to
their employment. Where a benefit of no more than $200 value is solely
for this purpose, it is exempt as a safety award benefit.
This exemption only applies to benefits provided to employees, not to their
associates.
41
U.
MEMBERSHIP FEES AND SUBSCRIPTIONS
The provision by an employer of "eligible memberships or subscriptions"
(which are otherwise classifiable as expense payment benefits or property
benefits) is exempt from FBT.
Each of the following is an eligible membership or subscription:
(a)
a subscription to a trade or professional journal;
(b)
an entitlement to use a corporate credit card (the exemption here
relates only to any fees paid by the employer in providing the
employee with the card, but does not extend to goods purchased
with the card);
(c)
an entitlement to use an airport lounge membership.
42
PART 5 – REPORTABLE FRINGE BENEFITS
A.
REPORTING OF BENEFITS
Since 1 April 1999, all employers have been required to report the total
grossed up taxable value of certain benefits on an employee’s Payment
Summary (previously Group Certificate) where the total taxable value of
those benefits exceeds $1,000.00.
Where reported on an employee’s Payment Summary, these figures are
used for the purposes of calculating certain income-related obligations of
individuals, including HECS payments, the Medicare levy surcharge, the
superannuation surcharge, certain means tested government benefits and
concessions, and child maintenance payments.
Accordingly, it is
imperative that School Councils ensure all benefits provided at school
level are, in the case of Department employees, reported to the
Department for each individual employee, and in the case of School
Council employees, are reported on the School Council employee’s
Payment Summary where necessary.
B.
CALCULATING REPORTABLE FRINGE BENEFITS
Reportable Fringe Benefits will only need to be reported on an employee’s
Payment Summary where the total taxable value of benefits exceeds
$1,000.00. Where benefits provided to an individual employee are less
than $1,000.00 in value for the FBT year, no amount will need to be
reported on the individual’s Payment Summary. However, this reporting
obligation is separate from the obligation to pay tax, and even where the
benefits are less than $1,000.00, the employer remains liable to pay FBT.
Where the taxable value of benefits exceeds $1,000.00, it is necessary to
report the total “grossed-up” value of those benefits on the employee’s
Payment Summary. For the purposes of Reportable Fringe Benefits, the
relevant gross-up factor is currently a figure of 1.9417. This gross-up
factor is used to identify the pre-tax value in dollars that the benefit would
represent for the employee if he had received equivalent salary. This is
based on the highest marginal tax rate.
Accordingly, where an employee receives $1,001.00 in benefits (at the
cost to the employer) the figure which will automatically be reported on his
Payment Summary is $1,943.00.
C.
BENEFITS EXCLUDED FROM REPORTING
Certain benefits are excluded from the Reportable Fringe Benefit
requirements, and while FBT may still need to be paid in respect of these
benefits, they do not need to be reported on an individual employee’s
Payment Summary.
Excluded benefits are as follows: 



meal entertainment;
remote area housing benefits;
remote area residential fuel benefits;
carparking fringe benefits (other than expense payment fringe
benefits);
43

exempt fringe benefits.
Various other benefits are also excluded from the reporting provisions;
however, these are unlikely to arise in schools and are not set out in this
Guide.
It is important for School Councils to note that where a fringe benefit is not
subject to FBT, for instance because of the otherwise deductible rule or
because the benefit is itself an exempt benefit, there is no reportable
benefit.
44
PART 6 – GST AND FBT
A.
OVERVIEW
Since the introduction of the Goods and Services Tax (GST) on 1 July
2000, fringe benefits have been divided into two broad categories: 

fringe benefits which attract GST when paid for by an employer and
which an employer is entitled to claim input tax credits in respect of
(Type 1 Fringe Benefits). These are also known as GST-creditable
benefits; and
fringe benefits which do not attract GST when paid for by an employer
or which an employer is not entitled to claim input tax credits in respect
of (ie. GST free or input taxed goods and services) (Type 2 Fringe
Benefits).
These categories are relevant for the purposes of assessing an
employer’s FBT liability, as the gross-up factor to be used to arrive at the
taxable value of a benefit will vary depending on whether or not input tax
credits are able to be claimed in respect of the benefit. This is because an
employer in acquiring a benefit may be entitled to claim an input tax credit,
whereas the individual employee would not necessarily have been able to
claim input tax credits in acquiring the benefit him or herself.
Consequently, when identifying benefits provided to staff, it will be
necessary to identify whether the School Council was able to claim an
input tax credit or not.
B.
TYPE 1 FRINGE BENEFITS
Where a School Council has paid GST and claimed back input tax credits
in respect of a benefit provided to a staff member, this will need to be
identified in the School Council’s FBT records. A Type 1 Fringe Benefit
will be any fringe benefit which attracted GST (ie. motor vehicles, fuel,
other transport, entertainment, meal entertainment, etc). The gross-up
factor to be used in identifying the taxable value of Type 1 Fringe Benefits
is 2.129.
C.
TYPE 2 FRINGE BENEFITS
Type 2 Fringe Benefits will be any kind of benefit which did not attract GST
when paid for by the School Council, including health insurance,
education, residential rent or any benefit at all provided prior to the
introduction of GST. The gross-up factor to be used in ascertaining the
taxable value of Type 2 Fringe Benefits is 1.942. In the case of any such
benefits, it will be necessary for a School Council to identify either in its
own FBT return or its return to the Department where a benefit was GST
free or input taxed.
D.
GST AND EXEMPT BENEFITS
Where a benefit is an exempt benefit, being for instance an otherwise
deductible benefit, a no private use benefit or an exempt benefit such as a
mobile phone or laptop computer, a School Council may claim the input
tax credits arising from acquiring the benefit. As this is an exempt benefit,
45
no gross-up rate needs to be applied to the fringe benefit as no FBT will
be payable. Similarly, for GST purposes, the acquisition will be a
creditable acquisition for the School Council where it is acquired for school
purposes (ie. as an exempt fringe benefit from employees).
E.
CONCLUSION
The interaction of GST and FBT requires thorough consideration at the
time of preparing an FBT return, whether by the School Council in its own
right to the Australian Taxation Office, or in the School Council’s annual
return to the Department.
APPENDICES
APPENDIX A
No private use declaration - expense payment benefits
I,
on behalf of
(name of person authorised to make declaration)
(name of employer)
declare that the expense payment benefits, described below, and provided during the
FBT year from 1 April
to 31 March
are payments or reimbursements of
expenses which, under the "otherwise deductible" rule, would have a taxable value of
nil.
(Show sufficient detail to enable identification of the relevant benefits, eg. name of
employee(s) and/or class of employee and/or type of expense).
Signature
Date
APPENDIX B
46
Living-away-from-home declaration
I,
declare that:
•
during the period
19
to
19
I was required to live away from my usual place of residence in order to perform the
duties of my employment and that during that period my usual place of residence was
(state place where you usually live)
and the nature of that residence was
and;
•
during the period the place at which I actually resided was
(state all addresses at which you resided while away from home in the period stated above)
Signature
Date
APPENDIX C
No private use declaration - residual benefit
I,
on behalf of
(name of person authorised to make declaration)
(name of employer)
declare that the residual benefits, described below, and provided during the FBT year
from 1 April
to 31 March
arise from the use of property which is subject to
a consistently enforced prohibition on the private use of that property and which, under
the "otherwise deductible" rule, would have a taxable value of nil.
(Show sufficient detail to enable identification of the relevant benefits, eg. name of
employee(s) and/or class of employee and/or type of benefit).
Signature
Date
47
48