Article published in Issue 1, 2010-11 of The Taxpayer, dated 5 July 2010
In a nutshell...
Reportable fringe benefits and superannuation
Payment summaries, detailing an employee’s remuneration and taxes withheld, allowances and reportable
fringe benefits are required to be issued to employees by 14 July of each year.
A reportable fringe benefit amount is required to be disclosed on an employee’s payment summary
where the taxable value of the benefits provided (ie, the pre-gross up values) during the FBT year exceeds
$2,000 (ie. from 1 April to 31 March), notwithstanding that the disclosure relates to the year ended 30 June.
Benefits provided that do not give rise to a taxable value and hence FBT, do not need to be disclosed
in an employee’s payment summary. These include benefits which satisfy the ‘otherwise deductible rule’
such as work related expenses, situations where the employee has made a contribution which reduces
the taxable value to nil, or benefits that do not fall within the meaning of a fringe benefit, such as certain
superannuation contributions.
While the grossed-up amount of reportable fringe benefits included on a payment summary does not
represent assessable income, the amount will be taken into account for the purposes of determining
access to various government benefits, calculating certain liabilities and the availability of particular tax
deductions.
With effect from 1 July 2009, reportable employer superannuation contributions (RESCs), while not
included in the reportable fringe benefits amount of an employee, will be taken into account when
determining an individual’s entitlement to various government provided benefits, and forms part of the
‘adjusted taxable income’ calculation.
...the full article follows
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The Taxpayer
5 July 2010 www.taxpayer.com.au
Issue 1 • 2010/2011
Reportable fringe benefits and
superannuation
By Andy Nguyen
It is that time of year again where employers are required to issue payment summaries to their employees for
the year ended 30 June. One of the items required to be recorded on a payment summary are any reportable
fringe benefits which may arise from the provision of fringe benefits to employees during the year. This article
considers what a reportable fringe benefit is and outlines situations where certain fringe benefit amounts, while
not reportable, may still have other implications.
Determining reportable fringe benefits
Payment summaries, detailing an employee’s
remuneration and taxes withheld, allowances and
reportable fringe benefits are required to be issued to
employees by 14 July of each year.
A reportable fringe benefit amount is required to be
disclosed on an employee’s payment summary where
the taxable value of the benefits provided (ie, the pregross up values) during the FBT year exceeds $2,000
(ie. from 1 April to 31 March), notwithstanding that the
disclosure relates to the year ended 30 June.
The reportable fringe benefit amount is determined
by grossing-up the taxable value of the benefits for
that individual employee by the type 2 gross-up rate of
1.8692. This applies irrespective of whether the amount
is required to be grossed up by a type 1 or 2 rate when
the employer determines their FBT liability.
Note: The minimum reportable fringe benefit amount will
be $3,738 ($2,000 x 1.8692). Any amount below this value
is not required to be disclosed.
In addition, if an employee leaves their employment
between 31 March and 30 June (say 2010), any reportable
fringe benefits provided during that time would need to
be reported on a payment summary for the following
income year (ie. 2011).
Excluded benefits
Benefits provided which do not give rise to a taxable
value and hence FBT, do not need to be disclosed in an
employee’s payment summary. These include benefits
which satisfy the ‘otherwise deductible rule’ such as
work related expenses, situations where the employee
has made a contribution which reduces the taxable value
to nil, or benefits that do not fall within the meaning
of a fringe benefit, such as certain superannuation
contributions (discussed in detail below).
Further, there are some benefits which are not required
to be included in the reportable fringe benefit amount.
Referred to as ‘excluded benefits’, these include but are
not limited to:
•
the provision of meal entertainment (irrespective
of whether the 50/50 split method or 12 week
register method is used)
•
car parking fringe benefits (not car parking
expenses paid for or reimbursed)
•
fringe benefits relating to entertainment facility
leasing expenses (eg. hiring of corporate boxes)
•
car benefits for employees using a shared or
pooled vehicle which is employer provided and
shared at the directive of the employer
•
certain benefits provided to employees residing
in a ‘remote area’ such as fuel, cost of travel to a
major Australian population and remote housing
assistance, and
•
certain benefits provided to Defence Force
members such as housing assistance, reunion
travel and removal and storage costs.
Benefits cannot be excluded merely because they are
provided to a number of employees, rather than a single
employee (typically referred to as ‘shared benefits’). If a
benefit provided to multiple employees is a reportable
benefit, the employer must determine a reasonable basis
upon which to allocate a proportion of the value to all
employees who have shared the fringe benefit.
Consequences of reportable fringe
benefits
While the grossed-up amount of reportable fringe
benefits included on a payment summary does not
represent assessable income, the amount will be taken
into account for the purposes of determining access
to various government benefits, calculating certain
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Reportable fringe benefits and superannuation
liabilities and the availability of particular tax deductions.
These include:
•
assessing liability for the Medicare Levy Surcharge
•
the availability of the mature age tax offset and/or
senior Australian’s tax offset
•
determining entitlement to a deduction for
personal superannuation contributions
•
A
motor
vehicle under a
novated
lease
arrangement.
This is provided
to Janet under a
salary sacrifice
arrangement. The
provision of the
vehicle satisfies
the definition of a
‘car fringe benefit’.
The
employee
contributions
method is used
by the company
in providing the
vehicle such that
the taxable value
from the provision of the vehicle is nil.
•
A mobile phone for which her costs are paid. The
phone is used strictly for business purposes. The
total cost is $700.
•
As a bonus, she was provided with an all-expensespaid holiday to the Northern Territory which
included flights and accommodation costs totalling
$4,000.
If the person is engaged in an ‘employment activity’
during the year, they must satisfy the maximum
earnings test (ie. 10% rule) in order to be entitled
to a deduction for a personal contribution. Broadly,
the rule requires the person’s employment income,
reportable fringe benefits and reportable employer
superannuation contributions in relation to their
employment activities, to be less than 10% of
the aggregate of their total assessable income,
reportable fringe benefits and reportable employer
superannuation contributions.
•
determining entitlement to a superannuation
co-contribution
•
determining entitlement to a tax offset for a
spouse superannuation contribution
•
calculating a taxpayer’s Higher Education Loan
Program liability repayment
•
child support obligations
•
income-tested government benefits (such as family
tax benefit), and
(All amounts quoted above are GST-inclusive amounts.)
•
calculating ‘adjusted taxable income’ in order to
ascertain whether deductions subject to the noncommercial loss provisions will be quarantined.
What is the reportable fringe benefit amount required
to be disclosed by Janet’s employer in her payment
summary?
The following example illustrates a typical scenario
involving various benefits which are both included and
excluded from the reportable fringe benefit amount.
Example: Reportable Fringe Benefits
During the FBT year ended 31 March 2010, Janet, a
sales manager, received the following benefits from her
employer (a full-FBT employer):
•
•
A car park beneath her employer’s premises – the
car park benefit is valued at $2,400 for the year
(using the statutory formula method). On days
where Janet had forgotten her car parking pass, her
employer would reimburse her for car parking costs
she incurred in parking at a nearby commercial car
park. The total reimbursement for the FBT year
was $200.
A corporate credit card arrangement under which
Janet is reimbursed for meal entertainment of
$2,000 incurred taking potential clients to lunch
and travelling and accommodation costs of $4,000
when she makes sales calls. The company uses a
50/50 split method for meal entertainment costs.
Step 1: Determine the taxable value of the benefits provided
•
Car parking fringe benefit = $2,400 (based on the
statutory formula method)
•
Car parking reimbursement = $200 (expense
payment fringe benefit).
•
Meal entertainment = $1,000 (based on 50/50 split
method).
•
Travelling and accommodation costs = nil
(‘otherwise deductible’ rule).
•
Car fringe benefit = nil (using employee
contributions method).
•
Mobile phone = nil (expense payment fringe
benefit – ‘otherwise deductible’ rule).
•
Holiday (flights and accommodation) = $4,000
(property fringe benefit).
Step 2: Determine the reportable fringe benefits amount
The total reportable fringe benefit amount to be
disclosed in Janet’s payment summary for the year
ended 30 June 2010 is:
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Reportable fringe benefits and superannuation
Car parking reimbursement. . . . . . . . . . $200.00
•
an individual agreement or award, or
Property fringe benefit (holiday). . . . $4,000.00
•
the trust deed governing the fund
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,200.00
would not constitute RESCs.
x 1.8692 (type 2 gross-up)
Reportable fringe benefit amount. . . $7,850.64
In all other situations where an employer contributes
more than the statutory superannuation guarantee
requirement, it will be necessary to examine the relevant
circumstances to ascertain whether any part of the
contribution is an RESC.
Notes:
•
As the total taxable value of fringe benefits provided
exceeds $2,000, Janet’s employer is required to
disclose the reportable fringe benefit amount in her
payment summary for the income year.
•
The provision of a car parking fringe benefit is not
required to be included in the reportable fringe
benefits, however the car parking reimbursement
is included as this is an expense payment fringe
benefit and not the provision of a car parking fringe
benefit.
•
The meal entertainment provided is not required
to be included in the reportable fringe benefits
amount.
Notwithstanding that the benefits being provided would
have been recorded as a type 1 benefit and grossed-up
using a rate of 2.0647 (as the amounts are GST inclusive),
the type 2 gross-up rate of 1.8692 is applied to all
benefits for reportable fringe benefit purposes.
Reportable employer superannuation
contributions
With effect from 1 July 2009, reportable employer
superannuation contributions (RESCs), while not
included in the reportable fringe benefits amount of an
employee, will be taken into account when determining
an individual’s entitlement to various government
provided benefits, and forms part of the ‘adjusted taxable
income’ calculation.
An RESC is a contribution for an individual:
a) by an employer (or associate) for the benefit of the
employee, and
It should not be assumed, however, that all employer
contributions in excess of the statutory superannuation
guarantee levels will be RESCs. For example, if an
employer maintained a standard employment contract
that provided for employer contributions of, say, 14%
for each employee, it should follow that the amount in
excess of 9% would not be an RESC due to the absence
of the necessary employee influence. Where employer
contributions exceed 14%, a different outcome is likely in
respect of the excess.
Example: Salary sacrifice superannuation and
reportable fringe benefits
Mr and Mrs Jones own all of the shares in ABC Co Pty Ltd.
They are also employees of the company. During the
income year ended 30 June 2010, Mr Jones is not paid a
salary but instead the company has made of contribution
of $50,000 into his self managed superannuation fund
under a salary sacrifice arrangement. Mr Jones received
no other fringe benefits during the income year.
Is ABC Co Pty Ltd required to disclose reportable fringe
benefit amounts with respect to the superannuation
contribution to Mr Jones payment summary?
No. The salary sacrificed superannuation contribution
is not required to be included in Mr Jones’ payment
summary as it is not considered to be a fringe benefit
under FBT law.
However, there may be other implications for Mr Jones:
•
The superannuation contribution exceeds the
superannuation guarantee amount which would be
required to be paid in respect of a salary of $50,000.
In the circumstances it would be concluded that
the level of contribution was influenced by Mr
Jones and therefore the excess would be classed
as an RESC pursuant to s16-182 of the Taxation
Administration Act. RESCs are included for income
test purposes under the new definition of ‘adjusted
taxable income’, and therefore taken into account
for the various purposes described above.
•
The salary sacrifice arrangement must be an
effective salary sacrifice arrangement, that is, the
arrangement must be undertaken prospectively in
relation to future earnings.
•
Mr Jones should be mindful of the contribution
b) either of the following applies:
i. the individual has, or might be reasonably
expected to have, the capacity to influence the
amount of the contribution
ii. the individual has, or might be reasonably
expected to have, the capacity to influence the
way the amount is contributed so that his or
her assessable income is reduced.
Contributions that an employer is required to make
under:
•
the terms of a federal or state law
(eg. superannuation guarantee contributions)
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Reportable fringe benefits and superannuation
cap, which for the 2009-10 income year is $25,000
unless the transitional cap of $50,000 applies due
to him being at least 50 years of age during the
2010 year.
Example: Increase in superannuation
contributions by employer
Ian is an employee for DEF Co Pty Ltd. His employer
makes additional annual contributions of $3,000 to
his nominated fund to cover the cost of insurance
premiums for group life and total and permanent
disability cover deducted from Ian’s superannuation
account. If Ian chose a different fund, the additional
employer contributions to cover the insurance premium
costs would not be made.
The contribution is in addition to the superannuation
guarantee requirements of 9%. Ian’s salary is not reduced
as a result of the additional contributions being made
by his employer nor is his salary increased if he cancels
the cover.
Is this additional superannuation contribution a fringe
benefit, capable of being a reportable fringe benefit?
No. The amount paid by DEF Co as an employer
contribution of $3,000 into Ian’s superannuation fund is
considered to fall within the meaning of a ‘contribution’
as it is considered to have increased the capital of the
fund and is made for the benefit of Ian as employee (refer
to TR 2010/1).
On this basis, the contribution is not considered to be a
fringe benefit and therefore, no reportable fringe benefit
amount should arise. These facts are similar to those
considered in ATO ID 2010/12.
The amount of $3,000 would satisfy the meaning of an
RESC in accordance with s19-182 TAA if the decision
by Ian to nominate a particular fund resulted in the
additional employer contribution.
Comment
While the amount of reportable fringe benefit should
be readily ascertainable, the same may not be true
of RESCs. Employees should take care to identify the
circumstances in which an RESC may arise because of the
potential impact on other aspects of their tax affairs. n
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