non‑profit
Non‑profit
organisations
guide
NAT 14947–06.2006
SEGMENT
AUDIENCE
FORMAT
PRODUCT ID
Fringe benefits
tax for non‑profit
organisations
Help for non‑profit organisations to understand their fringe
benefits tax concessions and obligations.
You should use this guide if
you are involved in the fringe
benefits tax (FBT)
administration of a non‑profit
organisation.
Tax advisers, employers,
treasurers, accountants and
staff employed by non‑profit
organisations to look after FBT
matters should find this guide
a useful reference.
Our commitment to you
We are committed to providing you with advice and information
you can rely on.
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is correct. If you follow advice in this publication and it turns out
to be incorrect, or it is misleading and you make a mistake as a
result, we must still apply the law correctly. If that means you
owe us money, we must ask you to pay it. However, we will not
charge you a penalty or interest if you acted reasonably and in
good faith.
If you make an honest mistake when you try to follow our advice
and you owe us money as a result, we will not charge you a
penalty. However, we will ask you to pay the money, and we
may also charge you interest.
If correcting the mistake means we owe you money, we will pay
it to you. We will also pay you any interest you are entitled to.
You are protected under GST law if you have acted on any GST
advice in this publication. If you have relied on GST advice in this
publication and that advice later changes, you will not have to
pay any extra GST for the period up to the date of the change.
Similarly, you will not have to pay any penalty or interest.
If you feel this publication does not fully cover your
circumstances, please seek help from the Tax Office or a
professional adviser.
The information in this publication is current at June 2006.
We regularly revise our publications to take account of any
changes to the law, so make sure that you have the latest
information. If you are unsure, you can check for a more recent
version on our website at www.ato.gov.au or contact us.
© Commonwealth of Australia 2006
published by
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Australian Taxation Office
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June 2006
JS 4610
ABOUT FRINGE BENEFITS TAX FOR
NON‑PROFIT ORGANISATIONS
You should use this guide if you are involved in the
administration of fringe benefits tax (FBT) for a non‑profit
organisation.
Non‑profit organisations include charities, clubs, societies and
associations.
If you are a non‑profit organisation this guide will help you:
ndecide
whether you have a fringe benefits tax (FBT) obligation
the FBT concessions that apply to you, and
ncalculate your fringe benefits liability.
nrecognise
We explain how FBT works and the FBT concessions available
to certain non‑profit organisations.
We:
n detail the fringe benefits most commonly provided
n explain how to calculate the FBT payable for these benefits
n let you know what records you need to keep in relation to FBT
n explain in brief the less commonly provided benefits, and
n let you know where you can locate more detailed information.
Although we generally refer only to fringe benefits
provided to employees by an employer, fringe benefits can
also be provided to employees’ associates (such as a family
member). Further, fringe benefits can also be provided by
an associate of the employer or a third party by
arrangement with the employer.
Some technical terms used may be new to you. They are
explained in the definitions list on page 89.
Where we use the term ‘you’, we are referring to your non‑profit
organisation.
Fringe benefits tax for non‑profit organisations
iii
contents
About Fringe benefits tax for non‑profit organisations
iii
01
02
FBT CONCESSIONS AND ENDORSEMENT
11
ABOUT FRINGE BENEFITS TAX 1
Do FBT concessions apply to your organisation?
(including table of concessions)
12
What is a fringe benefit?
2
Explanation of terms
14
Who pays fringe benefits tax?
3
Charity tax concessions
14
Do you have employees, volunteers or contractors?
3
Charity
14
Meaning of employee
4
Charitable fund
14
Meaning of volunteer
4
Charitable institution
14
Meaning of contractor
4
Public benevolent institution
14
What is not subject to fringe benefits tax?
5
Health promotion charity
15
Exemptions from fringe benefits tax
5
Hospitals (public and non‑profit)
15
5
Rebatable employer
15
6
Religious institution
15
Common fringe benefits
6
Religious practitioner
15
Less common fringe benefits
6
Religious institutions and live‑in carers
16
Salary sacrifice or salary packaging
8
Religious institutions and domestic employees
16
GST and fringe benefits
8
Non‑profit company
16
Reducing the value of your fringe benefits tax
9
Minor benefits
Types of fringe benefits
Exemptions from FBT capping measures
16
Otherwise deductible rule
9
Meal entertainment
16
Employee contributions
9
Entertainment facility leasing expenses
16
Reportable fringe benefits
9
Car parking
16
iv
Reportable fringe benefits
17
Applying for endorsement
17
Fringe benefits tax for non‑profit organisations
03
05
WHAT TO DO IF YOU PROVIDE
FRINGE BENEFITS
19
EXPENSE PAYMENT FRINGE BENEFITS
69
1 Calculate your FBT liability
20
Common expenses reimbursed or paid for by employers
70
Public benevolent institutions (other than hospitals)
and health promotion charities
Exempt expense payment benefits
71
20
How to calculate the taxable value of an expense
payment fringe benefit
Public and non‑profit hospitals and public
ambulance services
72
20
Special records you need to keep for expense
payment fringe benefits
73
Worked example – capping threshold not exceeded 22
Worked example – capping threshold exceeded
Rebatable organisations
25
28
Worked example – rebate threshold not exceeded
32
Worked example – rebate threshold exceeded
36
2Reportable fringe benefits 41
3Record keeping
43
4Register for FBT
43
5 Lodge a return and pay FBT 44
04
06
TAX‑EXEMPT BODY ENTERTAINMENT
FRINGE BENEFITS
75
Are you a tax‑exempt body?
76
Is the benefit entertainment?
76
Do you provide food or drink that is entertainment?
77
Does an exemption apply?
78
Is the benefit a tax‑exempt body entertainment
fringe benefit?
79
Common circumstances in which food or drink
is provided
79
CAR FRINGE BENEFITS
47
What is a car fringe benefit?
48
Taxable value of food and drink that is tax‑exempt body
entertainment
83
What is a car?
48
Meal entertainment fringe benefits
83
Exempt car benefits
49
Do you provide recreational entertainment?
85
How to calculate the taxable value of a car fringe benefit 49
Using the statutory formula method
49
If the benefit is recreational entertainment, does
an exemption apply?
85
Sample worksheet – statutory formula method
52
Taxable value of recreational entertainment
86
Worked example – statutory formula method
54
Keep the appropriate records
86
Using the operating cost method
56
Reporting requirements
87
Sample worksheet – operating cost method
58
Worked example – operating cost method 60
Providing a benefit which is not entertainment or
tax-exempt body entertainment
87
DEFINITIONS
89
MORE INFORMATION
91
INDEX
92
How to calculate the taxable value of a benefit
provided as a vehicle other than a car
62
Special records you need to keep for car fringe benefits
63
Special records you need to keep for vehicles
other than cars 67
Fringe benefits tax for non‑profit organisations
vi
Fringe benefits tax for non‑profit organisations
ABOUT FRINGE
BENEFITS TAX
This chapter outlines fringe
benefits tax (FBT) and how it
affects non‑profit organisations,
the different types of fringe
benefits and which type of
organisations need to pay FBT.
It also includes a checklist to
help you work out if you are
providing fringe benefits.
01
01 about fringe benefits tax
What is a fringe benefit?
A fringe benefit is a ‘payment’ to an employee but in a different
form to salary and wages.
According to the fringe benefits tax (FBT) legislation, a fringe
benefit is a benefit provided in respect of employment. This
effectively means a benefit provided to somebody because they
are an employee. The employee may even be a former or future
employee.
Non‑profit organisations that provide non‑cash benefits to their
employees may have fringe benefits tax (FBT) obligations.
Benefits include rights, privileges or services. For example, a
fringe benefit may be provided when an employer:
n allows an employee to use a work car for private purposes
n gives an employee a cheap loan
n pays an employee’s green fees at golf days
n provides entertainment by way of food or drink
n reimburses an expense incurred by an employee, such as
school fees, or
n enters into a salary sacrifice arrangement with an employee.
Even if your organisation is exempt from income tax,
you may still have to pay FBT. The FBT year is different to
the income tax year and runs from 1 April to 31 March.
A checklist to help you work out if you are already providing a
fringe benefit to your employees follows.
If you answer yes to any of the following you may have
an FBT liability and may need to read all or parts of this
guide.
YES NO
Do your employees take cars home and
garage them overnight, even if only for security
reasons?
Do you make a car or other vehicles owned by
the business available to employees for private
use?
Do you sell cars to employees at below market
value?
Do any of your employees have a salary
package arrangement in place?
Have you paid for, or reimbursed, an expense
incurred by an employee?
Have you provided your employees with goods
at a lower price than they are normally sold to
the public?
Have you provided property, either free or at a
discount, to employees?
Do you provide a house or unit of
accommodation to your employees?
Do you provide employees with living away
from home allowances?
Do you provide entertainment by the way of
food, drink or recreation to your employees?
Do you provide loans at reduced interest rates
to employees?
Have you released an employee from an owed
debt?
Fringe benefits tax for non‑profit organisations
01 about fringe benefits tax
Who pays fringe
benefits tax?
Do you have employees,
volunteers or
contractors?
As an employer, you have to pay FBT, even if the benefit is
provided by an associate or by a third party under an
arrangement with you. For example, you may deal with a
supplier who, in turn, provides free goods to your employees.
If your organisation provides a fringe benefit to its employees or
to associates of its employees, your organisation may have a
fringe benefits tax liability. This is separate from income tax and
is calculated on the taxable value of the fringe benefits provided.
You have to pay FBT if:
n you are a sole trader
n you are a partnership
n you are a trust
n you are a corporation
n you are a unincorporated association
n you are a government body, or
n you have to pay other taxes such as income tax.
It is important to determine whether an individual is an
employee, volunteer or, contractor of your organisation. This
status may affect the tax treatment between the individual and
the organisation. You should always consider the facts and
circumstances of each individual when determining whether
they are an employee, volunteer or independent contractor.
Benefits can be provided by an employer, an associate of the
employer, or by a third party under an arrangement with the
employer to an employee. An employee can be a current, future
or former employee.
To help you decide whether a benefit is provided in respect of
employment, ask yourself:
‘Would I have provided the benefit if the person had not been
an employee?’
For the purposes of FBT, an employee is a person who receives
(or is entitled to receive) salary or wages, or a benefit that has
been provided in respect of their employment. A volunteer is not
paid for work. Reimbursing a volunteer for out‑of‑pocket
expenses does not cause them to become an employee.
Generally benefits provided to volunteers do not attract FBT. If
an organisation provides non‑cash benefits to workers in lieu of
salary and wages, FBT can apply.
As a general rule:
n volunteers do not have to pay tax on payments or benefits
they receive in their capacity as volunteers, and
n non‑profit organisations are not liable for fringe benefits tax
(FBT) on payments they make, or benefits they provide, to
volunteers or independent contractors.
To decide if a benefit is provided in relation to
employment, ask yourself whether you would have
provided the benefit if the recipient had not been an
employee.
Fringe benefits tax for non‑profit organisations
01 about fringe benefits tax
Meaning of employee
The meaning of employee for FBT purposes includes past,
present or future employees. Generally, an individual is
considered to be an employee if they:
n are paid for time worked
n receive paid leave (for example, sick, annual or recreation, or
long service leave)
n are not responsible for providing the materials or equipment
required to do their job
n must perform the duties of their position
n agree to provide their personal services
n work hours set by an agreement or award
n are recognised as part and parcel of the payer’s ‘business’,
and
n do not take commercial risks and cannot make a profit or loss
from the work performed.
Example: Employee
Michele is an employee of a retirement home. She takes
residents on outings using the retirement home’s car and is
entitled to use the car on the weekends for her own private
use. Michele has received a fringe benefit being the private
use of the car and FBT may be payable in this situation as
Michele is an employee of the non‑profit organisation.
Meaning of volunteer
There is no legal definition of the term ‘volunteer’ for tax
purposes. The dictionary explanation of a volunteer is someone
who enters into any service of their own free will, or who offers
to perform a service or undertaking.
A genuine volunteer does not work under a contractual
obligation for remuneration and would not be an employee or an
independent contractor.
Meaning of contractor
Contractors are those workers who are self‑employed and have
a contract with you to provide services. Generally, an individual
is considered to be a contractor if they:
n can exercise their own discretion as to how the contracted
services are to be performed
n are paid on the performance of the contract services
n provide their own tools and equipment
n can sub‑contract or delegate the work
n perform the services as specified in a contract with the
non‑profit organisation and provides additional services only
by agreement, and
n bear legal risk in respect of the work.
Example: Contractor
Brad, an electrician, is contracted to rewire a non‑profit
organisation’s new canteen. He is asked by the non‑profit
organisation to complete the work within a short timeframe
so that the canteen can be painted. Brad is paid on
completion of the work and is given some wine as a thank
you gift for completing the work within a short timeframe.
No FBT arises on the gift as Brad is not an employee of the
non‑profit organisation.
MORE INFORMATION
Taxation Ruling TR 2005/16 – Income tax: Pay as you go –
Withholding from payments to employees
PAYG withholding guide no. 2 – how to determine if workers
are employees or independent contractors (NAT 2780)
Volunteers and tax (NAT 4612)
Example: Volunteer
Matthew volunteers his time with a community radio
station. He spends time on marketing the radio station
around Brisbane. He is reimbursed for his fuel costs and
other minor expenses he incurs for the benefit of the
station. At Christmas time he is given a hamper worth $150
as a thank you gift. Matthew is not considered to be an
employee as the reimbursement he receives does not
amount to salary and wages. No FBT will arise on these
reimbursements or gift.
Fringe benefits tax for non‑profit organisations
01 about fringe benefits tax
What is not subject to
fringe benefits tax?
Exemptions from fringe
benefits tax
The following are not fringe benefits.
n Payments of salary or wages.
n Shares acquired under employee share acquisition schemes.
n Employer contributions to complying superannuation funds.
n Benefits provided by public benevolent institutions, health
promotion charities, public ambulance services, public and
non‑profit hospitals subject to capping thresholds.
n Benefits provided by religious institutions to their religious
practitioners, in certain circumstances.
Some of the common benefits that are exempt from FBT such
as certain work‑related items, minor benefits and relocation
expenses are outlined here.
A number of benefits are exempt from FBT. Exempt benefits are
not only exempt from FBT, they are also (with one exception)
exempt from income tax in the hands of the employee to whom
they are provided. (Refer to chapter 20 of Fringe benefits tax: a
guide for employers (NAT 1054) for details of the exception in
relation to car expenses)
Benefits that are exempt from FBT are exempt for all employers,
regardless of your organisation type, are:
n a mobile phone or a car phone used mainly in the employee’s
employment
n protective clothing required for the employee’s employment
n a briefcase
n a calculator
n a tool of trade
n an electronic diary, personal digital assistant (PDA) or
similar item
n a notebook computer, a laptop computer or a similar portable
computer (limited to the purchase or reimbursement of one
computer for each employee a year)
nfrom 1 April 2006, portable printers designed specifically for
use with a notebook computer, a laptop computer or a similar
portable computer
n some taxi travel, and
n in‑house health care facilities.
Minor benefits
Some minor benefits you provide may be exempt from FBT. This
is the case where the value of the benefit is less than $100 and
it would be unreasonable to treat it as a fringe benefit where:
n you
provide the benefit infrequently and irregularly
taxable value of the minor benefit and other similar or
identical benefits (if they were treated as fringe benefits) is low
n the likely total taxable value of the minor benefit and other
associated benefits is low – associated benefits are those
benefits provided in conjunction with the minor benefit, for
example, accommodation, board, electricity and telephone
benefits provided as part of an accommodation package
n it is difficult to calculate the taxable value of the benefit and
any associated benefits, or
n the benefit is provided as a result of a contingency (for
example, unexpected overtime).
n the
The minor benefit exemption is treated differently in
relation to entertainment where a tax‑exempt body
organisation is involved. Refer to chapter 6 for more details.
The Government has announced that from 1 April 2007, the
minor benefits threshold will increase from $100 to $300.
Fringe benefits tax for non‑profit organisations
01 about fringe benefits tax
Types of fringe benefits
Example: Exempt minor benefit
The manager of a non‑profit organisation gives flowers to
Jane, an employee, for the birth of her daughter. The
flowers have a taxable value of less than $100. This is an
exempt minor benefit.
FBT law identifies various types of fringe benefits and specific
valuation rules for each type of benefit.
Common fringe benefits
We provide you with a detailed chapter about:
n cars (chapter 4)
n expense payments (chapter 5), and
n tax-exempt body entertainment (chapter 6).
Example: Not exempt minor benefit
Less common fringe benefits
If the manager gave Jane a pram valued at $350 instead of
the flowers, this would not be an exempt minor benefit
because the value of the pram is more than $100.
The manager of a non‑profit organisation gives flowers to
the organisation’s administrative assistant each week. The
value of the flowers is $15. Because the flowers are
provided on a regular basis, this is not an exempt minor
benefit.
We provide an overview of each of the less commonly provided
benefits. To simplify the descriptions, the following overviews of
these types of benefits refer only to employer and employee.
However, they can equally apply where the benefit is provided
by a third party under an arrangement with the employer, or
where the benefit is provided to an associate of the employee.
For more information about these types of benefits
please refer to Fringe benefits tax: a guide for employers
(NAT 1054)
Loan fringe benefits
You provide a loan fringe benefit if you give an employee a loan
and charge no interest rate on it, or a low rate of interest. A low
rate of interest is one that is less than the statutory rate of
interest which is published by the Tax Office each year, usually in
April.
If an employee owes money to you or to the business, you may
also be providing a loan fringe benefit.
For example, if an employee owes you a debt but you don’t
enforce payment after the debt becomes due, the unpaid
amount is treated as a loan to the employee. Such a loan starts
immediately after the due date at the rate of interest, if any, at
which the interest accrues on the unpaid amount.
This does not apply if the employee owes money under the
same terms and conditions as an ordinary customer.
Debt waiver fringe benefits
You provide a debt waiver benefit if you waive or release an
employee from the obligation to pay a debt or loan (see above).
For example, if you sell goods to an employee and later tell
them not to bother about paying the invoiced amount, you have
provided a debt waiver fringe benefit.
An employee debt that you write off as a genuine bad debt is
not a debt waiver fringe benefit.
Fringe benefits tax for non‑profit organisations
01 about fringe benefits tax
Housing fringe benefits
If you give an employee the right to use a unit of
accommodation and that unit of accommodation is where the
employee usually lives, the right to use the unit of
accommodation is a housing fringe benefit.
A unit of accommodation includes:
n a house, flat or home unit
n accommodation in a house, flat or home unit
n accommodation in a hotel, motel, guesthouse, bunkhouse or
other living quarters
n a caravan or mobile home, or
n accommodation on a ship or other floating structure.
The employee doesn’t have to have exclusive use of the
accommodation.
Board fringe benefits
A board fringe benefit may arise if you provide an employee with
accommodation and there is an entitlement to at least two
meals a day. The meals may be a board fringe benefit.
Property fringe benefits
A property fringe benefit may arise when an employer provides
an employee with property, either free or at a discount. Property
includes:
n all goods, for example, items of clothing or a cylinder of
heating gas
n real property, for example, land and buildings, and
n other property, for example, shares.
Car parking fringe benefits
A car parking fringe benefit may arise if an employer provides
car parking to an employee and:
n there is a commercial car parking station within a
one‑kilometre radius of where the car is parked, and
n that commercial car parking station charges a fee for all day
parking that is more than the car parking threshold.
The car parking threshold is indexed in line with the consumer
price index. It is announced each year in a tax determination,
usually published in April.
Examples include:
n meals provided in a dining facility located on a remote
construction site, oil rig or ship, and
n meals provided to a live‑in housekeeper or to resident
teachers in a boarding school.
Residual fringe benefits
Airline transport fringe benefits
Residual benefits could include providing services and
assistance such as:
n travel
n the performance of professional or manual work
n the use of property
n providing insurance cover (for example health insurance cover
under a group policy you take out for the benefit of your
employees), and
n giving an employee the right to private use of a vehicle that is
not classed as a car under FBT law.
An airline transport fringe benefit may arise where employees of
an airline or travel agent are provided with free or discounted air
travel on a standby basis.
Living away from home allowance fringe benefits
If you pay an employee a living away from home allowance, you
are providing a living away from home allowance fringe benefit.
For FBT purposes, a living away from home allowance is an
allowance you pay to an employee to compensate them for any
additional expenses they incur and disadvantages they suffer
because they are required to live away from their usual place of
residence to do their work. Additional expenses do not include
expenses the employee could claim as an income tax
deduction.
Fringe benefits tax for non‑profit organisations
Any fringe benefit that is not subject to any of the above
categories is called a residual fringe benefit. A residual fringe
benefit may arise when you provide an employee with any right,
such as a privilege, service or facility, which is not one of the
specific types of fringe benefits already mentioned above.
Generally, where a benefit consists of both goods and services,
the goods component (property fringe benefit) and the services
component (residual fringe benefit) are valued separately.
However, when the person providing the benefit is in a business
where goods and services are provided together, for example,
carrying out repairs that entail the supply of spare parts, and the
benefit is of that kind, it is a residual fringe benefit.
01 about fringe benefits tax
Salary sacrifice or
salary packaging
A salary sacrifice arrangement (SSA) is also commonly referred
to as salary packaging or total remuneration packaging. It is an
arrangement between an employer and an employee where the
employee agrees to forgo part of their future entitlement to
salary or wages in return for the employer (or someone
associated with their employer) providing benefits of a similar
value. The employee is likely to place greater value on the
benefits provided under this arrangement than its cost to the
employer.
An effective salary sacrifice arrangement is an arrangement
between the employer and the employee detailing the amount
of salary or wages income to be sacrificed. The arrangement
should be entered into before the work is performed or the
employee becomes entitled to be paid. If this occurs after the
work has been performed the SSA will be ineffective.
Under an effective salary sacrifice arrangement:
n the employee pays income tax on the reduced salary
or wages
n the employer may be liable to pay FBT on the fringe benefits
provided, and
n salary sacrificed superannuation contributions are classified as
employer superannuation contributions (not employee
contributions) and are taxed in the superannuation fund under
tax laws dealing specifically with this subject.
MORE INFORMATION
Fringe benefits tax and salary sacrifice arrangements
(NAT 7424)
Taxation Ruling TR2001/10 (and Addendum) Income tax:
fringe benefits tax and superannuation guarantee: salary
sacrifice arrangements
GST and fringe benefits
A goods and services tax of 10% applies on most goods and
services supplied in Australia and on goods imported into
Australia. GST affects the calculation of your FBT liability.
To calculate a fringe benefits tax liability, the taxable amounts of
fringe benefits provided must be grossed‑up.
Grossing‑up means increasing the taxable value of a benefit to
reflect the gross salary an employee would have to earn at the
highest marginal tax rate (including Medicare levy) had they
received cash salary rather than the fringe benefit.
There are two separate gross‑up rates:
A higher (type 1) gross‑up rate of 2.0647
This rate is used where the benefit provider is entitled to a GST
credit in respect of the provision of a benefit.
A lower (type 2) gross‑up rate of 1.8692
This rate is used if the benefit provider is not entitled to claim
GST credits.
The FBT rate, currently 46.5%, is then levied on the grossed-up
amount of the benefits provided to your employees in order to
calculate your FBT liability. Chapter 3 has more details on how
to calculate your FBT liability.
Regardless of whether the benefits provided are type 1 or
type 2, the lower gross-up rate of 1.8692 should be used for
reporting on employees’ payment summaries.
Prior to the FBT year 1 April 2006 – 31 March 2007,
the FBT rate was 48.5%. The type 1 gross-up rate was
2.1292 and the type 2 gross-up rate was 1.9417. The
lower gross-up rate of 1.9417 should be used for reporting
on payment summaries for the income year ending
30 June 2006.
Fringe benefits tax for non‑profit organisations
01 about fringe benefits tax
Reducing the value of
your fringe benefits tax
Reportable fringe
benefits
There are a range of FBT concessions available to non‑profit
organisations. The concession is a reduction in the taxable value
of the fringe benefit that results in a reduced amount of FBT, or
even no FBT, being payable. Chapter 2 discusses this in more
detail.
As an employer, you are required to record the value of fringe
benefits provided to each of your employees. In addition, you
may also have to report the value of certain benefits on your
employees’ payment summaries, including the notional value of
certain exempt benefits.
There are other various ways you can reduce your FBT liability –
sometimes to nil, by:
n replacing the fringe benefits with cash salary
n providing benefits that your employees would be entitled to
claim as an income tax deduction if they had paid for the
benefits themselves
n providing benefits that are exempt from FBT, or
n using employee contributions.
It is important to note that even if your organisation is not liable
to pay FBT, you may still have to report the grossed‑up taxable
value of benefits provided to your employees in an FBT year
(1 April to 31 March) on their payment summaries for the
corresponding income year (1 July to 30 June).
Otherwise deductible rule
MORE INFORMATION
Chapter 3 of this guide and Reportable fringe benefits –
facts for employees (NAT 2836)
If you provide something as a benefit to an employee that they
would normally be able to claim as an income tax deduction,
you can reduce the taxable value of the benefit by the amount
they would have been able to claim. This is called the ‘otherwise
deductible’ rule.
For example, if an employee incurred a work expense, it would
be wholly deductible for income tax purposes. Under the
otherwise deductible rule, if you reimburse the employee for all
or part of this expense, the taxable value of the expense
payment fringe benefit would be zero.
Employee contributions
In most categories, if an employee makes a payment to you as
a contribution towards the cost of providing a fringe benefit, the
taxable value of that fringe benefit is reduced by the amount of
the payment. Such a payment is referred to as an employee
contribution (or recipient’s contribution).
Some important points to note about employee
contributions are:
n an employee contribution may be made only from an
employee’s after‑tax income
n you cannot use an employee contribution towards a
particular fringe benefit to reduce the taxable value of any
other fringe benefit
n if you are not an income tax exempt organisation you may
have to include an employee contribution in your assessable
income (as a general rule, the costs you incur in providing a
fringe benefit are income tax deductible), and
n when calculating the taxable value of either a type 1 or type 2
benefit, you use the full GST‑inclusive amount of the
contribution to reduce the taxable value of the benefit.
Fringe benefits tax for non‑profit organisations
01 about fringe benefits tax
10
Fringe benefits tax for non‑profit organisations
FBT CONCESSIONS
AND ENDORSEMENT
This chapter outlines the
concessions available to
particular types of non‑profit
organisations and provides
information to help you
determine if a concession
applies to your organisation.
This chapter also provides
information regarding
endorsement requirements.
For the purposes of this chapter
we have grouped non‑profit
organisations into categories.
02
02 FBT CONCESSIONS AND ENDORSEMENT
Do FBT concessions apply
to your organisation?
Few tax concessions apply to all organisations in the non‑profit
sector – they tend to apply to particular types of non‑profit
organisation.
An endorsed charity’s details are recorded on the Australian
Business Register at www.abr.business.gov.au so that the
charity’s endorsements for tax concessions can be viewed by
the public.
Charities that want to access FBT concessions from
1 July 2005 must be endorsed by the Tax Office to access
the FBT exemption or FBT rebate.
A summary of FBT concessions available to non‑profit
organisations is in the following table. Explanations of the
terms used in the table and other terms necessary are
provided after the table.
FBT CONCESSIONS AVAILABLE TO NON‑PROFIT ORGANISATIONS
Type of organisation,
entity or employer
Fbt concessions
Endorsement for fbt
Charitable funds
refer to page 14
No FBT concessions available
No FBT endorsement required.
Charitable institutions
refer to page 14
FBT rebate (capped at $30,000)
Endorsement required from 1/7/05 to
access the FBT rebate subject to a
capping threshold of $30,000.
Public benevolent institution
(other than public hospitals)
refer to page 14
Health promotion charities
refer to page 15
Qualifying employers are entitled to have their
liability reduced by a rebate equal to 48% of the
gross FBT payable (subject to a $30,000
capping). If the total grossed‑up taxable value of
benefits is more than $30,000 a rebate cannot be
claimed for the FBT liability on the excess
amount.
FBT exemption (capped at $30,000)
As a PBI or health promotion charity benefits you
provide to your employees are exempt from FBT
where the total grossed‑up value of certain fringe
benefits for each employee during the FBT year is
$30,000 or less.
Endorsement required from 1/7/05 to
access the FBT exemption subject to
the capping threshold of $30,000.
If your employees receive grossed‑up benefits
above this threshold you are liable for FBT on the
excess (or the aggregate non‑exempt amount).
Public hospitals
refer to page 15
Non‑profit hospitals
refer to page 15
Public ambulance service
FBT exemption (capped at $17,000)
No FBT endorsement required
Benefits provided by public and non-profit
hospitals and public ambulance services are
exempt from FBT if the grossed‑up taxable value
of certain benefits provided to each employee is
$17,000 or less.
These entities will not need to apply for
endorsement to access this concession
as they are not charities
The $17,000 threshold will apply regardless of
whether the organisation is also a PBI.
12
Fringe benefits tax for non‑profit organisations
02 FBT CONCESSIONS AND ENDORSEMENT
Type of organisation,
entity or employer
Fbt concessions
Endorsement for fbt
Certain non‑government and
non‑profit organisations –
also referred to as ‘rebatable
employers’
FBT rebate (capped at $30,000)
Endorsement required from 1/7/05 to
access the FBT rebate subject to a
capping threshold of $30,000.
eg. public education
institutions; employer
associations
refer to page 15
Religious institutions
refer to page 15
Non‑profit company
refer to page 16
Qualifying employers are entitled to have their
liability reduced by a rebate equal to 48% of the
gross FBT payable (subject to a $30,000
capping). If the total grossed‑up taxable value of
benefits is more than $30,000 a rebate cannot be
claimed for the FBT liability on the excess
amount.
FBT rebate (capped at $30,000)
In addition, religious practitioners and certain
employees of religious institutions may be
entitled to other types of concessions as listed
on page 16:
No FBT concessions available
Religious institutions that are not
charities do not have to be endorsed
by the Tax Office to access the FBT
rebate concession.
However, religious institutions that are
charities will require endorsement from
1/7/05 to access the FBT rebate
concession.
No FBT endorsement required.
If your activities include caring for elderly or
disadvantaged people, you can provide exempt
benefits to live‑in carers. The condition for
exemption is the same as for religious institutions
listed on page 16.
Fringe benefits tax for non‑profit organisations
13
02 FBT CONCESSIONS AND ENDORSEMENT
Explanation of terms
Charity tax concessions
Charitable fund
Charity
A charitable fund is a fund established under an instrument of
trust or a will for a charitable purpose. The purposes set out in
the will or instrument of trust must be charitable. Charitable
funds mainly manage trust property, and/or hold trust property
to make distributions to other entities or people. In contrast, if
the trustee mainly carries on activities that are charitable, the
fund will be treated as a charitable institution and not as a
charitable fund.
Charities are required to be endorsed by the Tax Office to
access the following concessions.
n Income tax exemption.
n GST charity concessions.
n FBT rebate (subject to $30,000 capping threshold).
n FBT exemption (subject to either $17,000 or $30,000 capping
thresholds).
A charity is an entity established for altruistic purposes that the
law regards as charitable. The Tax Office does not set the
criteria to decide whether or not an organisation is a charity.
Criteria for deciding what is a charity have been established by
case law.
Charities include most religious institutions, aged persons
homes, homeless hostels, organisations relieving the special
needs of people with disabilities and societies that promote the
fine arts.
The characteristics of a charity are:
n it is an entity that is also a trust fund or an institution
n it exists for the public benefit or the relief of poverty
n its purposes are charitable within the legal sense of that term
n it is non‑profit, and
n its sole or dominant purpose is charitable.
A charitable purpose is one which the law regards as charitable.
Charitable purposes are any of the following purposes:
n the relief of poverty or sickness or the needs of the aged
n the advancement of education
n the advancement of religion
n other purposes beneficial to the community, and
n the provision of child care services on a non‑profit basis.
A statutory extension to the meaning of charity applies from 1 July
2004. The provision of child care services on a non‑profit basis is
accepted as a charitable purpose from this date.
Many community organisations are not charities. An entity is
not a charity if:
n it is primarily for sporting, recreational or social purposes, or
n it is primarily for political, lobbying or promotional purposes.
Government departments and instrumentalities carrying out the
ordinary functions of government are unlikely to be charities.
For more information to help you determine whether
your organisation is a charity see our publication Income tax
guide for non-profit organisations (NAT 7967).
14
To be this entity type your organisation must be a charity.
Charitable institution
To be this entity type your organisation must be a charity.
A charitable institution is an establishment, organisation or
association that is instituted and operated to advance or
promote a charitable purpose. An organisation’s purposes can
be found in its governing document/s and from its activities,
history and control. A charitable institution will carry on
charitable activities while a charitable fund mainly manages,
and/or holds trust property.
Public benevolent institution
A public benevolent institution (PBI) is a non‑profit institution
organised for the direct relief of poverty, sickness, suffering,
distress, misfortune, disability or helplessness. The
characteristics of a PBI are:
n it is set up for needs that require benevolent relief
n it relieves those needs by directly providing services to people
suffering from them
n it is carried on for the public benefit
n it is non‑profit
n it is an institution, and
n its dominant purpose is providing benevolent relief.
Organisations that may be PBIs include:
n hostels for the homeless
n disability support services
n hospitals and medical clinics
n disaster relief organisations, and
n refugee relief centres.
A PBI is distinct from a charitable institution. An institution with
charitable activities, but not having as its principal objects the
relief of poverty, sickness, suffering, distress, misfortune,
destitution or helplessness, is not a PBI. A charitable institution
may qualify as either a rebatable employer (see page 15) for
FBT purposes or as exempt from FBT if it is a health promotion
charity.
Fringe benefits tax for non‑profit organisations
02 FBT CONCESSIONS AND ENDORSEMENT
Health promotion charity
A health promotion charity is a non‑profit charitable institution
whose principal activity is promoting the prevention or control of
diseases in human beings. The characteristics of a health
promotion charity are that:
n its principal activity is promoting the prevention or control of
diseases in human beings, and
n it is a charity which is a charitable institution.
n non‑profit
organisations established to promote the
development of Australian information and communications
technology resources, and
n non‑profit organisations established to promote the
development of the agricultural, pastoral, horticultural,
viticultural, aquacultural, fishing, manufacturing or industrial
resources of Australia.
Examples of activities that can promote the prevention or
control of diseases include:
n providing relevant information to sufferers of a disease, health
professionals, carers and the public
n researching how to detect, prevent or treat diseases, and
n developing or providing relevant aids and equipment to
sufferers of a disease.
Religious institution
Hospitals (public and non‑profit)
An organisation that is established, controlled and operated by
family members and friends would not normally be an institution.
A hospital is an institution in which patients are received for
continuous medical care and treatment for sickness, disease or
injury. The provision of accommodation is integral to a hospital’s
care and treatment.
Clinics that mainly treat ambulatory patients who return to their
homes after each visit are not hospitals. However, day surgeries
that provide beds for patients to recover after surgery may be
hospitals.
Homes to provide nursing care for feeding, cleanliness and the
like are not hospitals. However, nursing homes for people
suffering from illness are accepted as hospitals.
Your organisation will be a religious institution if it is an
establishment, organisation or association that is instituted to
advance or promote religious purposes.
An institution may have the legal structure of an unincorporated
association or a corporation. However, incorporation is not
enough, on its own, for an organisation to be an institution. Its
activities, size, permanence and recognition will be relevant.
Example
A corporation is set up and controlled by a family. Its object
is to spread the gospel. The only activities are holding
assets and arranging for the father of the family to speak at
churches on some Sundays. The corporation is not an
institution.
An institution will be a religious institution if:
objects and activities reflect its character as a body
instituted for the promotion of some religious object, and
n the beliefs and practices of the members constitute a religion.
Hospices for the terminally ill will generally be hospitals. Minor
outpatient and nursing care will not prevent an institution being
a hospital.
n its
Non‑profit hospitals include those run by churches and religious
orders.
The term ‘religion’ is not confined to major religions such as
Christianity, Islam, Judaism, but also extends to Buddhism,
Taoism, Jehovah’s Witness, the Free Daist Communion of
Australia and Scientology. The categories of religion are not
closed. Nonetheless, to be a religion there must be:
n belief in a supernatural being, thing or principle, and
n acceptance of canons of conduct that give effect to that
belief, but that do not offend against the ordinary laws.
Rebatable employer
Rebatable employers are certain non‑government, non‑profit
organisations. Those that qualify for an FBT rebate include:
n certain religious, educational, charitable, scientific or public
educational institutions
n trade unions and employer associations
n non‑profit organisations established to encourage music, art,
literature or science
n non‑profit organisations established to encourage or promote
a game, sport or animal races
n non‑profit organisations established for community service
purposes
n non‑profit organisations established to promote the
development of aviation or tourism
Religious practitioner
A religious practitioner is someone who is:
n a minister of religion
n a student at an institution who is undertaking a course of
instruction in the duties of a minister of religion
n a full‑time member of a religious order, or
n a student at a college conducted solely for training people to
become a member of a religious order.
Subject to certain requirements, benefits provided by religious
institutions to religious practitioners are exempt if they relate
Fringe benefits tax for non‑profit organisations
15
02 FBT CONCESSIONS AND ENDORSEMENT
Exemptions from FBT
capping measures
principally to the practitioners’ pastoral duties or other duties
relating to the practice, study, teaching or propagation of
religious beliefs.
Religious institutions and live‑in carers
Where your activities include caring for elderly or disadvantaged
people, certain benefits you provide to employees are exempt.
The exemption relates to live‑in carers where the carer resides
with the elderly or disadvantaged person in residential
accommodation you provide. The benefits that may be exempt
include the employees’ live‑in accommodation, residential fuel,
meals or other food and drink.
Religious institutions and domestic
employees
Benefits you provide to live‑in and non‑live‑in domestic workers
are exempt in certain circumstances.
For a live‑in employee, the employee’s duties must principally
involve domestic or personal services for religious practitioners
and the practitioners’ relatives residing with them. The benefits
that may be exempt include the employees’ live‑in
accommodation, residential fuel, meals or other food and drink.
For a non‑live‑in employee, the employee’s duties must also
principally involve domestic services for religious practitioners
and the practitioners’ relatives residing with them. The exempt
benefits are limited to food and drink consumed by the
employee while carrying out employment‑related duties.
Certain employers are entitled to an exemption from FBT for the
following types of benefits.
Meal entertainment
The provision of benefits that constitute the provision of meal
entertainment are exempt from FBT when provided by PBIs,
health promotion charities, public hospitals, non‑profit hospitals
and public ambulance services.
Entertainment facility leasing expenses
Entertainment facility leasing expenses are exempt from FBT
when incurred by PBIs, health promotion charities, public
hospitals, non‑profit hospitals and public ambulance services.
Car parking
You are exempt from FBT in relation to car parking fringe
benefits and car parking expense payment fringe benefits if you
are one of the following employers:
n a non‑profit scientific institution
n a religious institution
n a charitable institution
n a public educational institution, or
n a government body where the employee is exclusively
employed in, or in connection with, a public educational
institution.
Non‑profit company
For your organisation to be a non‑profit company:
n it must be a company that is not carried on for the purposes
of profit or gain to its individual members, and
n its constituent documents must prohibit it from making any
distribution, whether in money, property or otherwise, to its
members.
Your organisation can be a non‑profit company and still make a
profit. Any profits it makes must be used to carry out its
purposes. The profits must not be distributed to the members.
The prohibition on distributions applies while the organisation is
operating and on its winding up. If it permits the organisation’s
members to transfer the assets to themselves on winding up, it
is not a non‑profit company.
A non‑profit company can make payments to its members as
bona fide remuneration for services they have provided to it, and
as reasonable compensation for expenses incurred on behalf of
the organisation.
Organisations carried on for the joint or common benefit of their
members can qualify as non‑profit companies. An example
would be a professional association established to advance the
professional interests of its members.
16
Fringe benefits tax for non‑profit organisations
02 FBT CONCESSIONS AND ENDORSEMENT
Reportable fringe
benefits
If the value of certain fringe benefits provided to your employees
or their associates exceeds $1000 in an FBT year you must
record the grossed‑up taxable value of those benefits on their
payment summaries for the corresponding income year. This
requirement applies even if your organisation is not liable to pay
FBT. Refer to chapter 03 for more information.
The Government has announced that from
1 April 2007, the fringe benefits reporting exclusion
threshold will increase from $1000 to $2000.
Applying for endorsement
Charities that are not currently endorsed as income tax exempt
charities and that want to access charity tax concessions will
need to apply for endorsement using the Application for
endorsement as a tax concession charity (NAT 10651).
These charities can indicate on their application form that
they want to be endorsed for some concessions and not
others. An endorsed charity’s details are recorded at
www.abr.business.gov.au
MORE INFORMATION
For more information about public benevolent institutions
and health promotion charities, refer to our publication
Giftpack for deductible gift recipients & donors (NAT 3132).
For more information about applying for endorsement refer
to the Instructions for endorsement as a tax concession
charity (NAT 10652).
For more information on reportable fringe benefits refer to
our publication Reportable fringe benefits – facts for
employees (NAT 2836).
Fringe benefits tax for non‑profit organisations
17
02 FBT CONCESSIONS AND ENDORSEMENT
18
Fringe benefits tax for non‑profit organisations
WHAT TO DO IF YOU
PROVIDE FRINGE
BENEFITS
03
In this chapter we outline the five
things you need to do if you
provide fringe benefits to your
employees.
You need to:
1 Calculate your FBT liability –
how to calculate how much
FBT you have to pay.
2Reportable fringe benefits –
report fringe benefits amounts
on your employees’ payment
summaries.
3Record keeping – keep the
necessary FBT records.
4 Register for FBT – how and
when to register for FBT.
5 Lodge a return and pay FBT –
when to lodge a return and
pay any FBT to the Tax Office.
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
1 Calculate your FBT
liability
We do not usually notify you of how much FBT you have to pay.
Rather, you self‑assess your FBT payable when you lodge your
FBT return. The FBT year begins on 1 April and ends on 31
March. The current rate of FBT is 46.5%, but this can change
from time to time.
Prior to the FBT year commencing 1 April 2006, the
FBT rate was 48.5%. The type 1 (higher) gross-up rate was
2.1292 and the type 2 (lower) gross-up rate was 1.9417.
The lower gross-up rate of 1.9417 is used for reporting on
payment summaries for the income year ended 30 June
2006. All calculations shown use the current FBT and
gross-up rates. The current gross-up rates are 2.0647 (type
1) and 1.8692 (type 2).
The taxable value of a fringe benefit is established from a series
of valuation rules. As previously discussed there are different
types of fringe benefit and each has specific rules for calculating
the taxable value.
You must allocate the taxable value of all fringe benefits, except
excluded fringe benefits, related to an FBT year to each relevant
employee. This is the employee’s individual fringe benefits
amount. Where you provide benefits to an associate of an
employee in respect of that employee’s employment, you
allocate the value to the employee, not to the associate.
The Tax Office has designed a web based calculator to
assist you in calculating your fringe benefits tax liability for
public benevolent institutions, health promotion charities
and rebatable employers after 1 April 2001. The $30,000
capping threshold only has been considered in this
calculator.
Public benevolent institutions (other
than hospitals) and health promotion
charities
If your organisation is a public benevolent institution (but not a
hospital), or a health promotion charity, benefits you provide to
your employees are exempt from FBT where the total
grossed‑up value of certain fringe benefits for each employee
during the FBT year is $30,000 or less.
The $30,000 capping threshold applies even if the employee
was not employed by you for the full FBT year. For example, if
you employed someone from October to March, and the total
grossed‑up value of the benefits you gave them was $25,000,
you would not have to pay FBT.
Public and non‑profit hospitals and
public ambulance services
Benefits provided by public hospitals and non‑profit hospitals
that are public benevolent institutions are exempt from FBT if
the grossed‑up taxable value of certain benefits provided to
each employee is $17,000 or less.
From 1 April 2004, benefits provided by public ambulance
services are exempt from FBT if the grossed‑up taxable value of
certain benefits provided to each employee is $17,000 or less.
This is consistent with the FBT treatment of employees of public
hospitals.
The $17,000 threshold applies even if the employee was not
employed by you for the full year.
Where your employees have been provided with grossed‑up
benefits above the $17,000 threshold, you are liable for FBT on
the amount of grossed‑up benefits above the $17,000.
Even though the amount of fringe benefits provided to
an employee may be below the capping threshold, you may
still be required to report the amount on the employee’s
payment summary (see page 41).
Calculating your FBT payable – PBI, health
promotion charity, public hospital, non-profit
hospital or public ambulance service
If you are a public benevolent institution, health promotion
charity, public hospital, non‑profit hospital or a public ambulance
service use the following steps to calculate your FBT payable.
The Tax Office has designed a web based calculator to
assist you in calculating your fringe benefits tax liability for
public benevolent institutions, health promotion charities
and rebatable employers after 1 April 2001. The $30,000
capping threshold only has been considered in this
application. If you do not have access to the web based
calculators, the steps below will help you calculate your
FBT payable.
In order to calculate your FBT payable, you must first calculate
the individual grossed‑up type 1 and type 2 non‑exempt
amounts.
If your employees have received grossed‑up benefits above the
$30,000 threshold, you are liable for FBT on the amount of
grossed‑up benefits above $30,000.
20
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Table 1: Calculating the individual grossed‑up type 1 and 2 non‑exempt amounts
Step
Action
Result
1
Establish what the employee’s individual fringe benefits amount would be if
the capping concession was not available.
$xxx
The individual fringe benefits amount is the value of all benefits other than
excluded benefits. See page 41 for a list of excluded fringe benefits.
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
3
Identify those fringe benefits not taken into account under amount 1 (that is
the result for step 1 minus the result for step 2).
4
Determine the employee’s share of the benefits that would be excluded
fringe benefits if the capping concession was not available. See page 41 for
a list of excluded fringe benefits.
$xxx
(Amount 1)
$xxx
(Amount 3)
$xxx
Benefits specifically not included in this calculation are:
n benefits that constitute the provision of meal entertainment
n benefits that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses.
5
Identify the GST‑creditable fringe benefits included in step 4.
6
Identify those excluded fringe benefits that are not taken into account under
amount 2 (that is, the result for step 4 minus the result for step 5).
7
Add amount 1 and amount 2 (that is, the results from step 2 plus the results
from step 5).
Type 1 individual base
non‑exempt amount
8
Use the following formula:
Individual grossed‑up type
1 non‑exempt amount
Type 1 individual base non‑exempt amount
$xxx
(Amount 2)
$xxx
(Amount 4)
X
FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
(That is, the results from step 7 x 2.0647).
9
Add amount 3 and amount 4 (that is, the results from step 3 plus the results
from step 6).
Type 2 individual base
non‑exempt amount
10
Use the following formula:
Individual grossed‑up type
2 non‑exempt amount
1
Type 2 individual base X non‑exempt amount 1 – FBT rate
(That is, the results from step 9 x 1.8692).
After calculating the individual grossed‑up type 1 and type 2 amounts, follow the steps in table 2 to calculate your FBT payable.
Fringe benefits tax for non‑profit organisations
21
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Table 2 : Calculating your FBT payable
Step
Action
Result
1
For each employee add:
n the individual grossed‑up type 1 non‑exempt amount
(from table 1, step 8), and
n the individual grossed‑up type 2 non‑exempt amount
(from table 1, step 10).
The result is the individual
grossed‑up non‑exempt
amount.
2
Subtract the appropriate capping threshold from the individual grossed‑up
non‑exempt amount for each employee.
Capping thresholds
$30,000 for PBIs and health promotion charities,
$17,000 for public and non‑profit hospitals and public
ambulance services
If the individual grossed‑up
non‑exempt amount is less
than or equal to the
appropriate capping threshold
($30,000 or $17,000), the
amount calculated under this
step is nil.
3
Add together all the amounts calculated under step 2 for each employee.
The total is your aggregate
non‑exempt amount.
4
Multiply the result in step 3 by the FBT rate (currently 46.5%).
The result is your FBT
payable.
Example 1: capping thresholds not exceeded
An employee of a public ambulance service receives the following benefits during a FBT year:
A car fringe benefit
$2,000
GST taxable supply with an entitlement to GST credits
Restaurant meals
$1,000
Valued as expense payment fringe benefits. Excluded fringe benefit
with an entitlement to GST credits
Reimbursement of
school fees
$1,000
Expense payment fringe benefit. GST‑free supplies with no entitlement
to GST credits
Remote area rent
reimbursement
$2,000
Excluded fringe benefit for payment summary reporting purposes only.
No entitlement to GST credits.
In order to calculate their FBT payable, the public ambulance service must first calculate the individual grossed‑up type 1 and
type 2 non‑exempt amounts.
Table 1: Calculating the individual grossed‑up type 1 and 2 non‑exempt amounts
Step
Action
Result
1
Establish what the employee’s individual fringe benefits amount would be if
the capping concession was not available.
The individual fringe
benefits amount =
The individual fringe benefits amount is the value of all benefits other than
excluded benefits.
Car fringe benefit +
Reimbursement of school
fees.
$2,000 + $1,000 = $3,000.
The individual fringe
benefits amount is $3,000.
22
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
Result
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$2,000
(Amount 1)
3
Identify those fringe benefits not taken into account under amount 1 (that is
the result for step 1 minus the result for step 2).
4
Determine the employee’s share of the benefits that would be excluded
fringe benefits if the capping concession was not available. See page 41 for
a list of excluded fringe benefits.
Benefits specifically not included in this calculation are:
n benefits
that constitute the provision of meal entertainment
that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses.
n benefits
In this example, the employer
is entitled to GST credits for
the car fringe benefit.
$3,000 – $2,000 =
$1,000
(Amount 3)
$2,000
The excluded fringe benefits
are the restaurant meals
fringe benefit and the remote
area rent reimbursement. The
restaurant meals fringe
benefit is specifically
excluded from this
calculation.
$0
(Amount 2)
5
Identify the GST‑creditable fringe benefits included in step 4.
6
Identify those excluded fringe benefits that are not taken into account under
amount 2 (that is, the result for step 4 minus the result for step 5).
$2,000 – $0 = $2,000
(Amount 4)
7
Add amount 1 and amount 2 (that is, the results from step 2 plus the results
from step 5).
$2,000 + $0 = $2,000.
8
Use the following formula:
Type 1 individual base non‑exempt amount
X
FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
9
10
(That is, the results from step 7 x 2.0647).
Add amount 3 & amount 4 (that is, the results from step 3 plus step 6).
Use the following formula:
1
Type 2 individual base X non‑exempt amount 1 – FBT rate
(That is, the results from step 9 x 1.8692).
The type 1 individual base
non‑exempt amount is
$2,000.
$2,000 x 2.0647 =
$4,129 (rounded to the
nearest dollar).
The individual grossed‑up
type 1 non‑exempt amount
is $4,129.
$1,000 + $2,000 = $3,000
The type 2 individual base
non‑exempt amount is
$3,000.
$3,000 x 1.8692 = $5,607
(rounded to the nearest
dollar).
The individual grossed‑up
type 2 non‑exempt amount
is $5,607.
After calculating the individual grossed‑up type 1 and type 2 amounts, the public ambulance service will calculate their FBT
payable by following the steps in table 2.
Fringe benefits tax for non‑profit organisations
23
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Table 2: Calculating the FBT payable
Step
Action
Result
1
For each employee add:
n the individual grossed‑up type 1 non‑exempt amount (from table 1,
step 8, above), and
n the individual grossed‑up type 2 non‑exempt amount (from table 1,
step 10).
$4,129 + $5,607 = $9,736.
Subtract the appropriate capping threshold from the individual grossed‑up
non‑exempt amount for each employee.
$9,736 – $17,000 = nil.
2
The individual grossed‑up
non‑exempt amount is
$9,736.
Capping thresholds
$30,000 for PBIs and health promotion charities,
$17,000 for public and non‑profit hospitals and public
ambulance services
That is, the result from step 1 minus the applicable capping threshold.
3
Add together all the amounts calculated under step 2 for each employee.
As there is only one
employee, the result is the
same as for step 2, ie $0.
The aggregate non‑exempt
amount is $0.
4
Multiply the result in step 3 by the FBT rate (currently 46.5%).
$0 x 46.5% = $0.
The FBT payable by the
public ambulance service
is $0.
24
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Example 2: capping thresholds exceeded
An employee of a health promotion charity receives the following benefits during a FBT year:
A car fringe benefit
$7,700
GST taxable supply with an entitlement to GST credits
Restaurant meals
$1,100
Valued as expense payment fringe benefits. Excluded fringe benefit with
an entitlement to GST credits
Reimbursement of
school fees
$6,000
Expense payment fringe benefit. GST‑free supplies with no entitlement
to GST credits
Remote area rent
reimbursement
$3,000
Excluded fringe benefit for payment summary reporting purposes only.
No entitlement to GST credits.
In order to calculate their FBT payable, the health promotion charity must first calculate the individual grossed‑up type 1 and
type 2 non‑exempt amounts.
Table 1: Calculating the individual grossed‑up type 1 and 2 non‑exempt amounts
Step
Action
Result
1
Establish what the employee’s individual fringe benefits amount would be if
the capping concession was not available.
The individual fringe
benefits amount =
The individual fringe benefits amount is the value of all benefits other than
excluded benefits.
Car fringe benefit +
Reimbursement of school
fees.
$7,700 + $6,000 = $13,700.
The individual fringe
benefits amount is $13,700.
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$7,700
(Amount 1)
In this example, the employer
is entitled to GST credits for
the car fringe benefit.
3
4
Identify those fringe benefits not taken into account under amount 1 (that is
the result for step 1 minus the result for step 2).
$13,700 – $7,700 =
Determine the employee’s share of the benefits that would be excluded
fringe benefits if the capping concession was not available. See page 41 for
a list of excluded fringe benefits.
$3,000
Benefits specifically not included in this calculation are:
n benefits that constitute the provision of meal entertainment
n benefits that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses.
5
Identify the GST‑creditable fringe benefits included in step 4
Fringe benefits tax for non‑profit organisations
$6,000
(Amount 3)
The excluded fringe benefits
are the restaurant meals
fringe benefit and the remote
area rent reimbursement. The
restaurant meals fringe
benefit is specifically
excluded from this
calculation.
$0
(Amount 2)
25
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
Result
6
Identify those excluded fringe benefits that are not taken into account under
amount 2 (that is, the result for step 4 minus the result for step 5).
$3,000 – $0 = $3,000
(Amount 4)
7
Add amount 1 & amount 2 (that is, the results from step 2 plus step 5).
$7,700 + $0 = $7,700.
The type 1 individual base
non‑exempt amount is
$7,700.
8
Use the following formula:
$7,700 x 2.0647 =
Type 1 individual base non‑exempt amount
X
FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
$15,898 (rounded to the
nearest dollar).
The individual grossed‑up
type 1 non‑exempt amount
is $15,898.
(That is, the results from step 7 x 2.0647).
9
Add amount 3 & amount 4 (that is, the results from step 3 plus step 6).
$6,000 + $3,000 = $9,000
The type 2 individual base
non‑exempt amount is
$9,000.
10
Use the following formula:
1
Type 2 individual base X non‑exempt amount 1 – FBT rate
(That is, the results from step 9 x 1.8692).
$9,000 x 1.8692 = $16,822
(rounded to the nearest
dollar).
The individual grossed‑up
type 2 non‑exempt amount
is $16,822.
After calculating the individual grossed‑up type 1 and type 2 amounts, the health promotion charity will calculate their FBT
payable by following the steps in table 2.
26
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Table 2: Calculating the FBT payable
Step
Action
Result
1
For each employee add:
n the individual grossed‑up type 1 non‑exempt amount (from table 1,
step 8), and
n the individual grossed‑up type 2 non‑exempt amount (from table 1,
step 10, above).
$15,898 + $16,822 =
$32,720.
2
Subtract the appropriate capping threshold from the individual grossed‑up
non‑exempt amount for each employee.
The individual grossed‑up
non‑exempt amount is
$32,720.
$32,720 – $30,000 = $2,720.
Capping thresholds
$30,000 for PBIs and health promotion charities,
$17,000 for public and non‑profit hospitals and public
ambulance services
That is, the result from step 1 – the applicable capping threshold.
3
Add together all the amounts calculated under step 2 for each employee.
As there is only one
employee, the result is the
same as for step 2, ie $2,720.
The aggregate non‑exempt
amount is $2,720.
4
Multiply the result in step 3 by the FBT rate (currently 46.5%).
$2,720 x 46.5% = $1,264.80.
The FBT payable by the
health promotion charity is
$1,264.80.
Fringe benefits tax for non‑profit organisations
27
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Rebatable organisations
Charitable institutions and most non‑government organisations
that are income tax exempt, qualify for an FBT rebate. As a
rebatable employer, you are eligible for a rebate of 48% of the
amount of FBT that would otherwise be payable.
The maximum gross‑up value of benefits that can be provided
to an employee, without losing the concession, is $30,000.
If the total grossed‑up value of the fringe benefits provided to an
individual employee is more than $30,000, a rebate cannot be
claimed for the FBT liability on the excess amount.
Use the following formula to calculate the rebate available to
you.
0.48 x
(gross tax – aggregate
non‑rebatable amount)
x
rebatable days in year
total days in year
Gross tax is the FBT you would have paid if you had not been
entitled to claim a rebate.
The aggregate non‑rebatable amount is the portion of fringe
benefits tax in respect of which the employer cannot obtain a
rebate.
Use the following formula to calculate your FBT payable.
Gross tax – FBT rebate = FBT payable
Calculating your FBT payable – rebatable employer
The Tax Office has designed a web based calculator to
assist you in calculating your fringe benefits tax liability for
public benevolent institutions, health promotion charities
and rebatable employers after 1 April 2001. The $30,000
capping threshold only has been considered in this
calculator. If you do not have access to the web based
calculators, the steps below will help you calculate your
FBT payable.
To calculate your FBT payable, you need to first calculate your
gross tax (see table 1, following).
Rebatable days in the year are the number of days during the
FBT year that you qualified as a rebatable employer.
28
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Table 1: Calculating your gross tax
Follow the steps below to calculate your gross tax.
Step
Action
Result
1
Establish the employee’s individual fringe benefits amount. The individual
fringe benefits amount is the value of all benefits other than excluded
benefits.
$xxx
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$xxx
(Amount 1)
3
Identify those fringe benefits not taken into account in the calculation for
amount 1(that is, the result for step 1 minus the result for step 2).
$xxx
(Amount 3)
4
Determine the employee’s share of the benefits that would be excluded
fringe benefits. These excluded fringe benefits are listed on page 41
$xxx
5
Identify the GST‑creditable fringe benefits included in step 4
$xxx
(Amount 2)
6
Identify those excluded fringe benefits that are not taken into account under
amount 2 that is, the result for step 4 minus the result for step 5).
$xxx
(Amount 4)
7
Add amount 1 & amount 2 (that is, the results from step 2 plus the results
from step 5).
Type 1 individual fringe
benefits taxable amount
8
Use the following formula:
Individual grossed‑up type
1 fringe benefits taxable
amount
Type 1 individual fringe benefits amount
X
FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
(That is, the results from step 7 x 2.0647).
9
Add amount 3 & amount 4
(that is, the results from step 3 plus the results from step 6).
Type 2 individual fringe
benefits taxable amount
10
Use the following formula:
Individual grossed‑up type
2 fringe benefits amount
1
Type 2 individual base X non‑exempt amount 1 – FBT rate
(That is, the results from step 9 x 1.8692).
11
For each employee add:
n the individual grossed‑up type 1 fringe benefits amount, and
n the individual grossed‑up type 2 fringe benefits amount.
(That is, the result calculated at step 8 plus the result calculated at step 10).
Individual fringe benefits
taxable amount
12
Add together the individual fringe benefits taxable amount calculated for
every employee (that is, the result calculated at step 11 for every employee).
Total fringe benefits taxable
amount
13
Multiply the total fringe benefits taxable amount by the FBT rate (that is, the
result calculated at step 12 x 46.5%)
Gross tax
You need to then calculate your FBT rebate (see table 2, following).
Fringe benefits tax for non‑profit organisations
29
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Table 2: Calculating your FBT rebate
Follow the steps below to calculate your FBT rebate.
If you do not provide the following excluded benefits:
n benefits
that constitute the provision of meal entertainment
that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses,
enter the same amount calculated at step 11 for table 1, into step 11 for table 2 below. Complete steps 12‑15, then move on
to table 3.
n benefits
Step
Action
Result
1
Establish the employee’s individual fringe benefits amount.
$xxx
The individual fringe benefits amount is the value of all benefits other than
excluded benefits.
(This will be the same amount calculated in table 1, step 1).
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$xxx
(Amount 1)
(This will be the same amount calculated in table 1, step 2).
3
Identify those fringe benefits not taken into account in the calculation for
step 2 (that is, the result for step 1 minus the result for step 2).
$xxx
(Amount 3)
(This will be the same amount calculated in table 1, step 3).
4
Determine the employee’s share of the benefits that would be excluded
fringe benefits. These excluded fringe benefits are listed on page 41.
Benefits specifically not included in this calculation are:
n benefits that constitute the provision of meal entertainment
n benefits that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses.
$xxx
5
Identify the GST‑creditable fringe benefits included in step 4.
$xxx
(Amount 2)
6
Identify those excluded fringe benefits that are not taken into account under
step 5 (that is, the result for step 4 minus the result for step 5).
$xxx
(Amount 4)
7
Add amount 1 and amount 2
(that is, the results from step 2 plus the results from step 5).
Type 1 individual base
non‑rebatable amount
8
Use the following formula:
Individual grossed‑up type
1 non‑rebatable amount
Type 1 individual base non‑rebatable amount
X FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
(That is, the results from step 7 x 2.0647)
9
30
Add amount 3 and amount 4
(that is, the results from step 3 plus the results from step 6)
Type 2 individual base
non‑rebatable amount
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
Result
10
Use the following formula:
Individual grossed‑up type
2 non‑rebatable amount
1
Type 2 individual base X non‑rebatable amount 1 – FBT rate
(That is, the results from step 9 x 1.8692)
11
For each employee add:
n the individual grossed‑up type 1 non‑rebatable amount for the FBT year
(that is, your result calculated at step 8), and
n the individual grossed‑up type 2 non‑rebatable amount for the FBT year
(that is, the result calculated at step 10).
The result is the individual
grossed‑up non‑rebatable
amount for the employee.
12
Subtract $30,000 from the individual grossed‑up non‑rebatable amount for
each employee.
(That is, the result for step 11 – $30,000).
If the individual grossed‑up
non‑rebatable amount for an
employee is equal to or less
than $30,000, the amount
calculated under this step is
nil.
13
Add together the amounts calculated at step 12 for each employee.
$xxx
14
Multiply the total amount calculated under step 13 by the FBT rate.
The result is your aggregate
non‑rebatable amount for
the FBT year.
15
Use this formula:
The result is your FBT rebate
0.48 x (gross tax – aggregate non‑rebatable amount) x number of days in
the FBT year you were a rebatable organisation.
0.48
X
(table 1, step 13 – table 2, step 14)
X
rebatable days in year
total days in year
You then need to calculate your FBT payable (see table 3, following).
Table 3: Calculating your FBT payable
Use the following step to calculate your FBT payable.
Step
Action
Result
1
Gross tax – FBT rebate
The result is your FBT
payable.
(That is, the result from table 1, step 13) minus ( the result from table 2,
step 15)
Fringe benefits tax for non‑profit organisations
31
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Example 1: Rebate threshold not exceeded
A rebatable employer provides the following benefits to a single employee during the FBT year:
Car fringe benefit
$4,000
GST taxable supply with an entitlement to GST credits
Reimbursement of
school fees
$2,000
Expense payment fringe benefit. GST‑free supply with no entitlement to
GST credits.
Remote area rent
reimbursement
$3,000
Excluded fringe benefit for payment summary reporting purposes only.
No entitlement to GST credits.
To calculate their FBT payable, the rebatable organisation needs to first calculate their gross tax (see table 1, below).
Table 1: Calculating the gross tax
Step
Action
Result
1
Establish the employee’s individual fringe benefits amount. The individual
fringe benefits amount is the value of all benefits other than excluded
benefits.
The individual fringe
benefits amount =
Car fringe benefit + payment
of school fees
$4,000 + $2,000 = $6,000.
The individual fringe
benefits amount is $6,000
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$4,000
(Amount 1)
In this example, the employer
is entitled to GST credits for
the car fringe benefit.
3
Identify those fringe benefits not taken into account in the calculation for
amount 1
(that is, the result for step 1 minus the result for step 2).
$6,000 – $4,000 = $2,000
Determine the employee’s share of the benefits that would be excluded
fringe benefits. These excluded fringe benefits are listed on page 41.
$3,000
5
Identify the GST‑creditable fringe benefits included in step 4.
$0
(Amount 2)
6
Identify those excluded fringe benefits that are not taken into account
under amount 2
(that is, the result for step 4 minus the result for step 5).
$3,000 – $0 =
Add amount 1 & amount 2
(that is, the results from step 2 plus the results from step 5).
$4,000 + $0 = $4,000
4
7
32
$2,000
(Amount 3)
The excluded fringe benefit is
the remote area rent
reimbursement
$3,000
(Amount 4)
The type 1 individual fringe
benefits taxable amount is
$4,000.
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
Result
8
Use the following formula:
$4,000 x 2.0647 =
Type 1 individual fringe benefits taxable amount
X FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
$8,258 (rounded to the
nearest dollar)
The individual grossed‑up
type 1 fringe benefits
taxable amount is $8,258.
(That is, the results from step 7 x 2.0647)
9
Add amount 3 & amount 4
(That is, the results from step 3 plus the results from step 6).
$2,000 + $3,000 =
$5,000
The type 2 individual fringe
benefits taxable amount is
$5,000.
10
Use the following formula:
$5,000 x 1.8692 =
Type 2 individual fringe benefits taxable amount X 1
$9,346 (rounded to the
nearest dollar)
1 – FBT rate
(That is, the results from step 9 x 1.8692)
11
12
For each employee add:
n the individual grossed‑up type 1 fringe benefits amount, and
n the individual grossed‑up type 2 fringe benefits amount.
(That is, the result calculated at step 8 plus the result calculated at step 10).
$8,258 + $9,346 = $17,604.
Add together the individual fringe benefits taxable amount calculated for
every employee.
There is only one employee,
so the total fringe benefits
taxable amount is $17,604.
(that is, the result calculated at step 11 for every employee).
13
The individual grossed‑up
type 2 fringe benefits
amount is $9,346.
Multiply the total fringe benefits taxable amount by the FBT rate (that is, the
result calculated at step 12 x 46.5%).
The individual fringe
benefits taxable amount is
$17,604.
$17,604 x 0.465 = $8,185.86
The gross tax is $8,185.86.
The rebatable organisation then needs to calculate their FBT rebate (see table 2, following).
Table 2: Calculating the FBT rebate
If the rebatable organisation does not provide the following excluded benefits:
n benefits
that constitute the provision of meal entertainment
that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses,
they will enter the same amount they calculated at table 1, step 11 into step 11 following. The rebatable organisation would
then complete steps 12 – 15, then move on to table 3.
n benefits
Fringe benefits tax for non‑profit organisations
33
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
Result
1
Establish the employee’s individual fringe benefits amount.
$xxx
The individual fringe benefits amount is the value of all benefits other than
excluded benefits.
(This will be the same amount calculated in table 1, step 1).
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$xxx
(Amount 1)
(This will be the same amount calculated in table 1, step 2).
3
Identify those fringe benefits not taken into account in the calculation for
step 2 (that is, the result for step 1 minus the result for step 2).
$xxx
(Amount 3)
(This will be the same amount calculated in table 1, step 3).
4
Determine the employee’s share of the benefits that would be excluded
fringe benefits. These excluded fringe benefits are listed on page 41.
$xxx
The following benefits are specifically not included in this calculation:
n benefits that constitute the provision of meal entertainment
n benefits that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses.
5
Identify the GST‑creditable fringe benefits included in step 4.
$xxx
(Amount 2)
6
Identify those excluded fringe benefits that are not taken into account
under step 5
(that is, the result for step 4 minus the result for step 5).
$xxx
(Amount 4)
7
Add amount 1 and amount 2
(that is, the results from step 2 plus the results from step 5).
Type 1 individual base
non‑rebatable amount
8
Use the following formula:
Individual grossed‑up
type 1 non‑rebatable
amount
Type 1 individual base non‑rebatable amount
X FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
(That is, the results from Step 7 x 2.0647)
9
Add amount 3 & amount 4 (that is, the results from step 3 plus the results
from step 6).
Type 2 individual base
non‑rebatable amount
10
Use the following formula:
Individual grossed‑up
type 2 non‑rebatable
amount
1
Type 2 individual base X non‑rebatable amount 1 – FBT rate
(That is, the results from step 9 x 1.8692)
34
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
11
For each employee add:
n the
individual grossed‑up type 1 non‑rebatable amount for the FBT year
(that is, the result calculated at step 8), and
n the individual grossed‑up type 2 non‑rebatable amount for the FBT year
(that is, the result calculated at step 10).
Result
$17,604 (from Table 1,
Step 11, above)
The individual grossed‑up
non‑rebatable amount is
$17,604.
12
Subtract $30,000 from the individual grossed‑up non‑rebatable amount for
each employee.
$17,604 – $30,000 = $0.
13
Add together the amounts calculated at step 12 for each employee.
As there is only one
employee, this amount is $0.
14
Multiply the total amount calculated under step 13 by the FBT rate.
$0 x 0.465 = $0
The aggregate
non‑rebatable amount is
$0.
15
Use this formula:
0.48
0.48 x (gross tax – aggregate non‑rebatable amount) x number of days in
the FBT year you were a rebatable organisation.
x
0.48
x
($8,185.86 – $0)
x
(table 1, step 13 – table 2, step 14)
365
365
x
=0.48 x $8,185.86 x 1
rebatable days in year
total days in year
= $3,929.21
The FBT rebate is $3,929.21.
The rebatable organisation then needs to calculate their FBT payable (see table 3, following).
Table 3: Calculating your FBT payable
Step
Action
Result
1
Gross tax – FBT rebate
$8,185.86 – $3,929.21 =
$4,256.65
[(That is, the result from table 1, step 13) – ( the result from table 2,
step 15)]
Fringe benefits tax for non‑profit organisations
The FBT payable is
$4,256.65.
35
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Example 2: Rebate threshold exceeded
A rebatable employer provides the following benefits to a single employee during the FBT year:
Car fringe benefit
$7,700
GST taxable supply with an entitlement to GST credits
Restaurant meals
$1,100
Valued as expense payment. Excluded fringe benefit with an
entitlement to GST credits.
Reimbursement of
school fees
$6,000
Expense payment fringe benefit. GST‑free supply with no entitlement to
GST credits.
Remote area rent
reimbursement
$3,000
Excluded fringe benefit for payment summary reporting purposes only.
No entitlement to GST credits.
To calculate their FBT payable, the rebatable organisation needs to first calculate their gross tax (see table 1, following).
Table 1: Calculating the gross tax
Step
Action
Result
1
Establish the employee’s individual fringe benefits amount. The individual
fringe benefits amount is the value of all benefits other than excluded
benefits.
The individual fringe
benefits amount =
Car fringe benefit +
reimbursement of school fees
$7,700 + $6,000 = $13,700.
The individual fringe
benefits amount is $13,700.
2
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$7,700
(Amount 1)
In this example, the employer
is entitled to GST credits for
the car fringe benefit.
3
4
5
Identify those fringe benefits not taken into account in the calculation for
amount 1.
(that is, the result for step 1 minus the result for step 2).
$13,700 – $7,700 = $6,000
Determine the employee’s share of the benefits that would be excluded
fringe benefits. These excluded fringe benefits are listed on page 41.
$1,100 + $3,000 = $4,100
Identify the GST‑creditable fringe benefits included in step 4.
$1,100
(Amount 2)
$6,000
(Amount 3)
The excluded fringe benefits
are the restaurant meals and
the remote area rent
reimbursement.
In this example, the employer
is entitled to GST credits on
the restaurant meals.
36
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
Result
6
Identify those excluded fringe benefits that are not taken into account under
amount 2
(that is, the result for step 4 minus the result for step 5).
$4,100 – $1,100 = $3,000
7
8
$3,000
(Amount 4)
Add amount 1 & amount 2
(that is, the results from step 2 plus the results from step 5)
$7,700 + $1,100 = $8,800
Use the following formula:
$8,800 x 2.0647 =
Type 1 individual fringe benefits taxable amount
X FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
The type 1 individual fringe
benefits taxable amount is
$8,800.
$18,169 (rounded to the
nearest dollar)
The individual grossed‑up
type 1 fringe benefits
taxable amount is $18,169.
(That is, the results from step 7 x 2.0647)
9
Add amount 3 & amount 4
(that is, the results from step 3 plus the results from step 6).
$6,000 + $3,000 =
$9,000
The type 2 individual fringe
benefits taxable amount is
$9,000.
10
Use the following formula:
Type 2 individual fringe X benefits taxable amount $9,000 x 1.8692 =
1
1 – FBT rate
$16,822 (rounded to the
nearest dollar)
(That is, the results from step 9 x 1.8692)
The individual grossed‑up
type 2 fringe benefits
amount is $16,822.
For each employee add:
n the individual grossed‑up type 1 fringe benefits amount, and
n the individual grossed‑up type 2 fringe benefits amount.
(That is, the result calculated at Step 8 plus the result calculated at Step 10).
$18,169 + $16,822 =
$34,991
12
Add together the individual fringe benefits taxable amount calculated for
every employee (that is, the result calculated at step 11 for every employee).
There is only one employee,
so the total fringe benefits
taxable amount is $34,991.
13
Multiply the total fringe benefits taxable amount by the FBT rate (that is, the
result calculated at step 12 x 46.5%).
$34,991 x 0.465 =
$16,270.81
11
The individual fringe
benefits taxable amount is
$34,991.
The gross tax is $16,270.81.
The rebatable organisation then needs to then calculate their FBT rebate (see table 2, following).
Fringe benefits tax for non‑profit organisations
37
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Table 2: Calculating your FBT rebate
If you do not provide the following excluded benefits:
n benefits
that constitute the provision of meal entertainment
that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses,
enter the same amount calculated at table 1, step 11 into step 11 following. Complete steps 12‑15, then move on
to table 3.
n benefits
Step
Action
Result
1
Establish the employee’s individual fringe benefits amount
$13,700
The individual fringe benefits amount is the value of all benefits other than
excluded benefits. (This will be the same amount calculated in table 1,
step 1).
(From table 1, step 1)
Identify the amount of GST‑creditable fringe benefits included in the amount
for step 1.
$7,700
(Amount 1)
(This will be the same amount calculated in table 1, step 2).
(From table 1, step 2)
Identify those fringe benefits not taken into account in the calculation for
step 2
(that is, the result for step 1 minus the result for step 2)
$6,000
(Amount 3)
2
3
(From table 1, step 3)
(This will be the same amount calculated in table 1, step 3).
4
Determine the employee’s share of the benefits that would be excluded
fringe benefits. These excluded fringe benefits are listed on page 41.
$3,000
(The $3,000 is the remote
area rent reimbursement. The
restaurant meals are
specifically not included here).
Benefits specifically not included in this calculation are:
n benefits that constitute the provision of meal entertainment
n benefits that would be a car parking fringe benefit, and
n benefits attributable to entertainment facility leasing expenses.
5
Identify the GST‑creditable fringe benefits included in step 4
$0
(Amount 2)
(The employer is not entitled
to GST credits for the remote
area rent reimbursement).
6
7
38
Identify those excluded fringe benefits that are not taken into account under
step 5
(that is, the result for step 4 minus the result for step 5).
$3,000 – $0 =
Add amount 1 and amount 2
(that is, the results from step 2 plus the results from step 5).
$7,700 + $0 = $7,700
$3,000
(Amount 4)
The type 1 individual base
non‑rebatable amount is
$7,700.
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Step
Action
Result
8
Use the following formula:
$7,700 x 2.0647 = $15,898
(rounded to the nearest
dollar)
Type 1 individual base non‑rebatable amount
X FBT rate + GST rate
(1 – FBT rate) x (1 + GST rate) x FBT rate
The individual grossed‑up
type 1 non‑rebatable
amount is $15,898.
(That is, the results from step 7 x 2.0647)
9
10
Add amount 3 & amount 4
(that is, the results from step 3 plus the results from step 6)
$6,000 + $3,000 = $9,000.
Use the following formula:
$9,000 x 1.8692 = $16,822
(rounded to the nearest
dollar)
Type 2 individual base X non‑rebatable amount 1
1 – FBT rate
(That is, the results from step 9 x 1.8692)
11
The type 2 individual base
non‑rebatable amount is
$9,000.
The individual grossed‑up
type 2 non‑rebatable
amount is $16,822.
For each employee add:
n the individual grossed‑up type 1 non‑rebatable amount for the FBT year
(that is, the result calculated at step 8), and
n the individual grossed‑up type 2 non‑rebatable amount for the FBT year
(that is, the result calculated at step 10).
$15,898 + $16,822 = $32,720
12
Subtract $30,000 from the individual grossed‑up non‑rebatable amount for
each employee.
$32,720 – $30,000 = $2,720.
13
Add together the amounts calculated at step 12 for each employee.
As there is only one
employee, this amount is
$2,720.
14
Multiply the total amount calculated under step 13 by the FBT rate.
$2,720 x 0.465 = $1,264.80
The individual grossed‑up
non‑rebatable amount is
$32,720.
The aggregate
non‑rebatable amount is
$1,264.80.
15
Use this formula:
0.48
0.48 x (gross tax – aggregate non‑rebatable amount) x number of days in
the FBT year you were a rebatable organisation.
x
0.48
x
($16,270.81 – $1,264.80)
x
(table 1, step 13 – table 2, step 14)
365
365
x
=0.48 x $15,006.01 x 1
rebatable days in year
total days in year
= $7,202.88
Fringe benefits tax for non‑profit organisations
The FBT rebate is $7,202.88
39
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
The rebatable organisation then needs to calculate their FBT payable (see table 3, following).
Table 3: Calculating your FBT payable
Step
Action
Result
1
Gross tax – FBT rebate
$16,270.81 – $7,202.88 =
$9,067.93
[(That is, the result from Table 1, Step 13) – ( the result from Table 2,
Step 15)]
40
The FBT payable is
$9,067.93
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
2Reportable fringe
benefits
If you provide fringe benefits with a total taxable value of more
than $1,000 to an employee in an FBT year, you must report the
grossed‑up taxable value of the fringe benefits on the
employee’s payment summary for the corresponding income
year (1 July to 30 June). These are called reportable fringe
benefits.
You must allocate benefits to the relevant employee and include
any fringe benefits provided to associates of the employee. If
employees share a benefit, you have to allocate the respective
share of the benefit to individual employees.
The value of all fringe benefits other than excluded fringe
benefits must be allocated to the relevant employees. You must
allocate to the relevant employees benefits included in the
capping thresholds. The exemption from the requirement to pay
FBT in relation to such benefits continues to apply, however, you
may still be required to report these on your employees’
payment summaries.
The Government has announced that from
1 April 2007, the fringe benefits reporting exclusion
threshold will increase from $1000 to $2000.
If an employee’s individual fringe benefits amount is more than
$1,000, you must report the grossed‑up value of that amount
on the employee’s payment summary. This amount is known as
a reportable fringe benefits amount and is calculated using
the following formula.
Employee’s individual fringe benefits amount x gross‑up rate
For the income year ending 30 June 2006, the gross-up rate
used to calculate the reportable fringe benefits amount is
1.9417. For the income year ending 30 June 2007, the
gross-up rate used to calculate the reportable fringe benefits
amount is 1.8692.
Don’t forget to issue a payment summary to everyone
you provide reportable fringe benefits to, even if you don’t
pay them any salary or wages. For example, if you provide
a caretaker of a block of flats with free accommodation
instead of a salary, you have to give them a payment
summary if the value of the fringe benefit is more than
$1,000.
Example 1
What is an exempt benefit?
A number of benefits are exempt from FBT. Although these are
popularly called ‘exempt fringe benefits’, they are referred to in
the FBT legislation as exempt benefits. In fact, by definition an
exempt benefit cannot be a fringe benefit. Any exempt benefits
do not need to be allocated or reported.
Excluded benefits
There are some fringe benefits that don’t have to be reported on
payment summaries, although FBT may still payable.
These benefits are called excluded benefits and include:
n entertainment provided as food and drink, and benefits
associated with that entertainment, such as travel and
accommodation
n car parking fringe benefits, apart from eligible car parking
expense payments
n hired or leased entertainment facilities, such as corporate
boxes, and
n benefits provided to employees in remote areas that are
concessionally treated.
Reporting amounts on payment summaries
Where an employee’s individual fringe benefits amount is $1,000
or less, you do not have to report an amount on the employee’s
payment summary.
Fringe benefits tax for non‑profit organisations
Between 1 April and 31 March (the FBT income year) you
provide an employee with the following:
n a work car, with a taxable value of car fringe benefits
totalling $1440
n holiday accommodation twice during the year, with the
taxable value of the accommodation being $600
n a briefcase ($200)
n a mobile phone used mainly for their employment ($300),
and
n reimburse their HELP debt as well as their spouse’s ($550
each).
The total taxable value of fringe benefits for this employee is
$3140. The briefcase and mobile phone are exempt from
FBT and the reimbursement of the spouse’s HELP debt is
allocated to the employee.
The grossed‑up taxable value of these benefits would
appear on the employees’ payment summary.
$3140 x 1.8692 = $5,869.
Using the previous examples for calculating your FBT payable
the following table shows what you will be required to report on
an employee’s payment summary.
41
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Type of benefit
Example 1
‑ exempt
(see page 22)
Example 2
‑ exempt
(see page 25)
Example 1
‑ rebatable
(see page 32)
Example 2
‑ rebatable
(see page 36)
Example
‑ reportable
(see page 41)
Benefit
Reportable
Benefit
Reportable
Benefit
Reportable
Benefit
Reportable
Benefit
Reportable
amount
Y/N
amount
Y/N
amount
Y/N
amount
Y/N
amount
Y/N
Car
$2000
Yes
$7700
Yes
$7700
Yes
$4000
Yes
$1440
Yes
Expense
(restaurant meal)
$1000
No
(excluded)
$1100
No
(excluded)
$1100
No
(excluded)
$0
N/A
Expense (school
fees)
$1000
Yes
$6000
Yes
$6000
Yes
$2000
Yes
Expense
(accom.)
$ 600
Yes
Expense (HELP)
$1100
Yes
Exempt
nbriefcase
nmobile phone
$200
$300
No
No
Remote area
rent (excluded
benefit)
$2000
No
(excluded)
$3000
No
(excluded)
$3000
No
(excluded)
$3000
No
(excluded)
Total taxable
value of benefits
$3,000
$13,700
$6,000
$13,700
$3,140
Total reportable
fringe benefits
amount to be
shown on
payment
summary
$5,607
$25,608
$11,215
$25,608
$5,869
(Total taxable
value x 1.8692)
Even though you don’t have to report excluded
benefits on payment summaries, these benefits are still
subject to FBT and you must take them into account when
calculating how much FBT you have to pay.
More information
Reportable fringe benefits – facts for employees (NAT 2836)
42
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
3Record keeping
4Register for FBT
Under tax law, you must keep sufficient records to enable your
FBT liability to be assessed. You must keep your records in
English. If your records are not in a written form (for example,
you keep electronic computer records), they must be in a form
that is readily accessible and easily convertible into English.
We recommend you register for FBT once you establish that
your organisation has to pay FBT.
Provided the electronic form of the record kept by the employer
is able to be relied upon as a true and clear reproduction of the
original paper record and/or the source electronic declaration
from the employee is able to be verified as authentic, the FBT
record keeping requirements will be satisfied.
Generally, you must keep your records for at least five years
from the date of the relevant transaction.
To register for FBT you complete an Application for registration
– fringe benefits tax (NAT 1055) and send it to the Tax Office.
The application is available on our website at www.ato.gov.au
or by phoning 1300 130 248.
Once you are registered, the Tax Office will send you additional
information to help you lodge your return. The Tax Office will
also notify you if there is a change to any of the rates you need
to calculate the FBT you have to pay.
Your FBT number is the same as your tax file number.
You must also keep specific records if you want to take
advantage of various exemptions or concessions to reduce the
FBT you need to pay. These documents must be retained for
five years from when the relevant FBT return is lodged.
Examples of these records are:
n all documents you are required to obtain from employees,
such as declarations, invoices and/or receipts, bills of sales,
lease documents, travel diaries, copies of logbooks, odometer
records, and
n fleet management records, logbook records and odometer
records where the benefit is a car fringe benefit valued under
the operating cost method.
Some concessions and exemptions require you to obtain
documentary evidence of expenditure by an employee. You are
required to obtain the original invoice or receipt from the
employee. This must show the date of the receipt or invoice, the
date of the expense, the name of the supplier, what was bought
and the amount paid.
You must make elections and declarations no later than the day
on which your FBT return is due to be lodged with the Tax Office
or, if you do not have to lodge a return, by 21 May. There is no
need to notify the Tax Office of the election or declaration as
your business records are sufficient evidence of this.
You must also obtain all employee declarations no later than the
day on which your FBT return is due to be lodged with the Tax
Office or, if you do not have to lodge a return, by 21 May.
Later sections of this guide explain what special records you
need to keep for the most commonly provided fringe benefits.
Since 9 April 1999 certain employers have been able to
use an alternative way of calculating how much FBT they
have to pay, rather than keep full FBT records. You will find
more information about these record keeping exemption
arrangements and who may use them in Fringe benefits
tax: a guide for employers (NAT 1054)
Fringe benefits tax for non‑profit organisations
43
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
5 Lodge a return and
pay FBT
If you have not previously paid FBT or if the amount of FBT you
had to pay in the previous year was less than the instalment
threshold (currently $3,000), you are required to pay the tax
once a year when you lodge your annual FBT return.
If you had to pay FBT of $3,000 or more in the previous year,
you must pay the tax quarterly with your activity statement. This
is the case even if you estimate you will pay less than $3,000
FBT in the current year.
Annual return
You must lodge your FBT annual return with the Tax Office by
21 May (or first business day after) each year if you have
calculated you have an FBT liability.
You show on your annual return the amount of FBT you have to
pay, and other brief details, such as:
n the different categories of fringe benefit you provided
n the total taxable value of each category, and
n the total employee contributions for some categories.
Tax agents can send clients’ FBT returns directly to the Tax
Office via the electronic lodgment service (ELS), in the same
way they lodge income tax returns electronically. If you are
lodging a paper return, mail your completed and signed
return to:
WA, SA, NT, TAS & VIC clients ACT, NSW & QLD clients
Taxation Office
Locked Bag 1936
Albury NSW 1936
Taxation Office
Locked Bag 1793
Penrith NSW 1793
If you don’t need to lodge an FBT return, complete a Notice of
non‑lodgment (NAT 3094) and send it to:
Australian Taxation Office
Locked Bag 1793
PENRITH NSW 1793
Amendments
If you realise after lodging your return that you have made a
mistake, request an amendment by writing as soon as
possible to:
Australian Taxation Office
PO Box 9831
Townsville QLD 4810
If you request an amendment, you must sign the request or
have your tax agent sign on your behalf, and provide the
following information:
n name of employer
n employer’s tax file number
n reason for amendment
n exact adjustment to each benefit type, including the corrected
taxable values
n whether the benefits are type 1 or type 2 benefits, and
44
n the
amended taxable value.
The Commissioner of Taxation may amend your FBT
assessment if:
n you incorrectly value or don’t disclose benefits, or
n you request an amendment to your FBT payable (for example,
because you discover you’ve overpaid or underpaid FBT).
Requests for deferral of time to lodge
If you need additional time to lodge your return, write to:
Australian Taxation Office
PO Box 9820
Dandenong VIC 3175
BUSINESS TIP
Make sure you’re registered for FBT so that the Tax Office
can send you an annual FBT return and the FBT return
guide (NAT 2376), which contains instructions on how to
complete you FBT annual return.
How to pay
You must pay the total amount of FBT payable by 21 May or the
first business day after, unless other arrangements have been
made with the Tax Office.
All FBT payments can be rounded down to the nearest
multiple of five cents.
The Tax Office offers several different payment methods.
BPAY
BPAY® allows clients to transfer funds electronically from their
cheque or savings accounts to the Tax Office using their
financial institution’s phone or internet banking service.
Clients quote the Tax Office biller code (75556) and the EFT
code as the customer reference number. If you need assistance
locating or identifying the EFT code please phone
1800 815 886.
Clients should check with their financial institution for processing
deadlines, to ensure their payments reach the Tax Office on or
before the due date.
Direct credit
If clients have a desktop computer banking software package,
or access to a Third Party/Pay Anyone option through their
internet banking facility, they can make their payments by direct
credit. Send payments from a cheque or savings account to the
ATO Direct Credit account BSB No 093 003 Acc No 316 385.
You need to enter your EFT code in the lodgment reference
field. For more information about direct credit payments phone
1800 815 886.
Fringe benefits tax for non‑profit organisations
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
Direct debit
Payment difficulties
Mail payments
Activity statements
Direct debit provides clients with the option of having their tax
liability electronically debited from a financial institution account
(not credit cards). Phone 1800 802 308 for a direct debit
request form and/or details.
Clients can mail a cheque or money order to the address
printed on their payment slip forwarded by the Tax Office. If a
payment slip is not available, supply the following details:
n name
n address
n tax file number, Australian business number or client
identification number, and
n type of payment.
Mail to either:
WA, SA, NT, Tas, and Vic clients:
Australian Taxation Office
Locked Bag 1936
ALBURY NSW 1936
NSW, ACT and Qld clients:
Australian Taxation Office
Locked Bag 1793
PENRITH NSW 1793
Cheques and money orders should be made payable to the
‘Deputy Commissioner of Taxation’ and crossed ‘Not
negotiable’. Cheques must be tendered in Australian dollars and
must not be post dated. Clients should allow sufficient time for
their payment to reach the Tax Office on or before the due date.
Late payments may be subject to the general interest charge.
For more information about mail payments phone
1800 815 886.
Post office payments
If clients have a pre‑printed payment slip with a barcode, they
can pay in person at any Australia Post outlet. Photocopies of
payment slips are not accepted. A receipt is issued for any
payment made in person at a post office. Payments can be
made with cash (a $3000 limit applies), money order or cheque.
EFTPOS is also available at most Australia Post outlets,
however payments (up to your daily withdrawal limit) can only be
made using savings or cheque accounts. For more information
about paying in person at an Australia Post outlet phone
1800 815 886.
If you cannot pay your FBT on time, you should phone 13 11 42
between 8.00am to 6.00pm, Monday to Friday and explain your
reasons.
If you have to pay your FBT liability in quarterly instalments, the
Tax Office will send you an activity statement with your
instalment amount pre‑printed on it.
The instalment amount is a quarter of the FBT you had to pay
for the previous year. For example, if, you had to pay $20,000
FBT for the previous year, your quarterly instalments for the
following year would be $5,000 each.
If your instalments are not enough to cover your annual FBT
payable, you pay the difference when you lodge your annual
return. If your instalments are more than your annual liability and
you have no other taxes outstanding, the Tax Office will refund
you the difference.
If you estimate that your FBT payable will be less than for the
previous year, you may vary your quarterly instalments on your
activity statement. However you may vary an FBT instalment
only if you lodge your activity statement by the due date.
Be careful when varying your instalment amount as you
may incur a general interest charge if you underpay your
FBT liability for the year.
More information
Activity statement instructions FBT (NAT 7389)
Penalties
There are penalties for lodging incorrect returns and failing to
lodge returns or activity statements on time.
The Tax Office imposes a general interest charge on all
outstanding amounts of FBT, including instalments of FBT. If you
have varied an FBT instalment on an activity statement, you may
also be liable for a general interest charge if you underestimated
the instalment amount.
In addition, there are substantial penalties for underpayments of
tax arising from false and misleading statements.
Please do not present returns at post offices or
licensed agencies
Fringe benefits tax for non‑profit organisations
45
03 WHAT TO DO IF YOU PROVIDE FRINGE BENEFITS
46
Fringe benefits tax for non‑profit organisations
CAR FRINGE BENEFITS
04
This chapter provides information
about:
n when car fringe benefits may
arise for non‑profit
organisations
n how to decide if the use of a
car needs to be considered as
a fringe benefit
n exemptions from car fringe
benefits, and
n calculating the taxable value of
a benefit.
It also details records you may
need to keep.
04 car FRINGE BENEFITS
What is a car fringe
benefit?
A car fringe benefit most commonly arises where you make a
car you own or lease available for the private use of an
employee.
A car is taken to be made available for private use by an
employee on any day when:
n it is actually used for private purposes by the employee or
associate, or
n the car is available for the private use of the employee or
associate.
What is a car?
For FBT purposes, a ‘car’ is:
n a sedan, station wagon, panel van or utility (including
four‑wheel drive vehicles)
n any other goods‑carrying vehicle with a carrying capacity of
less than one tonne, or
n any other passenger‑carrying vehicle designed to carry fewer
than nine passengers.
Where the vehicle is not a car a residual fringe benefit arises.
If a car is garaged at or near an employee’s home, it is taken to
be available for the employee’s private use, regardless of
whether or not the employee has permission to use the car
privately.
As a general rule, travel to and from work is private use
of a vehicle.
48
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
Exempt car benefits
An employee’s private use of a taxi, panel van, utility or other
commercial vehicle (that is, one not designed principally to carry
passengers) is exempt if the employee’s private use of such a
vehicle is limited to:
n travel between home and work
n travel that is incidental to travel in the course of duties of
employment, and
n non‑work‑related use that is minor, infrequent and irregular
(for example, occasional use of the vehicle to remove
domestic rubbish).
Example: Exempt use
How to calculate the
taxable value of a car
fringe benefit
To calculate a car fringe benefit you first must calculate the
taxable value of the benefit by using either:
nthe
statutory formula method (based on the car’s cost
price), or
nthe operating cost method (based on the costs of operating
the car).
Both methods assume the vehicle is provided on a fully
maintained basis, including fuel.
If you want to use the operating cost method, you have to
decide to do so by 21 May. You can use this method for any of
your cars, regardless of which method you used in previous
years.
Paul is a PBI employee and takes the organisation’s van
(carrying capacity of less than one tonne) home each night.
The only non‑work‑related use during the FBT year was a
trip to pick up some furniture and take it to Paul’s home.
This use of the van would be exempt from FBT.
If the use of a vehicle exceeds the limits set out above it is a car
fringe benefit. All the private use of the vehicle, including the
travel between home and work, is taken into account in
determining the business percentage under the operating cost
method. If no logbook records are maintained, the statutory
formula method must be used to value the car fringe benefit.
Example: Non‑exempt use
David, a PBI employee takes a utility (carrying capacity of
less than one tonne) home each night and at the weekends.
Although the utility is clearly marked as the organisation’s
charity type, David uses it for shopping and other private
purposes during the week and often for country trips at the
weekends.
This use of the utility would not be exempt from FBT and would
be treated as a car fringe benefit. Where there are no logbook
records, the taxable value of the utility would be calculated
using the statutory formula method.
Work out which method gives you the lower taxable
value and use that to calculate your FBT payable.
Using the statutory formula method
Under this method, the taxable value of the car fringe benefit is
a percentage of the car’s cost price, and is calculated using the
following formula:
Where:
(A x B x C) – E
D
A = the base value of the car
B = the statutory percentage
C = the number of days in the FBT year when the
car was used or available for private use of
employees
D = the number of days in the FBT year
E = the employee contribution
The greater the total distance the car travels (business and
private), the lower the taxable value.
An explanation of base value, statutory percentage and
employee contribution follow.
A – Base value of a car
The base value of a car that is purchased includes:
n the original purchase price you paid (excluding registration
and stamp duty)
n the cost of any fitted accessories not required for business
use of the car (for example, a car stereo), and
n dealer delivery charges.
All costs and charges include GST and luxury car tax where
appropriate.
Fringe benefits tax for non‑profit organisations
49
04 car FRINGE BENEFITS
Any non‑business accessories added after the car is purchased
increase the base value of the car for the year in which they are
added and for subsequent years. An example of a non‑business
accessory is a car stereo or air conditioner, while an example of
a business accessory is a two‑way radio in a salesman’s car.
The base value of a car that is leased includes:
n the cost price to the lessor (including GST but excluding
registration and stamp duty)
n the cost of any fitted accessories not required for business
use of the car (for example, a car stereo), and
n dealer delivery charges.
Reducing the base value after four years
You do not reduce the base value of a car each year. However,
you can reduce the base value of a car by one‑third in the FBT
year that commences after you have owned or leased the car
for four years. That is, the reduction applies from 1 April after
the fourth anniversary of the date on which you first owned or
leased the car. The reduction applies only once for a particular
car and you then use the reduced base value for subsequent
years. The reduction does not apply to non‑business
accessories added after you acquired the car.
Example: reducing the base value after four years
An employer purchases a car for $30,000 (including GST)
on 1 July 2001. The employer can reduce the base value of
the car by one‑third ($10,000) in the FBT year beginning
1 April 2006.
Safeguards
There are safeguards to make sure the true base value of a car
is not artificially reduced by devices such as sale and lease‑back
or buy‑back. The safeguards also apply where a leased car is
acquired by the lessee on termination of the lease. Under the
safeguards, the base value is determined at the time you or your
associate first held the car and according to whether it was
owned or leased at the time.
There are further safeguards to ensure a car that changes
ownership at less than market value, or a car that is acquired at
no cost (for example, a car donated to a charitable organisation)
is priced appropriately. Generally, such a price is the market
value at the time of transfer.
When calculating the base value for each car:
n check
that you have included non‑business accessories,
GST and dealer delivery charges
n exclude registration and stamp duty
n make sure the vehicle has been owned or leased for
more than the minimum required period before reducing
the base value by one‑third
n ascertain the number of kilometres travelled by the car
during the FBT year, and annualise kilometres if the car
was not held for the full year
n establish the number of days the car was available for the
private use of employees, paying special attention to cars
bought or sold during the FBT year, and
n make sure you have obtained all necessary declarations
and records, such as receipts and invoices.
B – Statutory percentage
The statutory percentage depends on the total kilometres the
car travels, as follows.
Total kilometres travelled
during the FBT year
Statutory percentage
Less than 15,000
26
15,000 to 24,999
20
25,000 to 40,000
11
Over 40,000
7
Annualising the kilometres
If you own or lease a car for only part of an FBT year, use the
following formula to work out how many kilometres the car
would have travelled if you had owned or leased it for the whole
year (that is, annualise the kilometres).
A x C
B
Where: A = the number of kilometres travelled in the period
during the year when you owned or leased the car
B = the number of days in that period
C = the number of days in the FBT year
For example, where you acquire a car halfway through the year,
and it travels 12,000 kilometres, the annual distance would be
23,934 kilometres (that is, 12,000/183 x 365) and the statutory
percentage would be 20%.
50
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
C – Number of days used or available for private use
of employee
The statutory formula method is based on the number of days
during the FBT year when the car is available for the employee’s
private use or is actually used by the employee for private
purposes.
A car is considered to be available for private use, even though
the employee may not have actually used the car privately on
that day, if:
n it is garaged at or near the employee’s home or other place of
residence, or
n it is not kept at work and the employee (or their associate) is
allowed to use it for private purposes.
If the car is garaged at an employee’s home (home garaged) or
other place of residence, it is treated as being available for their
private use, regardless of whether they are actually allowed to
use it privately.
If the employee’s home is their workplace, the car is considered
to be available for their private use if it is garaged there.
D – Number of days in the FBT year
The number of days in the FBT year will be either 365 or 366
days.
E – Employee contribution
The amount that would otherwise be the taxable value of a car
fringe benefit is reduced by the amount of any employee
contribution.
An employee contribution does not have any GST implications
for you if:
n the contribution is made through payment of an amount by
the employee for some of the car’s operating costs (for
example, fuel), or
n you are neither registered nor required to be registered for
GST.
In certain circumstances, journal entries in your accounts can be
an employee contribution.
When calculating employee contributions for each car:
n identify
any employee contributions that reduce a car’s
taxable value (noting that employee contributions may be
made only from an employee’s after‑tax income and that
salary sacrifice amounts don’t count as employee
contributions)
n verify any employee contributions and that they have not
been reimbursed
n make sure that any employee contribution includes GST
paid by the employer
n make sure that any employee contributions are supported
by a declaration from the employee, or other records as
appropriate
n add any employee contributions to your assessable
income, where appropriate, and
n do not use any excess employee contributions for the car
to reduce the taxable value of other fringe benefits.
An employee contribution may be an amount paid:
n directly to you by an employee for use of the car – the
employee contribution must be made from the employee’s
after‑tax income, or
n by the employee to a third party for some of the car’s
operating costs (for example, fuel).
If you are using expenses paid for by an employee as an
employee contribution, you must have documentary evidence of
the expenditure (for example, receipts or invoices). In the case
of petrol and oil costs, the employee can give you a declaration
which must be in a form approved by the Commissioner (see
page 63 for the approved declaration). Where an employee
provides such a declaration, receipts are not required.
An employee contribution (other than a contribution of services
as an employee) is treated as consideration for a taxable supply
for GST purposes. You therefore have to pay GST on the
supply. You reduce the taxable value of the fringe benefit by the
GST‑inclusive amount of the employee contribution.
Fringe benefits tax for non‑profit organisations
51
52
Make and
model
Statutory %
(F x H)/G
yields
B
Base
value
(GSTinclusive
as
appropriate)
$
A
D
Number
of days
in the
FBT
year
(A x B x
C)/D
Gross
taxable
value
E
Employee
contribution
(GSTinclusive
as
appropriate)
$
((A x B x
C)/D) – E
Statutory
formula
method
taxable
value
$
F
Number
of
kilometres
travelled
GST may affect your FBT liability:
nUse the GST-inclusive base value for cars purchased or leased from
1 July 2000.
nUse the GST-inclusive employee contribution when calculating the
taxable value of a fringe benefit.
G
H
Number
of
days in
the
FBT year
(FxH)/G
Annualised
kilometres
26
20
11
7
15,000 to 24,999
25,000 to 40,000
Over 40,000
Closing
odometer
reading
(km)
Less than 15,000
Date
car first
held
Statutory percentage
J
Statutory
%
#Carry forward
details
Total kilometres travelled during the FBT year
Statutory percentage table
Number
of
days in
period
Statutory % calculation block
For example:
n recording ‘Date car first held’ details may help you work out when the
base value of the car can be reduced by one-third. The reduction
applies from 1 April next occurring after the fourth anniversary of the
date on which the car was first owned or leased by the employer, and
n recording ‘Closing odometer reading (km)’ may help you work out the
number of kilometres travelled for the following year, as one year’s
closing odometer reading will be the next year’s starting
odometer reading.
Totals to be transferred
to FBT return
C
Number
of days
available
for
private use
Taxable value calculation block
# You don’t have to complete the ‘Carry forward details’ section to
calculate the taxable value of the car fringe benefits in the adjacent
sections of the worksheet. But you may want to record these details
for cars you still own to make it easier to calculate the taxable value
of car fringe benefits for the following year.
Registration
or reference
number
Car details
Here is a worksheet that you may want to photocopy and use to calculate the taxable value of car fringe benefits if you use the statutory formula method.
There is a worked example of how to use the worksheet on page 54.
SAMPLE WORKSHEET – STATUTORY FORMULA METHOD
04 car FRINGE BENEFITS
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
Notes to worksheet
A
Base value
Details of what amounts to include in the base value are explained on pages 49
and 50. Records you can use to work out the base value include invoices/tax
invoices, receipts, journal entries, bills of sale and lease documents (for a leased
car). If the car was originally leased, the base value is usually the purchase price
(including GST as appropriate) paid by the lessor. The lease contract should show
the amount.
B, JStatutory percentage
Records you can use to work out what statutory percentage applies include
odometer records (see page 65), travel diaries and fleet management records. If
you don’t keep odometer records, you need some other way of identifying the
distance travelled by each car and a record of how you calculated the distance.
If a car is replaced during the year, record the kilometres travelled by each
car separately – don’t add the kilometres travelled by each car together.
C Number of days the car was available for private use
Records you can use to work out how many days the car was available for
private use include logbooks, diaries and fleet management records.
There are several methods you can use, including referring to the pattern of use,
for example, where a car is garaged each night. This information may be available
from an employee’s work records, such as a diary of work‑related business trips.
D, H Number of days in the FBT year (this is either 365 or 366)
EEmployee contribution
Records you can use to work out the amount of any employee contributions
include receipts, declarations, invoices/tax invoices, journal entries and cheque
butts.
F
Number of kilometres travelled in the period during the year when you owned or
leased the car
G
Number of days in the period during the year when you owned or leased the car
Calculating the taxable value of the car fringe
benefit
The information in the worksheet can then be used to calculate
the taxable value of the car fringe benefit provided to
employees, as follows.
Step
Action
1If the car is
owned or leased
for only part of
the FBT year,
calculate the
annualised
kilometres and
the relevant
statutory
percentage
Use the following formula to calculate how many kilometres the
car would have travelled if you had owned or leased it for the
whole year:
2Calculate the
taxable value
Use the following formula and the relevant data from the
worksheet to calculate the taxable value of the car fringe benefit:
Result
AxC
B
Where:A = number of kilometres travelled in the period during
the year when you owned or leased the car
B = number of days in that period
C = number of days in the FBT year
(A x B x C) – E
D
Where:A = base value of the car
B = statutory percentage
C = number of days in the FBT year when the car was
used or available for private use of employees
D = number of days in the FBT year
E = employee contribution
3Gross up the
taxable value to
obtain the
employer’s fringe
benefits taxable
amount
4Calculate the tax
payable
Use the following formula to gross up the fringe benefits amount:
AxB
Where:A = taxable value
B = type 1 or type 2 rate
From 1 April 2006:
The type 1 or higher gross-up rate is 2.0647.
The type 2 or lower gross-up rate is 1.8692.
To calculate the tax payable note the taxable amount and follow
the calculations in chapter 3
Fringe benefits tax for non‑profit organisations
53
54
Holden
Barina
Make and
model
11%
B
A
15,000
Statutory %
(F x H)/G
yields
Base
value
(GSTinclusive
as
appropriate)
$
182
C
Number
of days
available
for
private use
Taxable value calculation block
365
D
Number
of days
in the
FBT
year
Andrew uses the information to complete the worksheet.
Andrew is a bookkeeper and has gathered the following
information for his employer about a car the employer
provides to Vicki, a company employee.
nThe car, a Holden Barina, with number plate ZZZ 999,
was purchased by the employer on 1 October 2006. Its
base value is $15,000 (including GST).
nFor the whole of the period 1 October 2006 to 31 March
2007 (182 days) the car was available for Vicki’s private
use. During that time, Vicki travels 15,000 kilometres.
nVicki pays fuel costs of $550 (including GST) to third
parties and provides her employer with the necessary
declaration.
Example
ZZZ 999
Registration
or reference
number
Car details
Employer name
Statutory formula method worksheet
822
(A x B x
C)/D
Gross
taxable
value
550
E
Employee
contribution
(GSTinclusive
as
appropriate)
$
272
((A x B x
C)/D) – E
Statutory
formula
method
taxable
value
$
FBT year ended 31 March 2006
15,000
F
Number
of
kilometres
travelled
182
G
Number
of
days in
period
365
H
Number
of
days in
the
FBT year
Statutory % calculation block
30,082
(FxH)/G
11%
J
Annualised Statutory
kilometres %
1-Oct-06
Date
car first
held
117,000
Closing
odometer
reading
(km)
#Carry forward
details
04 car FRINGE BENEFITS
Worked example – statutory formula method
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
Andrew then uses the information in the worksheet to calculate the taxable value of the car fringe benefit provided to Vicki for the
year, as follows.
Step
Action
Result
1If the car is
owned or leased
for only part of
the FBT year,
calculate the
annualised
kilometres and
the relevant
statutory
percentage
Use the following formula to calculate how many kilometres the
car would have travelled if you had owned or leased it for the
whole year:
If the car was acquired on 1
October 2006 (owned for 182
days in the FBT year) and
travelled 15,000 kilometres in the
six months, the annualised
kilometres would be 30,082
kilometres.
2Calculate the
taxable value
Use the following formula and the relevant data from the
worksheet to calculate the taxable value of the car fringe benefit:
AxC
B
Where: A = number of kilometres travelled in the period during
the year when you owned or leased the car
B = number of days in that period
C = number of days in the FBT year
(A x B x C) – E
D
Where: A = base value of the car
B = statutory percentage
C = number of days in the FBT year when the car was
used or available for private use of employees
D = number of days in the FBT year
E = employee contribution
3Gross up the
taxable value to
obtain the
employer’s
fringe benefits
taxable amount
Use the following formula to gross up the fringe benefits amount:
4Calculate the
tax payable
To calculate the tax payable note the taxable amount and follow
the calculations in chapter 3
AxB
Where: A = taxable value
B = type 1 or type 2 rate
That is, (15,000 x 365)/182.
Based on the total kilometres the
car would have travelled during
the year, the relevant statutory
percentage is 11%.
($15,000 x 11% x 182) – $550
365
=$822 – $550
= $272 taxable value.
The base value of the car is the
purchase price, including the
cost of fitted accessories. The
luxury car depreciation limit does
not affect the calculation of FBT.
For FBT purposes, the amount
of $15,000 (including GST) is
used to determine the taxable
value.
As the employer is entitled to a
GST credit, the fringe benefits
taxable amount is calculated
using the type 1 higher gross‑up
rate, as follows:
$272 x 2.0647 = $561 taxable
amount
Fringe benefits tax for non‑profit organisations
55
04 car FRINGE BENEFITS
Using the operating cost method
You may use the operating cost method only if you
have kept a logbook and other necessary FBT records. See
Fringe benefits tax: a guide for employers (NAT 1054) for
more details.
Under this method, the taxable value of the car fringe benefit is
a percentage of the total costs of operating the car during the
FBT year, and is calculated using the following formula.
(A x B) – C
Where: A = the total operating costs
To calculate deemed depreciation multiply the depreciated
value of the car at the start of the FBT year by 18.75% for cars
purchased on or after 1 July 2002. For cars purchased before 1
July 2002, multiply the depreciated value of the car at the start
of the FBT year by 22.5%.
The depreciated value of a car for the year in which it is
acquired is the cost of the car, including the cost of
non‑business accessories. The cost of the car includes GST
and luxury car tax where appropriate.
In a subsequent year the depreciated value of a car is the cost
of the car reduced by deemed depreciation at the rate of 22.5%
(or 18.75% if acquired on or after 1 July 2002) a year over the
period of ownership.
B = the percentage of private use
C = the employee contribution
Total operating costs
For this particular purpose, the operating costs of a car include:
n actual costs, and
n deemed costs (that is, certain costs that are considered to
have been incurred even if they have not).
This is different from the costs you use for income tax
purposes.
Actual operating costs (including GST) are costs you (or the
employee or an associate) pay for:
n repairs, but not crash repair expenses met by an insurance
company or another person legally responsible for the
damage to the car
n maintenance
n fuel
n registration and insurance (for the year or part of the year
when the car was used to provide fringe benefits), and
n leasing, if the car is leased rather than owned (for the year or
part of the year when the car was used to provide fringe
benefits). The lease includes GST and luxury car tax where
appropriate.
Deemed operating costs are relevant only if the car is owned
(rather than leased). They are depreciation and interest
expenses deemed to be incurred. If the car was not used to
provide fringe benefits for the full year, apportion the
depreciation and interest to reflect the period it was so used.
56
The income tax depreciation cost limit doesn’t apply
for FBT purposes.
To calculate deemed interest multiply the depreciated value of
the car by the statutory interest rate. The statutory interest rate
for the FBT years ended 31 March 2006 is 7.05% and
31 March 2007 is 7.30%. The interest rate usually changes from
year‑to‑year and is published annually in a tax determination
and also in the annual FBT return form instructions.
Percentage of private use
You can calculate your percentage of private use using the
following formula.
A x 100
B
Where: A = your estimate of business kilometres travelled by
the car during the FBT year (or part‑year, as the case
may be)
B = the total kilometres (both business and private)
actually travelled by the car during the same period
You use information from logbook and odometer records, as
well as any variations in the pattern of business use throughout
the year, to estimate the percentage of business use.
You use different methods to estimate the business kilometres
travelled in a logbook year and in a year that is not a logbook
year. Also, if you replace a car during the year, you may be able
to transfer the percentage of business use to the new car. There
is more information about logbook years on page 64.
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
When calculating the percentage of private use for
each car:
n verify
all costs, such as those associated with fuel, repairs
and maintenance
n if the car was not used to provide fringe benefits for the
full FBT year, apportion the deemed depreciation and
deemed interest component to reflect the period it was
used to provide benefits
n include GST and lease costs
n obtain logbooks and odometer records and make sure
they meet the requirements. Ensure odometer records
are maintained in both logbook and non‑logbook years,
and
n obtain all necessary declarations and copies of
documents such as receipts and invoices.
Employee contribution
This is explained on page 51.
Fringe benefits tax: a guide for employers (NAT 1054)
Fringe benefits tax for non‑profit organisations
57
58
Make and
model
A
b
a
c
Fuel
and
oil
$
d
Registration
and
insurance
$
e
Leasing
costs
$
f
Other
misc.
costs
$
g
h
Deemed
interest
$
A
(a + b +
c+d+
e+f+g
+ h) =
Total
operating
costs
$
i km
j km
Total km
this year
B
Estimated
private
% of use
Totals to be transferred to FBT
return
Estimated
business
kilometres
the GST-inclusive employee contribution when
calculating the taxable value of a fringe benefit.
nUse
B
Estimated private % of use
the GST-inclusive base value for cars
purchased or leased from 1 July 2000.
nUse
GST may affect your FBT liability.
Deemed
depreciation
$
Deemed
operating costs
FBT year ended 31 March
For example, recording ‘Closing written down value
(CWDV) for cars still owned (S)’ details may help you
work out the ‘Deemed operating costs’ for a car for
the following year.
Maintenance
$
Repairs
$
Actual operating costs (GST-inclusive as appropriate)
# You don’t have to complete the ‘Carry forward
details’ section to calculate the taxable value of the
car fringe benefits in the adjacent sections of the
worksheet. But you may wish to record these details
for cars you still own to make it easier to calculate the
taxable value of car fringe benefits for the following year.
Registration
or reference
number
Car details
Employer name
Operating cost method worksheet
AxB
Gross
taxable
value
C
Employee
contributions
(GSTinclusive
as
appropriate)
$
C
(AxB)-C
Operating
cost
method
taxable
value
$
Closing written
down value
(CWDV) for cars
still owned (S)
‘Depreciated
value’
# Carry forward
details
Here is a worksheet that you may want to photocopy and use to calculate the taxable value of car fringe benefits if you use the operating cost method. There is a worked
example of how to use the worksheet on page 60.
Sample worksheet – operating cost method
04 car FRINGE BENEFITS
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
Notes to worksheet
A
Total operating costs (comprising sub‑costs a, b, c, d, e, f, g and h)
Records you can use to work out total operating costs include invoices/tax
invoices, receipts, journal entries, bills of sale, lease documents, declarations and
fleet management records. See page 56 for details of what to include in total
operating costs for cars that are owned and cars that are leased.
BEstimated percentage of private use (based on number of kilometres and
amount at j)
Records you can use to work out the estimated percentage of private use include
logbook records, odometer records and diaries. See page 56 for how to calculate
the percentage of business use, and pages 65–66 for a sample logbook and
odometer record.
CEmployee contribution
Records you can use to work out the amount of any employee contributions
include receipts, declarations, invoices/tax invoices, journal entries and cheque
butts.
Calculating the taxable value of the car fringe
benefit
The information in the worksheet can then be used to calculate
the taxable value of the car fringe benefit provided to
employees, as follows.
Step
Action
1Calculate total
operating costs
–A
Work out the total operating costs by adding actual and deemed
costs.
2Estimate
percentage of
private use – B
Use the formula and relevant information from the worksheet to
work out the estimated percentage of private use:
Result
A x 100
B
Where: A = your estimate of business kilometres travelled during
the FBT year (or part‑year)
B = total kilometres travelled by the car during the same
period
3Calculate
employee
contribution – C
Total all employee contributions for the year.
4Calculate the
taxable value
Use the following formula and the relevant information from the
worksheet to calculate the taxable value of the car fringe benefit:
(A x B) – C
Where: A = total operating costs
B = percentage of private use
C = employee contribution
5Gross up the
taxable value to
obtain the fringe
benefits taxable
amount
The fringe benefit amount is grossed up using the formula:
6Calculate the
tax payable
To calculate the tax payable note the taxable amount and follow
the calculations in chapter 3.
AxB
Where: A = taxable value
B = type 1 or type 2 amount
Fringe benefits tax for non‑profit organisations
59
60
Holden
Commodore
Make and
model
b
a
1,500
Maintenance
$
Repairs
$
2,500
c
Fuel
and
oil
$
1,000
d
Registration
and
insurance
$
e
Leasing
costs
$
Actual operating costs (GST-inclusive as appropriate)
A
car, a Holden Commodore with registration number
AAA 000, has an opening depreciated value of $20,000 at
1 April 2006.
nBusiness records held by the company show that:
– the cost of repairs incurred during the period was $1,500
– total fuel and oil costs for the period were $2,500, and
– registration and insurance costs for the period were $1,000.
nThe
Lois is a staff clerk. She has gathered the following information for
her employer about a car the employer provides to John, a
company employee. The car was purchased by the employer on
1 November 2003.
Example
AAA 000
Registration
or reference
number
Car details
Employer name
Operating cost method worksheet
WORKED EXAMPLE – Operating cost method
f
Other
misc.
costs
$
10,210
A
(a + b +
c+d+
e+f+g
+ h) =
Total
operating
costs
$
7,500
i km
Estimated
business
kilometres
10,000
j km
Total km
this year
25%
B
Estimated
private
% of use
Estimated private % of use
B
2,552
AxB
Gross
taxable
value
Lois uses the information to complete the worksheet.
C
1,100
C
Employee
contributions
(GSTinclusive
as
appropriate)
$
records kept by the employer for the period
1 April 2006 to 31 March 2007 show the car travelled 10,000
kilometres. Based on the logbook kept for the car for the
previous year and all other relevant factors, the employer
estimates that the number of business kilometres travelled for the
period was 7,500 kilometres.
nJohn pays fuel costs of $1,100 and provides the employer with
the necessary declaration. (Note: the $1,100 John paid for fuel is
included in the $2,500 total fuel and oil cost noted above.)
1,460
h
Deemed
interest
$
nOdometer
3,750
g
Deemed
depreciation
$
Deemed
operating costs
FBT year ended 31 March
1,452
(AxB)-C
Operating
cost
method
taxable
value
$
16,250
Closing written
down value
(CWDV) for cars
still owned (S)
‘Depreciated
value’
# Carry forward
details
04 car FRINGE BENEFITS
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
Lois then uses the information in the worksheet to calculate the value of the car fringe benefit provided to John for the year, as
follows.
Step
Action
Result
1Calculate total
operating costs
–A
Work out the total operating costs by adding actual and deemed
costs.
$5,000 actual costs
($2,500 + $1,500 + $1,000) +
$3,750 deemed depreciation
(18.75% of $20,000 depreciated
value) + $1,460 deemed interest
(7.30% of $20,000 depreciated
value)
= $10,210
2Estimate
percentage of
private use – B
Use the formula and relevant information from the worksheet to
work out the estimated percentage of private use:
A x 100
B
7,500 x 100 = 25
10,000
Where: A = your estimate of business kilometres travelled during
the FBT year (or part‑year)
B = total kilometres travelled by the car during the same
period
So the percentage of private use
would be 25% (2,500 kms (25%)
of the 10,000 kms travelled for
the year).
3Calculate
employee
contribution – C
Total all employee contributions for the year.
$1,100
4Calculate the
taxable value
Use the following formula and the relevant information from the
worksheet to calculate the taxable value of the car fringe benefit:
5Gross up the
taxable value to
obtain the fringe
benefits taxable
amount
(A x B) – C
($10,210 x 25%) – $1,100
Where: A = total operating costs
B = percentage of private use
C = employee contribution
= $2,552 – $1,100
The fringe benefit amount is grossed up using the formula:
As the employer is entitled to a
GST credit, the fringe benefits
taxable amount is calculated
using the type 1 higher gross‑up
rate, as follows:
AxB
Where: A = taxable value
B = type 1 or type 2 amount
= $1,452 taxable value
$1,452 x 2.0647 = $2,997
taxable amount
Assuming this amount is
allocated to a single employee
this amount becomes that
employee’s individual grossed‑up
non‑exempt amount.
6Calculate the
tax payable
To calculate the tax payable note the taxable amount and follow
the calculations in chapter 3.
Fringe benefits tax for non‑profit organisations
61
04 car FRINGE BENEFITS
How to calculate the
taxable value of a benefit
provided as a vehicle
other than a car
If an employee has private use of a vehicle that is not classed as
a car under the FBT law, the right to use the vehicle is called a
residual fringe benefit. Other types of benefits can be classed
as residual fringe benefits. For more information see page 7.
Which vehicles are not classed as cars?
For FBT purposes, a vehicle not classed as a car is:
n a motor bike
n any goods‑carrying vehicle with a capacity of one tonne or
more, or
n any other passenger‑carrying vehicle designed to carry nine or
more passengers.
Page 48 outlines what vehicles are classed as cars for FBT
purposes.
There are two methods to calculate the taxable value of a motor
vehicle other than a car.
n Operating cost method – this is the same as the calculation
for cars (see page 56).
n Cents‑per‑kilometre method, which is calculated by
multiplying the number of kilometres travelled by the
appropriate rate per kilometre. Use the following rates for the
2005–06 and 2006–07 FBT years.
Engine
capacity
Rate per
kilometre
2005–06
Rate per
kilometre
2006–07
0 to 2,500cc
39 cents
40 cents
Over 2,500cc
47 cents
48 cents
Motorcycles
12 cents
12 cents
Both methods assume the vehicle is provided on a fully
maintained basis, including fuel.
If the employee provides fuel, don’t include fuel costs in the
operating cost. If using the cents‑per‑kilometre method, you
could multiply the number of private kilometres travelled by
estimated fuel costs per kilometre based on average fuel costs
and average fuel consumption of the vehicle, and then deduct
this amount.
MORE INFORMATION
Taxation Ruling MT 2034: Fringe benefits tax: private use of
motor vehicles other than cars explains which method you
can use.
62
EXAMPLE: Calculating the taxable value of a motor
vehicle other than a car
An employee takes your one‑tonne utility home each day
and has private use of the vehicle in the evenings and on
weekends. The employee estimates that his home to work,
evening and weekend travel is 100 kilometres a week, and
has given you a declaration.
The vehicle travelled 52,000 kilometres during the FBT year
ending 31 March 2007 and the operating costs (including
deemed interest and depreciation) were $20,080. The
employee didn’t make any contributions.
Using the operating cost method
Taxable value = [$20,080 (total operating costs) x 10%
(percentage of private use)] – $0 (employee direct
contribution, not including fuel) = $2,080
Using the cents‑per‑kilometre method
Taxable value = [5,200 km (number of private kilometres
travelled) x 48 cents per km (rate per kilometre)] – $0
(employee direct contribution, not including fuel) = $2,496
Once you have calculated the taxable value of a residual fringe
benefit using either the operating cost method or the
cents‑per‑kilometre method, you have to gross up the taxable
value to obtain the fringe benefits taxable amount. To calculate
the tax payable note the taxable amount and follow the
calculations in chapter 3.
Exempt residual fringe benefits
An exempt residual fringe benefit arises if you provide an
employee with the use of a vehicle other than a car for FBT
purposes and the private use is restricted to:
n travel between home and work
n travel that is incidental to travel in the course of duties of
employment, and
n non‑work‑related use that is minor, infrequent and irregular
(for example, occasional use of the vehicle to remove
domestic rubbish).
Where private use exceeds the above restrictions, the right to
use the vehicle is a taxable residual fringe benefit.
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
Special records you need
to keep for car fringe
benefits
Employee contribution records
Record any contributions the employee has made during the
year towards the cost of running the car.
If you are using expenses paid for by an employee as an
employee contribution, you must have documentary evidence of
the expenditure (for example, receipts, invoices or tax invoices,
journal entries or cheque butts). In the case of petrol and oil
costs, the employee can give you a declaration which must be
in the form approved by the Commissioner. The approved
declaration is shown below. You must obtain any declarations
by 21 May.
Fuel expenses declaration
I _______________________________________________________________________________________________ declare that
(employee’s full name)
___________________________________________________________________ expenses of $ ___________________________
(state whether fuel and/or oil) (amount in figures)
were incurred by me during the period from _____________ 20_____ to ____________ 20______
in respect of ___________________________________________________ registration number ___________________________
(make and model of car)
Signed _____________________________________________________
Date ________________________________________
If the employee is responsible for all fuel and/or oil costs, you
can accept a declaration based on a reasonable estimate based
on the total kilometres travelled, average fuel costs and fuel
consumption. In these cases, the employee should add the
following to the declaration.
I also declare that the total kilometres travelled during the period was _________________________________________________
If the employee makes cash payments to you towards the
running costs of the car, you will need to record these payments
for each employee in such a way that they can be totalled easily
at the end of the year.
Details of cash payments are usually recorded in a business’s
cash receipts book, as these payments are assessable income
for business income tax purposes and may have GST
consequences. There is an example of a cash receipts book in
Record keeping for small business (NAT 3029).
Fringe benefits tax for non‑profit organisations
63
04 car FRINGE BENEFITS
Percentage of business use records
All costs associated with running each car need to be
recorded in such a way that the cost for each car can be
totalled at the end of the FBT year.
If you use the operating cost method to calculate the taxable
value of a car fringe benefit, you have to keep:
n logbook records, and
n odometer records.
Logbook records contain a record of business use and are
usually maintained for a continuous 12‑week period. Odometer
records are a record of the total distance travelled during the
same 12 weeks the logbook records are maintained, and also of
the total distance travelled each year. Logbook and odometer
records must be kept for each car.
In a logbook year, you have to keep both types of records. In a
year other than a logbook year, you keep odometer records.
A year is a logbook year if:
n none of the previous four years was a logbook year of tax for
that car
n you choose to treat the year as a logbook year (for example,
to increase the nominated percentage of business travel)
n the Tax Office told you in writing to treat the year as a logbook
year, or
n you start using this method to claim expenses for more than
one car.
A logbook year commonly occurs when you use the
operating cost method to value a car fringe benefit for the
first time. You can keep your logbook for up to five years
(assuming there is no major change in the pattern of use).
After the fifth year, you will need to keep a new logbook.
As part of your business records you should also record
additional information such as the car’s make, model and
registration number.
What information to record in logbooks
The Tax Office doesn’t produce an official logbook but we have
provided a sample one below that you can use. If you prefer,
you can design your own logbook or buy one of the commercial
products available. Regardless of which type of logbook you
use, you must keep a record of the following details for each
business journey during the 12‑week logbook period.
n The
dates on which the journey began and ended.
odometer readings at the start and end of each journey.
n The kilometres travelled.
n The purpose of the journey.
n The
64
The logbook records must be in English and entries must be
made at the end of the journey or as soon as reasonably
practicable afterwards.
Where two or more business journeys are undertaken
consecutively in any day, only one entry for the series needs to
be recorded in the logbook. For example, a salesman who
called on 10 customers while working in the Bathurst–Orange
area of New South Wales could record the odometer readings
at the start and end of the consecutive journeys and describe
the purpose of the travel as ‘10 customer calls, Bathurst–
Orange area’.
The 12‑week continuous period during which the logbook is
kept must be specified, but may overlap two FBT tax years. The
12 week period chosen should be representative of the car’s
business use.
Estimating the business kilometres travelled
Because logbook records are normally maintained for only 12
weeks, take care in estimating the percentage of business use
of the car. The estimate must take into account the information
in the logbook as well as any variations in the pattern of
business use throughout the year.
Estimating the business kilometres travelled in a
logbook year
In estimating the business kilometres travelled in a logbook year,
you must:
n keep a logbook recording details of business journeys
undertaken in the car for a continuous period of at least 12
weeks (the logbook period must also be recorded in the
logbook)
n keep odometer records of the total kilometres travelled during
that period
n keep odometer records of the total kilometres travelled during
the year
n estimate the number of business kilometres travelled during
the full FBT year (or part‑year if appropriate), and
n take into account all relevant matters, including logbook,
odometer and any other records you keep, and any variations
in the pattern of business use throughout the year due to
things like holidays or seasonal factors.
Estimating the business kilometres travelled in a
non‑logbook year
In estimating the business kilometres travelled in a non‑logbook
year, you must:
n keep odometer records of the total kilometres travelled during
the year (or part‑year if appropriate)
n estimate the number of business kilometres travelled during
the full FBT year (or part‑year if appropriate)
n take into account all relevant matters, including logbook,
odometer and any other records you keep, and any variations
in the pattern of business use throughout the year due to
things like holidays or seasonal factors.
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
SAMPLE CAR LOGBOOK
Employer name
Make
Date trip
began
FBT year ended 31 March
Model
Date trip
ended
Odometer
start
Odometer
end
Engine type
Registration
number
Kilometres travelled
Purpose of journey
Business
km
Private km*
* You don’t have to record private travel, but it may help with your calculations.
You need to keep a separate logbook for each car.
WORKED EXAMPLE – CAR LOGBOOK
Employer name
Make: Ford
Date trip
began
FBT year ended 31 March 2007
Model: Falcon
Date trip
ended
Odometer
start
Odometer
end
Engine type: 3,800cc
Registration
number: AAA 999
Kilometres travelled
Purpose of journey
Business
km
Private km*
06.06.06
06.06.06
118,500km
118,570km
70km
0km
Visit mechanic, tax agent
07.06.06
07.06.06
118,570km
118,580km
0km
10km
Private travel
What information to record in odometer records
n The
date the period began and ended.
odometer reading at the start and end of the period.
The odometer records must be in English, and the entries
should be made at, or as soon as reasonably practicable after,
the times to which the readings relate.
Odometer records are a record of the total kilometres travelled
by the car during the whole FBT year, or for that part of the year
it was used to provide fringe benefits. Odometer records should
also be kept for the 12 weeks for which a logbook is kept.
n The
As with logbooks, the Tax Office doesn’t produce an official
odometer record form but we have provided a sample one
below that you can use. If you prefer, you can design your own
form or buy one of the commercial products available.
Regardless of which type of odometer record form you use, the
following details must be entered for each period (that is, year,
part‑year or logbook period).
If you replace a car during the year and transfer the business
percentage to the new car, the odometer records must show
odometer readings for the replaced car and the new car on the
replacement date.
Fringe benefits tax for non‑profit organisations
65
04 car FRINGE BENEFITS
Sample odometer record
Employer name
Car make
FBT year ended 31 March
Model
Registration
number
Start
Date
End
Odometer
reading
Date
Odometer
reading
You can record details for more than one car on the same odometer record.
Don’t add together kilometres travelled by old and replacement cars.
WORKED EXAMPLE – SAMPLE ODOMETER RECORD
Employer name
Car make
Mitsubishi
66
FBT year ended 31 March 2007
Model
Magna
Registration number
XXX 999
Start
End
Date
Odometer
reading
Date
Odometer
reading
01.04.06
116,000
31.03.07
126,000
Fringe benefits tax for non‑profit organisations
04 car FRINGE BENEFITS
Special records you need
to keep for vehicles
other than cars
You don’t have to keep such detailed records as you do for car
fringe benefits. However, if you do keep logbook records, use
these to determine the extent of private use of the vehicle.
Otherwise, you can estimate the number of private kilometres
travelled. For example, you could determine the home to work
component of private use by multiplying the number of journeys
during the year by the distance between the employee’s
residence and place of employment.
If you are making a reduction for business travel, you must
obtain a declaration from the employee, in a form approved by
the Commissioner, specifying the deductible percentage of the
operating costs. If using the cents‑per‑kilometre method, the
declaration could state the number of private kilometres
travelled rather than the deductible percentage.
Here is the approved employee declaration for a vehicle other
than a car.
Residual benefit declaration – vehicles other than cars
I _____________________________________________________________ declare that during the period ___________20______
(name of employee)
to___________20______ that __________________________________________________________________________________
(show details of vehicle)
was provided to me by or on behalf of my employer.
The total number of private kilometres travelled was _______________________________________________________________
or
I would have been entitled to claim an income tax deduction equal to _______% of the operating costs.
Signature___________________________________________
Date __________________________________________________
MORE INFORMATION
and motor vehicle trade‑ins for charities (NAT 12353)
benefits tax: a guide for employers (NAT 1054)
nMiscellaneous Tax Ruling MT 2024 and addenda MT
2024A and MT 2024A2 – Fringe benefits tax: dual cab
vehicles eligibility for exemption where private use is
limited to certain work related travel
nMiscellaneous Tax Ruling MT 2050 – Fringe benefits tax:
payment of recipients contributions by journal entry
nGST
nFringe
Fringe benefits tax for non‑profit organisations
67
04 car FRINGE BENEFITS
68
Fringe benefits tax for non‑profit organisations
EXPENSE PAYMENT
FRINGE BENEFITS
05
The rules in this chapter apply to
expenses incurred by an
employee that are reimbursed or
paid by you, the employer.
They do not apply to goods or
services you purchase directly
and provide to the employee.
Nor do they apply to goods or
services purchased using your
credit card. Goods or services
acquired in these ways are
subject to valuation under the
property or residual benefit rules.
This chapter also includes
information about:
n when you might provide
expense payment fringe
benefits
n calculating taxable values of
expense payment fringe
benefits, and
n special records you need to
keep.
05 EXPENSE PAYMENT FRINGE BENEFITS
Common expenses
reimbursed or paid for by
employers
You may provide expense payment fringe benefits if an
employee incurs expenses and:
n you reimburse them for the expenses, or
n you pay a third party for the expenses.
The expenses can be business or private expenses, or a
combination of both, but they must be incurred by the
employee.
If you incur the expense, for example through a corporate credit
card, you don’t have an expense payment fringe benefit. You
could, however, have a property, residual or tax‑exempt body
entertainment fringe benefit, depending upon what is paid for.
Here are some of the most common expenses reimbursed or
paid for by employers and how they are treated for FBT
purposes.
Higher Education Loan Programme (HELP) charges
The reimbursement or payment of employee HELP charges is
an expense payment fringe benefit. These charges are not
‘otherwise deductible’ and the full value is subject to FBT if paid
by you.
Home or desktop computer
This is an expense payment fringe benefit and the taxable value
is the amount you reimburse or pay.
Even if a computer is used for work, the taxable value
cannot be reduced under the otherwise deductible rule.
This is because the computer is depreciated, and not
claimed as a one‑off deduction in the year it is purchased.
Car expenses
Home mortgage
The taxable value is the amount you reimburse or pay, reduced
by the otherwise deductible rule. There are special rules
determining the ‘otherwise deductible’ amount for car expense
payment benefits.
However, payments made to an employee’s home mortgage
offset facility may not be an expense payment fringe benefit, but
rather, a payment of salary and wages.
The payment or reimbursement of employee car expenses such
as registration is an expense payment fringe benefit.
Car expenses – reimbursed cents per kilometre
The reimbursement of car expenses on a rate per kilometre
basis is generally not a fringe benefit. An employee will need to
show this reimbursement as income in their tax return. They can
claim a deduction for any work‑related car expenses and
TaxPack has information about the records they will need to do
this.
Car parking expense payment fringe benefits
A car parking expense payment fringe benefit may arise if an
employee pays for car parking and:
n you subsequently reimburse the employee, or
n you pay for the car parking expenses on behalf of the
employee
and:
n the car is parked at or near the employee’s primary place of
employment for more than four hours between 7.00am and
7.00pm on the day the expense is incurred, and
n the car is used by the employee to travel between home and
work on that day.
Payments made to an employee’s mortgage account are
expense payment fringe benefits. The taxable value of this
benefit is the amount you reimburse or pay.
Home telephone expenses
The reimbursement or payment of employee home telephone
costs is an expense payment fringe benefit. To work out the
taxable value, you need to know the business use of the
telephone and apply the otherwise deductible rule.
Laptop computer expenses
This is an exempt benefit if the expense payments in the FBT
year are in relation to the employee’s purchase of one laptop
computer.
The other types of exempt benefit that can arise from providing
a laptop are as follows.
nWhere you own the computer and give it to the employee to
keep, this is a property benefit. This exemption is limited to
one computer per employee per year.
nIf the computer belongs to you and the employee will have to
return it, this is a residual benefit.
If the employee receives a laptop as part of a salary sacrifice
arrangement, they are entitled to an income tax deduction for
the decline in value of the asset to the extent they use it for a
taxable purpose.
Health insurance premiums
The reimbursement or payment of employee health insurance
premiums is an expense payment fringe benefit. The taxable
value is the amount you pay.
70
Fringe benefits tax for non‑profit organisations
05 EXPENSE PAYMENT FRINGE BENEFITS
Exempt expense payment
benefits
Personal credit card payments
You don’t have to pay FBT on certain expense payment fringe
benefits. Here are some examples of exempt expense payment
benefits.
Regardless of the items of expenditure incurred under the credit
card agreement (that is, purchases of goods, services or cash
advances), the reimbursement or payment by the employer will
generally be considered to be an expense payment.
Consequently, such payment or reimbursement would not be
salary or wages.
Newspapers and periodicals
Payment of an employee’s personal credit card expenses is an
expense payment fringe benefit. The taxable value is the amount
you reimburse.
The costs of providing newspapers and periodicals to
employees for business purposes are exempt benefits. The
exemption does not apply where the business use is merely
incidental.
Membership fees and subscriptions
Home rental expenses
Payment of home rental expenses is an expense payment fringe
benefit, unless the home is in a remote area. The taxable value
of this benefit is the total amount you reimburse or pay.
If you incur the rental expenses then it may be a housing,
residual or expense payment fringe benefit.
If you incur the rental expenses and the premises are not the
employee’s usual place of residence, the benefit is a residual
fringe benefit.
If you incur the rental expenses for an employee who is required
to live away from their usual place of residence, the benefit is an
exempt benefit.
School fees
Payment of school fees is an expense payment fringe benefit.
The taxable value is the amount you pay or reimburse.
Self‑education expenses
Payment of self‑education expenses is an expense payment
fringe benefit. The taxable value is the amount you pay. If the
self‑education expenses are work‑related, you can reduce the
taxable value by the otherwise deductible rule.
HELP charges are not ‘otherwise deductible’ for the
employee and the full value is subject to FBT if paid by you.
Unlike when claiming an income tax deduction, for FBT you
do not have to reduce self‑education expenses by $250
when working out the ‘otherwise deductible’ amount.
Non‑work‑related taxi travel expenses
Non‑work‑related taxi travel, such as taxi travel paid for an
employee while they are on holidays, generally gives rise to an
expense payment fringe benefit. The taxable value is the amount
you pay or reimburse.
Fringe benefits tax for non‑profit organisations
Expense payment benefits arising are exempt benefits if they
are:
n a subscription to a trade or professional journal, or
n an entitlement to use an airport lounge membership.
Taxi travel
Payment of taxi travel expenses is an exempt benefit if the
travel:
n is a single trip beginning or ending at the employee’s place of
work, or
n arises as a result of sickness or injury to the employee and is
the whole or a part of the journey directly between:
n the employee’s place of work
n the employee’s place of residence, or
n any other place that it is necessary, or appropriate, for the
employee to go as a result of the sickness or injury.
Laptop computer
One laptop computer per employee per year is an exempt
benefit, where the laptop is provided as an expense payment or
property benefit.
Mobile phone expenses
Payment of mobile phone expenses where the mobile phone is
primarily for use in the employee’s employment is an exempt
benefit.
Car parking
You are exempt from FBT in relation to car parking expense
payment fringe benefits if you are:
n a non‑profit scientific institution
n a religious institution
n a charitable institution
n a public educational institution, or
n a government body where the employee is exclusively
employed in, or in connection with, a public educational
institution.
71
05 EXPENSE PAYMENT FRINGE BENEFITS
How to calculate the
taxable value of an
expense payment fringe
benefit
The taxable value of an expense payment fringe benefit is the
amount of payment or reimbursement you make.
However, you use different rules for calculating the taxable value
of a benefit where you pay or reimburse an employee for goods
or services you (or an associate) sell to customers or clients in
the ordinary course of your business. For more information
about calculating the taxable value of these expense payment
fringe benefits, see Fringe benefits tax: a guide for employers
(NAT 1054).
Once you have calculated the taxable value of an
expense payment fringe benefit (after reducing it where
applicable – see below), you have to gross up the taxable
value to get your fringe benefits taxable amount then refer
to chapter 3 for how to calculate the FBT payable.
Reducing the taxable value of an expense payment
fringe benefit
You may be able to reduce the taxable value of certain expense
payment fringe benefits, as explained below.
Reduction where expense would have been
deductible to employee (otherwise deductible rule)
n If
you don’t take into account the business component of the
expense, the employee’s income tax deduction is the amount
of their expense, minus the amount of the reimbursement,
then multiplied by the business percentage.
Step 4 – Subtract the actual deductible amount (step 3) from
the hypothetical deductible amount (step 2). The result is the
amount by which you can reduce the taxable value of the fringe
benefit.
EXAMPLE
Jim, your employee, incurred expenditure of $500, of which
80% was employment‑related (and income tax deductible)
and 20% private. You reimburse Jim $250, without regard
to whether his expenditure was for business or private
purposes. The taxable value of the expense payment fringe
benefit (without the otherwise deductible rule) is $250.
Step 1 – Jim’s gross expense is $500.
Step 2 – Jim would normally be entitled to an income tax
deduction of $400 for the expense (that is, 80% x $500).
Step 3 – In fact, Jim can claim the following as an income
tax deduction.
If you provide a benefit to an employee that they would normally
be able to claim the expense as a once only income tax
deduction, you can reduce the taxable value of the benefit by
the amount they would have been able to claim. This is called
the otherwise deductible rule.
[$500 (employee’s expense) – $250 (reimbursement)] ×
80% (business percentage)
For example, if an employee incurred a work expense, it would
be wholly deductible for income tax purposes. Under the
otherwise deductible rule, if you reimburse the employee for all
or part of this expense, the taxable value of the expense
payment fringe benefit would be zero.
Step 4 – Subtract the actual deductible amount (step 3)
from the hypothetical deductible amount (step 2) to see by
how much the taxable value of the fringe benefit can be
reduced.
The otherwise deductible rule does not apply to deductions for
the decline in value of depreciating assets, except when the
cost does not exceed $300.
The taxable value of $250 can be reduced by $200 to $50.
Use these steps to reduce the taxable value using the otherwise
deductible rule.
Step 1 – Write down the employee’s expense before you
reimburse them.
Step 2 – Work out how much of the expense the employee
could normally claim as a deduction.
Step 3 – Determine how much the employee can actually claim
as an income tax deduction.
n If you reimburse all or part of the business component of the
employee’s expense, the employee’s tax deduction is the
amount of their expense multiplied by the business
percentage, minus the amount of the reimbursement.
72
= $250 × 80%
= $200
$400 – $200 = $200
Where an expense payment fringe benefit is provided in relation
to a car owned or leased by your employee, there are special
rules for determining how much, if any, of your expenditure
would have been otherwise deductible to your employee.
Other reductions
In certain instances you can further reduce the taxable value of
an expense payment fringe benefit that has been reduced under
the otherwise deductible rule. This further reduction applies to
benefits such as remote area housing assistance, relocation
travel by employee’s car, and transport to employment
interviews and selection tests by employee’s car. Sometimes
there may be special conditions (such as keeping certain
records) you must satisfy before you can further reduce the
value.
Fringe benefits tax for non‑profit organisations
05 EXPENSE PAYMENT FRINGE BENEFITS
Special records you need
to keep for expense
payment fringe benefits
Make sure you obtain any declaration from employees
before the due date for lodging your FBT return or, if you
are not required to lodge a return, by 21 May.
If you use the otherwise deductible rule to reduce the taxable
value of a fringe benefit, you must have documentation to show
how much of the expense would have been otherwise
deductible to the employee. If the documentation is a
declaration by the employee, it must be in a form approved by
the Commissioner (see below).
Employee declaration
You have to obtain an employee declaration in all cases except
where:
n the employee’s expense (other than an expense incurred in
respect of a car owned or leased by the employee) is incurred
exclusively as part of their employment (for example,
protective clothing, tools of trade)
n there is a requirement to keep a travel diary
n the requirement to keep a travel diary is waived because the
employee is a member of an international aircrew, or
n the provision of the fringe benefit is covered by a recurring
fringe benefit declaration.
Approved form for an employee declaration
Expense payment benefit declaration
I, ________________________________________________________________________________________________ declare that
(name of the employee)
_____________________________________________________________________________________________________________
(show nature of expense, for example, telephone rental and/or calls)
were provided to me by or on behalf of my employer during the period from
_____________ 20________ to _____________ 20________ and the expenses were incurred by me for the following purpose(s)
____________________________________________________________________________________________________________
____________________________________________________________________________________________________________
(Please give sufficient information to demonstrate the extent to which the expenses were incurred by you for the purpose of
earning your assessable income.)
I also declare that the percentage of those expenses incurred in earning my assessable income was_____________ %
Signature___________________________________________
Date___________________________________________________
MORE INFORMATION
Fringe benefits tax: a guide for employers (NAT 1054)
Fringe benefits tax for non‑profit organisations
73
05 EXPENSE PAYMENT FRINGE BENEFITS
74
Fringe benefits tax for non‑profit organisations
TAX‑EXEMPT BODY
ENTERTAINMENT
FRINGE BENEFITS
06
This chapter explains the
valuation rules for food, drink or
recreation provided by
tax‑exempt bodies. If you are not
a tax‑exempt body, refer to the
publication Fringe benefits tax: a
guide for employers (NAT 1054)
for information about valuing
these types of benefits.
There is no category of fringe
benefit called an ‘entertainment
fringe benefit’.
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Are you a tax‑exempt
body?
Is the benefit
entertainment?
The fringe benefits tax treatment of providing entertainment to
employees (and their associates) of tax‑exempt bodies are
different to those of income tax paying bodies. There are
different rules for tax‑exempt bodies when it comes to the
provision of entertainment because they do not pay income tax.
Entertainment is the provision of:
n entertainment by way of food, drink or recreation, or
n accommodation or travel in connection with, or to facilitate
the provision of, such entertainment.
Your organisation is a tax‑exempt body if your organisation’s
income is either:
n wholly exempt from income tax (for example, a club that earns
income from members only), or
n partially exempt from income tax (for example, a club that
earns income from both members and non‑members).
If your entity is a charity, you must be endorsed in order to be
income tax exempt. See page 17 for more information about
endorsement.
Recreational entertainment includes amusement, sport and
similar leisure time pursuits, for example:
n a game of golf
n theatre or movie tickets
n a joy flight, or
n a harbour cruise.
It includes the hiring or leasing of entertainment facilities.
Some examples of the provision of entertainment are:
lunches and drinks, cocktail parties and staff social
functions
n providing entertainment to employees by providing tickets to
sporting or theatrical events, and
n accommodation and travel when it is provided in connection
with or to facilitate activities such as entertaining clients and
employees over a weekend at a tourist resort, or providing
them with a holiday.
n business
If you provide recreational entertainment,
go to page 85.
How to identify whether the provision of food or
drink is entertainment
Tax‑exempt bodies are required to consider the same factors
and requirements as other employers for FBT purposes.
In order to determine when food or drink provided to a person
results in entertainment, you need to examine the
circumstances surrounding that provision of the food or drink.
You need to look at the following.
None of the factors below on their own will determine if
the food or drink provided is meal entertainment, however
(a) and (b) are considered the more important factors.
(a) Why is the food or drink being provided?
This is a purpose test. For example, food or drink provided for
the purposes of refreshment does not generally have the
character of entertainment, whereas food or drink provided in a
social situation where the purpose of the function is for
employees to enjoy themselves has the character of
entertainment.
(b) What food or drink is being provided?
Morning and afternoon teas and light meals are generally not
considered to be entertainment. However, as light meals
76
Fringe benefits tax for non‑profit organisations
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Do you provide food or
drink that is
entertainment?
become more elaborate, they take on more of the
characteristics of entertainment. The reason for this is that the
more elaborate a meal, the more likely it becomes that
entertainment arises from consuming the meal.
(c) When is the food or drink being provided?
Food or drink provided during work time, during overtime or
while an employee is travelling is less likely to be entertainment.
This is because in the majority of these cases, food provided is
for a work‑related purpose rather than an entertainment
purpose. This, however, depends upon whether the
entertainment of the person is the expected outcome of the
provision of the food or drink. For example, a staff social
function held during work time still has the character of
entertainment.
If you provide entertainment by way of food or drink you must
follow the steps outlined below.
Step
Action
Page
reference
1
Consider whether an exemption
applies.
78
2
If no exemption applies, decide
whether or not the entertainment is
a tax‑exempt body entertainment
fringe benefit.
79
If the benefit is not tax‑exempt body
entertainment, it may be a property,
expense payment or residual fringe
benefit.
87
3
If the benefit is a tax‑exempt body
entertainment fringe benefit, decide
whether it will be valued under the
meal entertainment fringe benefit
rules.
83
4
Keep the appropriate records.
86
5
If required, report an amount on the
employee’s payment summary.
87
(d) Where is the food or drink being provided?
Food or drink provided on the employer’s business premises or
at the usual place of work of the employee is less likely to have
the character of entertainment. However, food or drink provided
in a function room, hotel, restaurant, cafe, coffee shop or
consumed with other forms of entertainment is more likely to
have the character of entertainment. This is because the
provision of the food or drink is less likely to have a work‑related
purpose.
If the benefit:
n is
entertainment by way of food or drink, read below
recreational entertainment, go to page 85
n is not entertainment, go to page 87.
n is
Fringe benefits tax for non‑profit organisations
Examples of how the valuation rules apply are shown
on page 79–82.
77
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Does an exemption apply?
There are only very limited circumstances under which an
exemption will apply to the provision of food and drink.
PBIs, health promotion charities, public hospitals,
non‑profit hospitals and public ambulance services
The provision of benefits that constitute the provision of meal
entertainment are exempt from FBT when provided by PBIs,
health promotion charities, public hospitals, non‑profit hospitals
and public ambulance services.
Providing meal entertainment means:
n providing entertainment by way of food or drink
n providing accommodation or travel connected with such
entertainment, or
n paying or reimbursing expenses incurred by an employee for
the above.
Minor benefits exemption
Depending on the standard of entertainment provided, the
benefit may qualify for the minor benefits exemption. As well as
the general criteria (see below) for deciding whether a minor
benefit should be treated as an exempt benefit, for tax‑exempt
bodies the exemption is available only where:
n the provision of the entertainment is incidental to the provision
of entertainment to outsiders and does not consist of a meal,
other than light refreshments, or
n a function is held on your business premises solely as a
means of recognising the special achievements of your
employee in a matter relating to the employment of your
employee.
In these circumstances only benefits provided to your employee,
and their associates, are exempt from FBT.
General criteria
To qualify for the minor benefit exemption, the benefit must be
less than $100 in value. This does not mean that it is an exempt
benefit.
It must be unreasonable to treat it as a fringe benefit. There are
five criteria to determine this.
1How often benefits identical or similar to the minor benefit (or
benefits given in connection with the minor benefit) are
provided. The more frequently and regularly associated
benefits are provided, the less likely that the minor benefit will
qualify as an exempt benefit.
2The total of the taxable values of the minor benefit and other
identical or similar benefits. The greater the cumulative value
of the benefits, the less likely it is that the minor benefit will
qualify as an exempt benefit.
78
3The likely total of the taxable values of other associated
benefits. That is, those provided in conjunction with the minor
benefit, for example, where a meal is provided along with a
night’s accommodation and taxi travel. The greater the total
value of the associated benefits, in this case the
accommodation and taxi travel, the less likely it is that the
minor benefit will qualify as an exempt benefit.
4The practical difficulty in determining what would be the
taxable value of the minor benefit and any associated benefits
if they were treated as fringe benefits. This would include
consideration of the difficulty for you in keeping the necessary
records in relation to the benefits supplied.
5The circumstances in which the minor benefit and any
associated benefits are provided. This would include
consideration of the purpose and occasion for which the
benefit was given.
The Government has announced that from
1 April 2007, the minor benefits threshold will increase from
$100 to $300.
Example: Provision of light refreshment incidental to
provision of entertainment to outsiders
A tax‑exempt body hosts a morning tea at a local cafe for
its sponsors. Finger food, tea, coffee and soft drinks are
provided. Some employees attend to thank the sponsors
on behalf of the tax‑exempt body for their assistance
throughout a particularly difficult year. It is unusual for the
tax‑exempt body to host this type of function. The cost per
head is $15. Providing morning tea to employees in these
circumstances would meet the requirements of the minor
benefits exemption.
Example: Function recognising special achievements of
employee
A project manager, who is an employee of a tax‑exempt
body, is awarded ‘Project Manager of the Year’ by an
external organisation. A dinner is held on the tax‑exempt
body’s premises for the presentation of the award. Senior
management of the tax‑exempt body, the employee
receiving the award and their family and representatives
from the external organisation presenting the award attend
the dinner.
The minor benefits exemption applies in this circumstance
to the employee receiving the award and their family.
Fringe benefits tax for non‑profit organisations
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Is the benefit a tax‑exempt Common circumstances in
body entertainment fringe which food or drink is
provided
benefit?
A tax‑exempt body entertainment fringe benefit is
non‑deductible entertainment provided to employees (and their
associates) by a tax‑exempt body. Only entertainment that is
non‑deductible for income tax purposes can give rise to this
benefit. Where entertainment is deductible it will not constitute
a tax‑exempt body entertainment fringe benefit.
For the purpose of identifying a tax‑exempt body entertainment
fringe benefit, and determining whether the expenditure is
deductible for income tax purposes, you are treated as though
you are a taxable entity. You should ask yourself:
‘If my organisation paid income tax, would the organisation be
entitled to an income tax deduction for this expenditure?’
The benefit may arise from entertainment expenses incurred by
an employer who is wholly or partially exempt from income tax
or who does not derive assessable income from the activities to
which entertainment relates.
In general, entertainment expenses are non‑deductible for
income tax purposes. However, some specific entertainment
expenses are deductible, for example the cost of meals
provided to employees in a staff cafeteria excluding benefits
associated with a social function, and meals on business travel
overnight.
The following are some common circumstances in which food
or drink is provided by a tax‑exempt body to their employees.
The FBT consequences of providing food or drink in these
circumstances are explained.
The provision of alcohol generally means that
entertainment has been provided. However, there is a
narrow category of situations where alcohol provided to an
employee is not entertainment. These situations include
where some (but not excessive) alcohol is provided to an
employee while they are on business travel overnight.
Morning and afternoon teas and light meals
Providing morning or afternoon tea or light meals to your
employees on your premises is not entertainment if you are
providing refreshments to enable the employees to complete
the working day in comfort – in this circumstance this is not a
tax‑exempt body entertainment fringe benefit, it is exempt from
FBT under the property exemption. If the food or drink is
provided off your premises, you will need to consider the
circumstances surrounding the provision of the food or drink.
Providing morning or afternoon tea or light meals to associates
of your employees on your premises, is not entertainment. The
provision of food and drink in this circumstance is, however, a
property fringe benefit. You will need to look at the rules for
valuing property fringe benefits in order to determine the taxable
value. The property exemption does not apply where the benefit
is provided to an associate.
Morning and afternoon tea includes light refreshments such as
tea, coffee, fruit drinks, cakes and biscuits, but does not include
alcohol.
Light meals include sandwiches and other hand food, salads
and orange juice that are intended to be, and can be,
consumed on your premises or worksite. As light meals become
more elaborate, they take on more of the characteristics of
entertainment. Normal business practice determines when light
meals become entertainment.
Fringe benefits tax for non‑profit organisations
79
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Example 1: Afternoon tea without alcohol
A tax‑exempt body undertakes a research project. When
the project is completed, a presentation by the participants
in the project is provided to senior management. All staff
involved in the research project attend the presentation. The
presentation is undertaken on the business premises. An
afternoon tea break is included in the presentation and
afternoon tea consisting of tea, coffee, cakes and biscuits
are provided.
The afternoon tea provided to the employees is exempt
from FBT.
Example 2: Afternoon tea with alcohol
Assume the same facts as above apply, however alcohol is
also provided.
As alcohol has been provided, the afternoon tea provided
to employees in this situation is considered to have a social
context. The afternoon tea is entertainment. This will be
tax‑exempt body entertainment, or where an employer
elects, this would be meal entertainment.
If alcohol is provided at the morning or afternoon tea or
light lunch, you are providing entertainment to your
employees and their associates.
Meals provided to employees at in‑house dining
facilities
Full hot meals provided to employees, who are not on business
travel overnight, is entertainment. However, expenditure incurred
in providing full hot meals to employees at an in‑house dining
facility is an allowable income tax deduction to tax‑paying
bodies, and is therefore not tax‑exempt body entertainment.
An income tax deduction is available to tax‑paying bodies
except where the food and drink is provided at a party,
reception or social function. If you provide full hot meals at an
in‑house dining facility (not at a party, reception or social
function) this will be a property benefit, and the property
exemption will apply.
80
What is an in‑house dining facility?
A canteen, dining room or similar facility is an in‑house dining
facility if:
n it is located on your premises or, if you are a company, on
premises of a company related to you
n it is operated wholly or principally for providing food and drink
on working days to your employees or, if you are a company,
to employees of a company related to you, and
n it is not open to the public at any time.
‘Principally’ means operation mainly for providing food or drink.
Whether a facility is operated principally for providing food and
drink on working days to employees will ordinarily be
determined on a time basis. That is, operated for this purpose
more than 50% of the time it is used. However, time is not
necessarily the sole criterion. You need to look at the facts,
degree or impression of how the facility is used.
Provided the facility meets these three criteria, there is no
restriction on where the food and drink is consumed. The food
or drink provided in these facilities does not have to be
consumed at the facility.
Example: Food and drink not consumed at the in‑house
dining facility
A tax‑exempt body, with an in‑house dining facility, provides
full hot meals to its employees. Some employees have the
meals delivered to their workstations. The property
exemption will apply in these circumstances.
A canteen, dining room or similar facility can be an in‑house
dining facility even though it does not provide food and drink for
all your employees. For example, a dining room for the sole use
of your executive employees qualifies as an in‑house dining
facility.
What is not an in‑house dining facility?
A boardroom or a meeting room with kitchen facilities is not an
in‑house dining facility because:
n it is not a canteen, a dining room or a facility similar to a
canteen or a dining room, and
n it is not operated wholly or principally for providing food and
drink on working days to employees.
A boardroom or meeting room, whether or not it has associated
kitchen facilities, is used or operates mainly as a venue for
meetings or conferences. The costs of providing substantial
meals in a boardroom or meeting room with associated kitchen
facilities are not deductible, regardless of where the meals are
consumed.
Fringe benefits tax for non‑profit organisations
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Example 1: Meals provided in an in‑house dining facility
– property exemption applies
A tax‑exempt body provides hot lunches to employees in
an in‑house dining facility. The lunch provided does amount
to meal entertainment. However, it is a property benefit and
the property exemption will apply.
Example 2: Meals provided in an in‑house dining facility
– property exemption does not apply
A tax‑exempt body provides hot dinners to employees at
the entity’s end of financial year dinner. The dinner provided
does amount to meal entertainment, but no income tax
deduction would be available to tax‑paying bodies. Meals
provided in this instance are tax‑exempt body
entertainment fringe benefits and no exemptions apply.
Christmas parties
Christmas parties, whether held on a tax‑exempt employer’s
premises or at another venue, constitute entertainment and will
therefore give rise to a tax‑exempt body entertainment fringe
benefit.
Example
A tax‑exempt body hosts a Christmas function for
employees and their spouses on the employer’s premises.
This is tax‑exempt body entertainment.
If clients attended there would be no FBT on their portion,
provided the tax‑exempt body has not elected to use the
meal entertainment valuation rules.
Gifts provided to employees at Christmas
Christmas gifts provided to employees at Christmas functions
will form part of the tax‑exempt body entertainment fringe
benefit.
Hampers or presents which are unrelated to a Christmas
function are not considered to be the provision of entertainment.
As these are not treated as tax‑exempt body entertainment
benefits, you can consider the minor benefit exemption. For
example, a hamper given to each of your employees two weeks
before a particular Christmas function that meets the conditions
of the minor benefits exemption and is less than $100 will not
attract any FBT.
Fringe benefits tax for non‑profit organisations
Food and drink provided to employees while on
business travel overnight
Providing food or drink, including some alcohol, to your
employee while they are on business travel overnight, is
generally not considered to be provision of entertainment. Food
or drink provided in these circumstances is not tax‑exempt
body entertainment, but will be an expense payment or a
property fringe benefit. The ‘otherwise deductible’ rule applies to
reduce the taxable value of the expense payment or property
fringe benefit to nil.
If excessive alcohol is provided to employees while they are on
business travel overnight, the provision of the food or drink is
considered entertainment. The provision of a meal to employees
while they are on business travel overnight is also entertainment
if they receive entertainment in conjunction with their meal, such
as attending a floor show.
Example: Meals provided to employees while on
business travel overnight not entertainment
Two employees of a tax‑exempt body dine together while
travelling on business overnight and are subsequently
reimbursed by their employer.
The reimbursement of the meal expenses does not amount
to entertainment and would be income tax deductible to the
employer. The reimbursement of the meals is not
tax‑exempt body entertainment, but is an expense payment
fringe benefit. The taxable value of the meals is reduced to
nil because the meals would have been ‘otherwise
deductible’ to the employees.
Example: Meals provided to employees while on
business travel overnight are entertainment
Two employees of a tax‑exempt body have dinner together
while travelling on business overnight. They see a show at
the casino in the city where they are staying, and the fee to
see the show includes dinner. Their employer reimburses
them for the cost of the dinner show.
This expenditure is entertainment, and is therefore
tax‑exempt body entertainment. The expense payment
fringe benefit valuation rules could not apply in this
circumstance as this is a tax‑exempt body entertainment
fringe benefit.
81
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Food and drink provided to employees at work functions
Where your employees are required to attend work functions as
part of their employment duties, you will need to examine the
circumstances of the situation and what duties are being
performed by your employee in order to determine if
entertainment has been provided. The fact that an employee is
required to attend a function does not by itself mean that
entertainment has not been provided.
For example, depending on the standard of entertainment
provided, the benefit may qualify for the minor benefits
exemption. As well as the general criteria for deciding whether a
minor benefit should be treated as an exempt benefit, for
tax‑exempt bodies an exemption is available only if the
entertainment provided to employees is incidental to the
entertainment provided to outsiders and does not consist of a
meal, other than light refreshments.
FBT implications of tax‑exempt bodies providing
food and drink
The following table summarises the FBT implications of
tax‑exempt bodies providing food and drink.
Circumstances in which food or drink provided
(either on or off business premises)
Does fringe benefits tax arise?
Meal
Entertainment
Y/N
For
employees
Y/N
For associates
Y/N
For clients
Y/N
At a social function
(eg a staff Christmas party)
Y
Y
Y
N
In an in‑house dining facility (not at a social function)
N
N
Y
N
In an in‑house dining facility (at a social function)
Y
Y
Y
N
Morning and afternoon teas and light lunches
N
N
Y
N
At a social function or business lunch
Y
Y
Y
N
Employee on business travel overnight and dining by
themselves or with an employee, employee of an
associate or client who is also on business travel
overnight (regardless of who pays)
N
N
Y
N
N
N
Y
Y
N
N
Employee on business travel overnight dining with
employee not on business travel overnight (employer
pays for all meals).
n Travelling
employee’s meal
n Non‑travelling
employee’s meal
Employee on business travel overnight dining with
client who is not on business travel overnight
n Travelling
n Client’s
82
employee’s meal
meal
Y
N
Fringe benefits tax for non‑profit organisations
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Taxable value of food and
Meal entertainment
drink that is tax‑exempt
fringe benefits
body entertainment
The taxable value of the food and drink, and the associated
accommodation or travel, is the amount of the actual
expenditure you incur for the benefit of the employee. In
calculating the taxable value of a tax‑exempt body
entertainment fringe benefit there is no reduction for
contributions that may be made by an employee.
If you cannot easily determine the actual expenditure, you can
use a ‘per head’ basis of apportionment.
You may elect to value the food, drink and associated
accommodation or travel as ‘meal entertainment’. If you make
this election, you cannot use the per head basis of
apportionment.
Example: Per head basis of apportionment
Mary entertains three of her employer’s clients at a local
restaurant. Her employer is a tax‑exempt body who has not
elected to treat entertainment as ‘meal entertainment’. Mary
pays, and is reimbursed, for the full cost of the meals. The
benefit provided to Mary is a tax‑exempt body
entertainment fringe benefit. The taxable value of that
benefit is 25% of the amount reimbursed to Mary.
Where tax‑exempt body entertainment fringe benefits arise from
the provision of meal entertainment, you may choose to classify
these fringe benefits as meal entertainment fringe benefits. If you
choose to classify a fringe benefit as a meal entertainment fringe
benefit, you have to classify all fringe benefits arising from the
provision of meal entertainment during the FBT year as meal
entertainment fringe benefits.
Providing meal entertainment fringe benefits means:
n providing entertainment by way of food or drink
n providing accommodation or travel connected with such
entertainment, or
n paying or reimbursing expenses incurred by an employee for
the above.
The provision of meal entertainment does not include
the provision of entertainment by recreation.
If you choose to classify the provision of meal entertainment as
a meal entertainment fringe benefit, then the meal entertainment
provided does not give rise to a tax‑exempt body entertainment
fringe benefit, or an expense payment, property or residual
fringe benefit.
You cannot include meal entertainment provided by someone
other than you.
This means that if a fringe benefit arises from meal
entertainment provided by someone other than you, you must
value the fringe benefit according to the rules for that type of
fringe benefit. It could, for example, be an expense payment,
property, residual or tax‑exempt body entertainment fringe
benefit.
How to calculate the taxable value of a meal
entertainment fringe benefit
The two methods for calculating the taxable value of meal
entertainment fringe benefits are:
n the 50‑50 split method, and
n the 12‑week register method.
Both methods are based on your total meal entertainment
expenditure. This includes expenditure that might otherwise be
exempt from FBT or not normally subject to FBT.
If you choose to classify a fringe benefit as a meal entertainment
fringe benefit, you have to classify all fringe benefits arising from
the provision of meal entertainment during the FBT year as
such. You may choose to classify fringe benefits as meal
entertainment regardless of whether or not you did so in a
previous year.
Fringe benefits tax for non‑profit organisations
83
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
You must decide to classify fringe benefits as meal
entertainment no later than the day on which your FBT return is
due to be lodged with the Tax Office or, if you do not have to
lodge a return, by 21 May.
You need to carefully consider the full implications of both the
50‑50 split method and the 12‑week register method of
calculating the taxable value of meal entertainment fringe
benefits. It may be that a better option for you is to determine
the taxable value based on actual expenditure.
There is no need to notify the Tax Office of the method chosen
as your business records are sufficient evidence of this.
When determining which meal entertainment valuation
method is the best for your organisation, factors you could
consider include:
n who
do you provide entertainment to? (employees,
associates or clients)
n how often do you provide entertainment?
n which method results in the lowest FBT liability, and
n administration costs of each method for your
organisation.
Using the 50‑50 split method
Under this method, the total taxable value of meal entertainment
fringe benefits is 50% of the total expenses you incur in
providing meal entertainment to all people (whether employees,
clients or otherwise) during the FBT year. Your total meal
entertainment expenditure includes expenditure that might
otherwise be exempt from FBT or not normally subject to FBT.
You should note that the property benefits exemption and the
minor benefits exemption do not apply to meal entertainment
fringe benefits if you use the 50‑50 split method.
Using the 12‑week register method
Under this method, the total taxable value of meal entertainment
fringe benefits is the total expenses you incur in providing meal
entertainment to all people (whether employees, clients or
otherwise) during the FBT year multiplied by the ‘register
percentage’. You work out the register percentage using the
following formula.
A x 100
B
If you use this method, you must keep the register for a
continuous period of 12 weeks.
Your register
The provision of meal entertainment during this period must be
representative of the meal entertainment you provide during the
first FBT year for which the register is valid.
Generally, a register is valid for the year in which you keep it and
the four following years. However, if the period during which you
keep the register begins in one FBT year and ends in the
following FBT year, the register is not valid for the first year.
If the total expenses you incur in providing meal entertainment
increase by more than 20% in a year, the register is not valid for
any of the years following the year in which the increase
occurred.
A register that is otherwise valid for an FBT year ceases to be
valid if there is a later valid register for that FBT year.
A register containing an entry that is false or misleading in a
material particular is not a valid register.
The person making the entries in the register must do so as
soon as practicable after the details are known.
The details you need to record in your register are:
n the date you provided meal entertainment
n for each recipient of meal entertainment, whether they are one
of your employees or an associate of an employee
n the cost of the meal entertainment
n the kind of meal entertainment provided
n where the meal entertainment was provided, and
n if the meal entertainment was provided on your premises,
whether it was provided in an in‑house dining facility.
The property benefits exemption does not apply to meal
entertainment fringe benefits when you use the 12‑week register
method.
Once you have calculated the taxable value of a meal
entertainment fringe benefit using either the 50‑50 split
method or the 12‑week register method, this taxable value
is used to calculate your FBT payable. Chapter 3 explains
how to do this.
Where:A = total value of meal entertainment fringe benefits
provided to employees and their associates during the
12‑week register period
B = total value of meal entertainment provided to all
people during the 12‑week register period.
84
Fringe benefits tax for non‑profit organisations
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
If the benefit is
recreational
entertainment, does an
exemption apply?
Do you provide
recreational
entertainment?
Recreational entertainment includes amusement, sport and
similar leisure time pursuits, for example, a game of golf, theatre
or movie tickets, a joy flight or a harbour cruise.
There are only limited circumstances in which an exemption
applies to the provision of recreational entertainment.
If you provide recreational entertainment to your employees, you
need to:
PBIs, health promotion charities, public hospitals,
non‑profit hospitals and public ambulance services
Step
Action
Page
reference
1
Consider whether an exemption
applies.
85
2
If no exemption applies, you need to
decide how you’re going to value the
entertainment.
86
3
Keep the appropriate records.
43
4
If required, report an amount on the
employee’s payment summary.
87
Entertainment facility leasing expenses are exempt from FBT
when incurred by PBIs, health promotion charities, public
hospitals, non‑profit hospitals and public ambulance services.
Hiring or leasing entertainment facilities
Entertainment facility leasing expenses are expenses you incur
in hiring or leasing:
n a corporate box
n boats or planes for providing entertainment, or
n other premises or facilities for providing entertainment.
Expenses, or parts of expenses, that are not entertainment
facility leasing expenses are:
n expenses attributable to providing food or beverages, and
n expenses attributable to advertising that would be an
allowable income tax deduction.
Minor benefits exemption
Depending on the standard of entertainment provided, the
benefit may qualify for the minor benefits exemption.
See page 78 for the provisions and criteria that apply.
Example: Provision of entertainment incidental to
provision of entertainment to outsiders
A tax‑exempt body hosts a fundraising movie premiere.
Staff of the tax‑exempt body attend to meet and greet
ticket holders, usher ticket holders to their seats and to
serve light refreshments. This will be an exempt minor
benefit as the provision of the recreational entertainment is
incidental to the provision of entertainment to people
outside of the tax‑exempt body.
Fringe benefits tax for non‑profit organisations
85
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Taxable value of
recreational
entertainment
The taxable value of the recreation component of tax‑exempt
body entertainment is generally equal to the cost of the activity,
for example, the entry fee for a golf day.
Where you provide tax‑exempt body entertainment by hiring or
leasing entertainment facilities, the taxable value is the cost of
the activity, unless you use the 50‑50 split method.
50‑50 split method
You may choose that the total taxable value of tax‑exempt body
entertainment fringe benefits arising from the use of
entertainment facilities you hire or lease is 50% of all
entertainment facility leasing expenses.
Keep the appropriate
records
You should record information relating to tax‑exempt body
entertainment so that the taxable value of the fringe benefit can
be calculated. You should record:
n the date you provided the entertainment
n who is the recipient of the entertainment (are they an
employee, associate of the employee or another person)
n the cost of the entertainment
n the kind of entertainment provided, and
n where the entertainment is provided.
You must decide to use the 50‑50 split method for
entertainment facility leasing expenses no later than the day on
which your FBT return is due to be lodged with the Tax Office or,
if you do not have to lodge a return, by 21 May.
There is no need to notify the Tax Office of the method chosen
as your business records are sufficient evidence of this.
86
Fringe benefits tax for non‑profit organisations
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
Reporting requirements
Entertainment provided by way of food and drink, and benefits
associated with that entertainment, such as travel and
accommodation (regardless of which category is used to value
the benefit) are excluded benefits for reporting purposes and so
they are not included in your employees’ reportable fringe
benefits amount on their payment summary.
Expenses associated with hiring or leasing entertainment
facilities are excluded fringe benefits for reporting purposes and
are therefore not reportable.
Other types of recreational entertainment are subject to the
reporting requirements. Examples include tickets provided to
musicals and green fees for attendance at golf days.
providing a benefit which
is not entertainment or
tax-exempt body
entertainment
Where the benefit provided is not entertainment, you must:
Step
Action
1
Determine whether it is an expense payment,
property or residual fringe benefit.
2
Determine whether an exemption applies.
3
Keep the appropriate records, see chapter 3,
page 43.
4
If required, report an amount on the employee’s
payment summary, see chapter 3, page 41.
Is the benefit an expense payment, property or
residual fringe benefit?
Where the benefit provided is not entertainment or tax-exempt
body entertainment, it may be an expense payment, property or
residual fringe benefit.
Expense payment fringe benefits
You may provide expense payment fringe benefits if an
employee incurs expenses and:
n you reimburse them for the expenses, or
n you pay a third party for the expenses.
For more information about expense payment fringe
benefits, see chapter 5.
Property fringe benefits
A property fringe benefit may arise when you provide an
employee with property, either free or at a discount.
Residual fringe benefits
Any fringe benefit not subject to any of the other rules is a
residual fringe benefit. Essentially, these are the fringe benefits
that are left over because they are not one of the more specific
categories of fringe benefit.
A residual fringe benefit could include the use of property.
For information about property and residual benefits
see Fringe benefits tax: a guide for employers (NAT 1054).
Fringe benefits tax for non‑profit organisations
87
06 TAX‑EXEMPT BODY ENTERTAINMENT FRINGE BENEFITS
If the benefit is not entertainment, does an
exemption apply?
An exemption may apply in the following circumstances.
Property benefit exemption
Where you provide food or drink which is not entertainment,
this is a property benefit. Where the food and drink (which is a
property benefit) is provided to, and consumed by, the
employee on your business premises on a working day it is
exempt from FBT. Only the food and drink provided to your
employee is exempt in these circumstances. Food and drink
provided to an associate of your employee in these
circumstances is still subject to FBT.
A tax‑exempt body entertainment fringe benefit is a
specific type of benefit. If a benefit is a tax‑exempt body
entertainment fringe benefit, it is not a property fringe
benefit.
Minor benefits exemption
More information
n Taxation
Determination TD 94/25 and addendum TD
94/25A – Fringe benefits tax: where an employer provides
entertainment to both employees and non‑employees,
what is an acceptable method of determining the portion
applicable to the employees for the purposes of the
Fringe Benefits Tax Assessment Act 1986?
n Taxation Determination TD 93/195 – Income tax: to what
extent is a registration fee for a Continuing Professional
Development (CPD) seminar deductible if a part of the fee
represents the cost of food and drink to be provided as
part of the seminar?
n Taxation Ruling TR97/17 and addendum TR97/17A –
Income tax and fringe benefits tax: entertainment by way
of food or drink.
n Taxation Ruling IT2675 – Income tax and fringe benefits
tax: entertainment – morning and afternoon teas; light
meals; and in‑house dining facilities.
n Fringe benefits tax: a guide for employers (NAT 1054)
Depending on the standard of entertainment provided, the
benefit may qualify for the minor benefits exemption.
See page 78 for the provisions and criteria that apply.
88
Fringe benefits tax for non‑profit organisations
DEFINITIONS
Activity statements
You use an activity statement to report your business tax
entitlements and obligations, including GST, PAYG instalments,
PAYG withholding and FBT instalments.
Associate
Associates include people and entities closely associated with
you, such as relatives, or closely connected companies or
trusts. A partner in a partnership is an associate of the
partnership. A non‑profit sub‑entity of an entity is an associate
of the entity and every other non‑profit sub‑entity of that entity.
Charity
A charity is an institution or fund established for a charitable
purpose.
Examples of charities include:
n religious institutions
n aged persons homes
n homeless hostels
n primary or secondary schools run by churches
n organisations relieving the special needs of people with
disabilities, and
n societies that promote the fine arts.
Deductible gift recipient (DGR)
A DGR is an organisation that is entitled to receive income tax
deductible gifts. All DGRs have to be endorsed by the Tax
Office, unless they are listed by name in the income tax law.
There are two types of endorsement:
n where an organisation is endorsed as a DGR in its own right,
and
n where an organisation is endorsed as a DGR for a fund,
authority or institution that it operates.
For the second type, only gifts to the fund, authority or
institution are tax deductible.
Employee
An employee is generally someone who receives, or is entitled
to receive, salary and wages in return for work or services
provided, or for work under a contract that is wholly or
principally for the person’s labour.
For FBT, employees includes company directors, office holders,
common law employees and recipients of compensation
payments.
Employee contribution
An employee or recipient’s contribution generally refers to the
amount of consideration paid to an employer or provider by an
employee or recipient in respect of the fringe benefit. It is
reduced by the amount of any reimbursement paid to the
Fringe benefits tax for non‑profit organisations
employee or recipient in respect of that consideration. The
employee or recipient’s contribution must be made from the
employee’s after‑tax income.
An employee contribution may be assessable income in the
hands of the employer. As a general rule, the costs incurred by
the employer in providing fringe benefits are income tax
deductible.
Endorsement
Endorsement is the process under which organisations apply to
the Tax Office for approval to:
n access charity concessions under the income tax, FBT and
GST laws, and/or
n receive income tax deductible gifts.
Entity
For the purposes of this publication, an entity means an
individual, a body corporate, a corporation sole, a body politic, a
partnership, an unincorporated association or body of people, a
trust or a superannuation fund.
In addition, the trustee or superannuation fund is taken to be an
entity consisting of the people who are trustees at the time. That
entity is a different entity to the person acting in their personal
capacity. If reference is made to an entity of a particular kind (for
example, trustee), it refers to the entity only in its capacity as
that kind of entity.
Goods and services tax
GST is a broad‑based tax of 10% on the supply of most goods,
services and anything else consumed in Australia and the
importation of goods into Australia.
Grossing up
Grossing up means increasing the taxable value of benefits you
provide to reflect the gross salary employees would have to
earn at the highest marginal tax rate (including Medicare levy) to
buy the benefits after paying tax.
GST (input tax) credit
A GST credit is what you claim to get back the GST you pay in
the price of goods and services you purchase for your business
or enterprise. You are entitled to a GST credit for the GST
included in the price you pay for a purchase, or included in the
price you paid on an import, if it is for use in your business or
enterprise, but not to the extent that you use the purchase or
import to make input taxed sales, or if the purchase or import is
of a private or domestic nature. You must have a tax invoice
before you can claim a GST credit on your activity statement,
except for purchases of $50 or less excluding GST.
89
Health promotion charity
A health promotion charity is a non‑profit charitable institution
whose principal activity is promoting the prevention or control of
diseases in human beings. The characteristics of a health
promotion charity are:
n its principal activity is promoting the prevention or the control
of diseases in human beings, and
n it is a charity which is a charitable institution.
Income tax exempt charity
An income tax exempt charity is a charity that has been
endorsed by the Tax Office as exempt from income tax.
Non‑profit
An organisation is non‑profit for determining income tax exempt
status if it is not carried on for the profit or gain of its individual
members. This applies for direct and indirect gains, and both
while the organisation is being carried on and when it is winding
up. The Tax Office accepts an organisation as non‑profit if its
constitution or governing documents prohibit distribution of
profits or gains to individual members and its actions are
consistent with the prohibition.
Otherwise deductible rule
Broadly, this means that the taxable value of a benefit may be
reduced by the amount which an employee would have been
entitled to claim as an income tax deduction in their personal tax
return if the benefit was not paid for, reimbursed or provided, by
the employer.
Payment summary
Under the PAYG withholding system, payers are required to
provide payees with a payment summary, which shows total
payments made and the amount of tax withheld during the
financial year.
Public benevolent institution (PBI)
A public benevolent institution (PBI) is a non‑profit institution
organised for the direct relief of poverty, sickness, suffering,
distress, misfortune, disability or helplessness.
Religious institution
A religious institution is a non‑profit institution operated for the
public benefit to advance religion in a direct and immediate
sense. Religion involves belief in a supernatural being, thing or
principle and the acceptance of canons of conduct which give
effect to that belief. Examples of religious institutions include:
n bible colleges
n churches and other religious congregations
n institutions of missionaries, and
n seminaries.
Reportable fringe benefits
If you provide fringe benefits with a total taxable value of more
than $1,000 to an employee in an FBT year (1 April to 31
March), you must report the grossed‑up taxable value of the
benefits on the employee’s payment summary for the
corresponding income year (1 July to 30 June). These are called
reportable fringe benefits.
The Government has announced that from
1 April 2007, the fringe benefits reporting exclusion
threshold will increase from $1000 to $2000.
Salary sacrifice arrangement
A salary sacrifice arrangement is an arrangement between an
employer and an employee, whereby the employee agrees to
forgo part of their future entitlement to salary or wages in return
for the employer or associate providing them with benefits of a
similar cost (to the employer). The employee is likely to place
greater value on the benefit than its cost to the employer.
Taxable value
This is the value of fringe benefits that you use as a basis for
calculating your FBT liability. There are different rules for
calculating the taxable value of the different types of fringe
benefits.
The characteristics of a PBI are:
n it is set up for needs that require benevolent relief
n it relieves those needs by directly providing services to people
suffering them
n it is carried on for the public benefit
n it is non‑profit
n it is an institution, and
n its dominant purpose is providing benevolent relief.
90
Fringe benefits tax for non‑profit organisations
index
index
A
accessories in cars, 49–50
phones, 5
accommodation, see housing and accommodation
activity statements, 45
actual operating costs, 56
afternoon teas, 79–80
aged persons homes, see charitable institutions; hospitals
aggregate non-rebatable amount, 28
agricultural organisations, see rebatable employers
aids and equipment, see health promotion charities
air conditioning in cars, 50
air travel, 7
international crews, 73
planes leased/hired for entertainment, 41, 85–87
airport lounge membership, 71
alcohol, 80, 81
ambulance services, see public ambulance services
amendments, 44
amusement (recreational entertainment), 41, 85–87
animal racing organisations, see rebatable employers
annual returns, 44
annualising kilometres, 50
Application for registration – fringe benefits tax, 43
apportionment of share benefits, 41
per head basis, 83
aquacultural organisations, see rebatable employers
arts organisations, see charitable institutions; rebatable
employers
assessments, amendment of, 44
associates, 20, 89
providing food and drink to, 79, 84
Australia Post payments, 45
aviation organisations, see rebatable employers
B
bad debts, 6
base value of cars, 49–50
benevolent institutions, see public benevolent institutions
bible colleges, see religious institutions
board, 5, 7
boardrooms, meals provided in, 80
boats leased/hired for entertainment, 41, 85–87
borrowings, see loans
BPAY®, 44
briefcases, 5
buildings, 7
bunkhouse accommodation, see housing and accommodation
business journal subscriptions, 71
business premises, food and drink provided on, 78, 79–81
Fringe benefits tax for non‑profit organisations
business travel, 49, 62
by air, 73
car expenses, 70
living away from home, 71; allowance, 7
meals during, 81
salesmen, 50, 64
C
cab travel, 5, 71
cafes, food and drink provided in, 77
cafeterias, in-house, 80–81
calculating FBT liability, 20–40
see also taxable value
calculators, 5
car accessories, 49–50
phones, 5
car parking, 7, 41, 70, 71
caravans, see housing and accommodation
carers, live-in, 16
cars, 48–67
expense payments, 70, 71
cash employee contributions, 63
cents per kilometre basis, car expenses reimbursed on, 70
cents-per-kilometre method, 62, 67
charitable funds, 12, 14
charitable institutions, 12, 14
calculating liability, 28–40
exemptions from capping measures, 16
see also health promotion charities
charities, 14, 17
cheques, payment by, 45
child care organisations, see charitable institutions
Christmas parties, 81
churches, see religious institutions
clothing, 7
protective, 5
coffee shops, food and drink provided in, 77
commercial vehicles, 62, 67
see also cars
community organisations, see charitable institutions; rebatable
employers
companies, 13, 16
computer records, 43
computers, 5, 70
concessions, 12–17
record keeping, 43
remote area benefits, 41
construction sites, remote, 7
contingencies, benefits provided as result of, 5
contractors, 3–4
91
index
corporate boxes (entertainment facilities), 41, 85–87
corporate credit card payments, 70
crash repairs, 56
credit card payments, 70
employees’ personal expenses, 71
D
dates, see time
day surgeries, see hospitals
dealer delivery charges, 49
debts, 6
see also loans
declarations, 43
cars, 51, 63
expense payments, 73
vehicles other than cars, 67
deemed operating costs, 56
deferral of time to lodge, 44
definitions, 89–90
delivery charges for cars, 49
depreciation of cars, 56
desktop computers, 70
diaries
electronic, 5
travel, 73
dining, see meals
dining rooms, in-house, 80–81
direct credit/debit, 44–45
disabilities support services, see charitable institutions; public
benevolent institutions
disaster relief organisations, see public benevolent institutions
disease control, see health promotion charities
distance, see kilometres travelled
documentary evidence, see record keeping
domestic employees, 16
domestic rubbish removal, 49, 62
drink, see meals
E
health promotion charities
car parking exemption, 71
entertainment exemptions, 78, 85
education expenses, 70, 71
educational institutions, see charitable institutions; health
promotion charities; rebatable employers
elderly, care for, see charitable institutions; hospitals
elections, 43
electricity, 5
electronic diaries, 5
electronic funds transfer, 44–45
electronic records, 43
employee contributions, 9, 89
cars, 49, 51, 56, 63
92
employees, 3–4
benefits not subject to FBT, 5
of religious institutions, 16
see also declarations
employees’ payment summaries, 41–42
gross-up rate used on, 8
employer associations, see rebatable employers
employment, travel associated with, see business travel
endorsement, 12–13
entertainment, 41, 76–88
see also meals
entertainment facilities, hired or leased, 41, 85–87
errors on returns, 44, 45
evidence, see record keeping
excluded benefits, 41
exempt benefits, 5–6, 16, 41
capped, 12
cars, 49, 71
entertainment, 79, 85, 88
expense payments, 71
record keeping, 43
vehicles other than cars, 62
expense payments, 70–73, 81
F
family members, see associates
FBT numbers, 43
FBT year, 20
days in (statutory formula method), 49, 50–51
see also time
fees, 70–73
50-50 split method, 83–84, 86
fine arts societies, see charitable institutions; public benevolent
institutions
fishing organisations, see rebatable employers
fitted accessories in cars, 49–50
phones, 5
flats, see housing and accommodation
floating structures, 7
flying organisations, see rebatable employers
food, see meals
four-wheel drives, see cars
fuel expenses, 51, 56, 63
vehicles other than cars, 67
function rooms, food and drink provided in, 77
funds, charitable, 12, 14
G
gaming organisations, see rebatable employers
garaging cars at/near home, 48
garbage removal, domestic, 49, 62
gas supply, 7
general interest charge, 45
Fringe benefits tax for non‑profit organisations
index
gifts at Christmas, 81
golf days, 86, 87
goods and services tax (GST), 8, 14, 49, 56
employee contributions, 51
goods-carrying vehicles, 62, 67
see also cars
goods component, valuation of, 7
gross tax, 28, 29
when rebate threshold exceeded, 36–37
when rebate threshold not exceeded, 32–33
grossed-up amounts, 8
calculating, 21–26
guesthouse accommodation, see housing and accommodation
H
health care facilities, in-house, 5
health insurance, 7, 70
health promotion charities, 12, 15, 17
calculating liability, 20–27
Higher Education Loan Programme (HELP) charges, 70
hired cars, see cars
hired entertainment facilities, 41, 85–87
holiday taxi travel, 71
home and work, travel between, 49, 62
car parking, 70
by taxi, 71
home computers, 70
home mortgages, 70
home rental expenses, 71
home telephones, 70
home units, see housing and accommodation
homeless hostels, see charitable institutions; public benevolent
institutions
horticultural organisations, see rebatable employers
hospices, see hospitals
hospitals (public and non-profit), 12, 15
calculating liability, 20–27
car parking exemption, 71
entertainment exemptions, 78, 85
hostels, see charitable institutions; public benevolent institutions
hotel accommodation, see housing and accommodation
hotel food and drink, 77
housekeepers, live-in, 7
housing and accommodation, 7
associated with entertainment, 41, 78
associated with packages, 5
home rental expenses, 71
live-in employees, 16
Fringe benefits tax for non‑profit organisations
I
in-house dining facilities, 80–81
in-house health care facilities, 5
income tax, 14
entertainment deductibility and, 79
otherwise deductible rule, 72, 73
salary sacrifice arrangements, 8, 70
independent contractors, 3–4
individual fringe benefits amount, 20, 41
industrial organisations, see rebatable employers
information and communications technology organisations, see
rebatable employers
input tax (GST) credits, 9
instalment threshold, 44
instalments, 45
insurance cover, 7, 70
cars, 56
interest, 45
car expenses, 56
on loans, 6
international aircrews, 73
invoices, see record keeping
J
journal subscriptions, 71
joy flights, planes leased/hired for, 41, 85–87
K
kilometres travelled (distance)
cents-per-kilometre method, 62, 67
to commercial car parking station, 7
percentage of private use, 56–57, 64–66
statutory percentage, 49, 50
kitchen facilities attached to boardrooms/meeting rooms, 80
L
land, 7
language of records, 43
laptop computers, 5, 70
late lodgments, 45
requests for deferral of time, 44
leased cars, see cars
leased entertainment facilities, 41, 85–87
leisure (recreational entertainment), 41, 85–87
liability, see payment, liability for
light meals/refreshments, 78, 79–80, 85
literature organisations, see rebatable employers
live-in carers, 16
live-in housekeepers, 7
living away from home, 71
allowance, 7
living quarters, see housing and accommodation
93
index
loans, 6
Higher Education Loan Programme (HELP) charges, 70
mortgages, 70
lodging returns, 44–45
logbooks, 56, 64–65
luxury car tax, 49, 56
M
magazines and periodicals, 71
mail payments, 45
maintenance and repairs, 7
cars, 56
manufacturing organisations, see rebatable employers
meals (food and drink), 76–84
board, 7
excluded benefits, 41
incidental to provision of entertainment to outsiders, 85
religious institutions’ employees, 16
medical aids and equipment, see health promotion charities
medical clinics, see public benevolent institutions
meeting rooms, meals provided in, 80
membership fees, 71
ministers of religion, 15–16
minor benefits, 5–6
entertainment, 78, 85; Christmas hampers, 81
missionaries’ institutions, see religious institutions
mistakes on returns, 44, 45
mobile homes, see housing and accommodation
mobile phones, 71
money orders, payment by, 45
morning teas, 79–80
mortgages, 70
motel accommodation, see housing and accommodation
motor bikes, 62, 67
music organisations, see rebatable employers
N
newspapers, 71
non-business car accessories, 49–50
non-profit hospitals, see hospitals
notebook/laptop computers, 5, 70
Notice of non-lodgment, 44
nursing homes, see hospitals
O
odometer records, 64–66
office food and drink, 78, 79–81
oil, see fuel expenses
oil rigs, 7
old persons homes, see charitable institutions; hospitals
operating cost method, 49, 56–61, 62, 64–66
record keeping, 43
operating costs, employee contributions to, 51, 63
otherwise deductible rule, 72, 73
overpayments, 44, 45
94
P
panel vans, see cars
parking, 7, 16, 41, 70
part-year use of cars, 50, 56
parties, 81
passenger vehicles, 62, 67
see also cars
pastoral organisations, see rebatable employers
payment, 44–45
payment, liability for, 3
calculating, 20–40
salary sacrifice arrangements, 8
payment summaries, 41–42
gross-up rate used on, 8
penalties, 45
per head basis of apportionment, 83
percentage of private/business use, 56–57, 64–66
number of days (statutory formula method), 49, 50–51
periodicals, 71
personal credit card payments, 71
personal digital assistants (PDAs), 5
petrol, see fuel expenses
phones, 70, 71
planes leased/hired for entertainment, 41, 85–87
portable computers, 5, 70
portable printers, 5
post office payments, 45
premises, food and drink provided on, 78, 79–81
printers, portable, 5
private health insurance, 7, 70
private use, cars for, see cars
professional journal subscriptions, 71
profits, 16
promotional organisations, see health promotion charities;
rebatable employers
property benefits, 7, 70, 71
food and drink, 79, 81, 88
protective clothing, 5
public ambulance services, 12
calculating liability, 20–27
car parking exemption, 71
entertainment exemptions, 78, 85
public benevolent institutions (PBIs), 12, 14, 17
calculating liability, 20–27
car parking exemption, 71
entertainment exemptions, 78, 85
public educational institutions, see rebatable employers
public hospitals, see hospitals
purchase of cars during year, 56, 65
purchase price of cars, 49
purpose of food and drink, 76
Fringe benefits tax for non‑profit organisations
index
Q
quarterly instalments, 45
R
racing organisations, see rebatable employers
radios, two-way, 50
rates, 20
cents-per-kilometre method, 62
deemed car depreciation/interest, 56
interest on loans, 6
see also thresholds
real property, 7
rebatable days in year, 28
rebatable employers, 13, 15
calculating liability, 28–40
exemptions from capping measures, 16
rebate, 12, 13
rebate, calculation of, 28, 30–31
when rebate threshold exceeded, 38–39
when rebate threshold not exceeded, 33–35
record keeping, 43
cars, 63–67
entertainment, 84, 86
expense payments, 73
recreational entertainment/facilities, 41, 85–87
reducing FBT value, 9
cars, 50
concessions and endorsements, 12–17
expense payments, 72
see also employee contributions
refreshments/light meals, 78, 79–80, 85
refugee relief centres, see public benevolent institutions
register method, 83–84
registering for FBT, 43
registration of cars, 56, 70
reimbursement of expense payments, 70–73
relatives, see associates
religious institutions, 13, 15–16
calculating liability, 28–40
religious practitioners, 15–16
remote areas, 7, 41, 71
remuneration packaging, see salary sacrifice arrangements
rental expenses, 71
repairs and maintenance, 7
cars, 56
replaced cars, 56, 65
reportable fringe benefits, 41–42, 87
requests for amendments, 44
requests for deferral of time to lodge, 44
research organisations, see health promotion charities
resident teachers, 7
residential fuel, 5, 7
Fringe benefits tax for non‑profit organisations
religious institutions’ live-in employees, 16
residual benefits, 7
home rental payments, 71
laptop computers, 70
vehicles other than cars, 62, 67
restaurant meals, 77
returns, 44
rubbish removal, domestic, 49, 62
S
salary or wages, 5, 70
replacing fringe benefits by, 9
salary sacrifice arrangements, 8
laptops received as part of, 70
salesmen, 50, 64
school fees, 71
scientific organisations, see rebatable employers
sedans, see cars
self-education expenses, 70, 71
seminaries, see religious institutions
service component, valuation of, 7
shared benefits, 41
per head basis of apportionment, 83
shares, 7
acquired under employee schemes, 5
ships, 7
leased/hired for entertainment, 41, 85–87
social functions, 78, 79–80
Christmas parties, 81
spare parts, supply of, 7
sports organisations, see rebatable employers
staff cafeteria meals, 80–81
staff health care facilities, 5
statutory formula method, 49–55
statutory percentage, 49, 50
stereos in cars, 49–50
study expenses, 70
subscriptions, 71
superannuation contributions, 5
salary sacrifice arrangements, 8
T
tax agents, 44
tax-exempt body entertainment, 76–88
tax file numbers, 43
tax rate, 20
tax thresholds, see thresholds
taxable value, 20
cars and other vehicles, 49–62
entertainment, 83–84, 86
expense payments, 72
reducing, 9
reporting exclusion threshold, 41
95
index
taxi travel, 71
teachers, resident, 7
telephones, 70, 71
theatre tickets, 87
thresholds, 41, 44
capping measures, 12–13
car parking, 7
minor benefits, 5
time, 20, 44–45
car journey begins/ends, 64
when cars’ base value may be reduced, 50
cars owned/leased for part of year, 50
cars parked, 70
days in FBT years (statutory formula method), 49, 50–51
elections and declarations to be made, 43
entertainment provided, 84, 86
food and drink provided, 76
frequency of benefit provided, 5; example, 6
logbook periods/years, 64, 65
meal entertainment registers, 84
records to be kept, 43
reporting, 9
tools of trade, 5
total operating costs, 56
total remuneration packaging, see salary sacrifice arrangements
tourism organisations, see rebatable employers
trade journal subscriptions, 71
trade unions, see rebatable employers
travel, 5, 7
associated with entertainment, 41, 78, 85–87
see also air travel; business travel; cars
travel agents’ airline transport benefit, 7
travel diaries, 73
12-week register method, 83–84
two-way radios, 50
type 1/type 2 grossed-up amounts, 8
calculating, 21–26
96
U
underpayments, 44, 45
unions, see rebatable employers
units of accommodation, see housing and accommodation
university study, 70
unpaid debts, 8
utilities, see cars
V
vans, see cars
variation of instalment rates, 45
vehicles other than cars, 62, 67
viticultural organisations, see rebatable employers
volunteers, 3–4
W
wages, see salary or wages
waiver of debt, 6
waste removal, domestic, 49, 62
work, travel for, see business travel
work, travel to, see home and work, travel between
work time, food and drink provided during, 77
work vehicles, see cars
workers, 3–4
worksheets, 52–55, 58–61
Y
year, see FBT year
Fringe benefits tax for non‑profit organisations
more information
PUBLICATIONS
To obtain copies of our publications:
nvisit our website at www.ato.gov.au/nonprofit
nphone 1300 720 092 and quote the NAT number (which is the
unique national identifying number we give each of our
publications, for example, NAT 14947)
nwrite to us at GPO Box 9935 in your capital city, or
nobtain a fax by phoning 13 28 60.
GENERAL OVERVIEW INFORMATION
Tax basics for non-profit organisations (NAT 7966) is for all
non-profit organisations. It:
nprovides an overview of tax obligations and concessions for
non-profit organisations
nhelps you identify which taxes affect your organisation,
including income tax, fringe benefits tax, goods and services
tax, and pay as you go, and
nexplains where to find more detailed information.
MORE DETAILED INFORMATION
Income tax guide for non-profit organisations (NAT 7967) is for
all non-profit organisations. It explains:
nhow to work out if your organisation is exempt from
income tax
nthe endorsement process for charities, and
nthe income tax treatment of non-profit organisations that are
not exempt.
GiftPack for deductible gift recipients & donors (NAT 3132) is for
organisations that want to receive tax deductible gifts and
donors that want to claim deductions for their gifts. It explains:
nwho can receive tax deductible gifts
nthe endorsement process for deductible gift recipients
nthe types of gifts that are tax deductible, and
nwhat donors have to do to claim deductions for their gifts.
Volunteers and tax (NAT 4612) is for volunteers and
organisations that deal with volunteers. It explains the tax
treatment of transactions that commonly occur between nonprofit organisations and their volunteers.
Other guides are available with detailed information on goods
and services tax, PAYG withholding, fringe benefits tax,
superannuation, capital gains tax, activity statements and record
keeping.
SERVICES
Internet
Our website includes an area specifically for non-profit
organisations. The Non-profit organisations home page at
www.ato.gov.au/nonprofit links you to information about:
ntaxes relevant to non-profit organisations, including income
tax, fringe benefits tax, goods and services tax, and pay as
you go
nexemptions or concessions that may apply, and
nother issues, such as fundraising, record keeping, volunteers
and deductible gifts.
Email update service
Use the email updates link on our home page to subscribe to
the Non-profit organisations webspace and receive free email
updates when information is updated or added, including
articles from the Non-profit news service. This will keep you
up-to-date on key tax issues affecting the non-profit sector, new
publications we release for non-profit organisations, and
changes to tax law.
Speakers and seminars
Subject to availability, we have experienced tax officers who
can deliver a variety of informative, personalised and practical
tax presentations and workshops to groups of 15 or more
people. To discuss requirements for your meeting, seminar
or function phone 1300 130 282 or email
speakersandseminars@ato.gov.au
Phone
Phone our information line on 1300 130 248 for direct access to
staff trained to deal with non-profit enquiries, including income
tax, Australian business number, goods and services tax and
fringe benefits tax.
If you do not speak English well and want to talk to a tax officer,
phone the Translating and Interpreting Service on 13 14 50 for
help with your call.
If you have a hearing or speech impairment and have access to
appropriate TTY or modem equipment, phone 13 36 77. If you
do not have access to TTY or modem equipment, phone the
Speech to Speech Relay Service on 1300 555 727.
We also have a range of fact sheets on specific topics written
especially for non-profit organisations.
TECHNICAL INFORMATION
If you are looking for technical information such as rulings,
practice statements and tax laws, you can find them on our
website.
Fringe benefits tax for non‑profit organisations
97