FBT FAQs – updated 5/6/2009
FAQ
What is a fringe benefit?
A fringe benefit is a benefit that is provided to an employee or an associate of an
employee in respect of the employment of the employee. This includes past, present
and future employees.
The term ‘benefit’ is broadly defined by the Australian Taxation Office (ATO) to
include any right, privilege, service or facility but excludes payments of salary or
wages, eligible termination payments or contributions to complying superannuation
funds.
Fringe benefits tax (FBT) is essentially paid on non-cash remuneration provided to
employees1 or associates2 in place of or in addition to salary and wages.
Type of fringe benefits?
Flinders University normally provides a range of fringe benefits to its employees,
however there are others that may also be considered when determining appropriate
benefits.
The common benefits provided by Flinders are:
1.
2.
3.
4.
1.
Motor Vehicle Fringe Benefits
Accommodation Fringe Benefits
Entertainment Fringe Benefits
Travel benefits
MOTOR VEHICLE FRINGE BENEFIT
What is a motor vehicle benefit?
A motor vehicle benefit arises when a vehicle is owned or leased by the University and
is available at any time of day, for private use by an employee.
A vehicle is automatically considered to be available for private use if:

1
It is actually used for private purposes by the employee;
This definition includes former and future employees, as well as persons who receive benefits but no salary or
wages.
2
A person associated with an employee (eg. Spouse, De facto, Partner and child of the employee or partner).
FBT FAQs – updated 5/6/2009

It is not located on University premises and the employee is permitted to use the
vehicle for private purposes;

It is garaged or kept at or near the employee’s residence - regardless of whether
the employee has permission to use it privately.
Please note this benefit relates to ‘fleet’ cars only. All motor vehicles that are salary
sacrificed or packaged with salaries are administered by the Salary Packaging Office3.
What use of University vehicles is non-taxable?
The use of fleet cars during business hours is considered to be for business purposes
and hence exempt from FBT. Any private use of fleet vehicles is to be separately
identified to enable the FBT on this benefit to be calculated. Out of hours business
travel is also exempt from FBT.
Employee use of certain commercial vehicles is exempt, where the only private use is
for work related travel (i.e. home to work travel or travel incidental to work duties) or
for other minor, infrequent and irregular private use. This applies to utes, vans and
other commercial vehicles. This does not include 4WD drives.
What to do if a University vehicle is used for private use?
There is 2 options. The first option is to reimburse the University using the cents per
Km method. The value is worked out by determining the total private kilometre and
times it by the ATO value4.
Example:
J Bloggs a researcher for the School of Soccer Studies is conducting some research on
rural soccer clubs using a fleet car a Berrai 2.0 lt sedan. His business travel includes
visiting 3 clubs in the South East of SA, he then decides to visit friends for the day. This
extra visit is not business and adds 80 extra Kms to the overall travel. J Bloggs needs to
reimburse the University $48.80 (80kms X 61 cents for cars between 1.6 lt and 2.6 lt
per the ATO table) for the School of Soccer to avoid any FBT.
The second option is to pay FBT on the private portion of the travel. Please contact the
Tax Accountant or Salary Packaging Office for further guidance. This is charged to the
cost centre once a year.
3
4
Salary Packaging can be contacted on ext 15231
http://www.ato.gov.au/individuals/content.asp?doc=/content/33874.htm
FBT FAQs – updated 5/6/2009
2.
ACCOMMODATION FRINGE BENEFIT
What is an accommodation fringe benefit?
An accommodation (housing) fringe benefit arises where an employer grants an
employee or associate a ‘housing right’. In terms of the ATO this is a right to occupy or
use the accommodation. Accommodation includes a house, flat or home unit and
accommodation in a hotel, motel, guesthouse or other living quarters. The use of
accommodation as a usual place of residence is an accommodation fringe benefit. This
currently only applies to Flinders Housing.
What types of accommodation expenditure payments are non-taxable?
There is only one applicable accommodation benefit that are non-taxable that is
applicable to Flinders, this is accommodation covered by a Living Away From Home
Allowance (LAFA).
For FBT purposes, LAFA is an allowance paid by Flinders to staff to compensate for
additional expenses incurred and any disadvantages suffered because the staff member
is required to live away from their usual place of residence in order to perform their
employment duties. The term 'additional expenses' does not include expenses the
employee would be entitled to claim as an income tax deduction.
Accommodation provided outside Australia
Accommodation provided outside Australia as the employee’s usual place of residence
is subject to fringe benefits tax.
The market value of accommodation provided outside Australia must be determined
each year. The taxable value is the market value reduced by any rent contributed by the
employee. For further information please contact HR systems.
3.
ENTERTAINMENT FRINGE BENEFIT
What are entertainment benefits?
Entertainment in terms of the ATO means entertainment by way of food, drink or
recreation, or accommodation or travel in relation to the provision of entertainment by
way of food, drink or recreation.
Entertainment provided by Flinders to an employee (and/or associates of the
employee) is subject to fringe benefits tax. Each transaction must be looked at
individually in terms of its nature and substance. There are generally few circumstances
where an entertainment benefit is not subject to FBT. A checklist can be found at
FBT FAQs – updated 5/6/2009
http://www.flinders.edu.au/finance/tax-information/tax-information_home.cfm this
identifies functions most likely to be conducted by the University.
What types of expenditure are ordinarily considered to be entertainment benefits?
Provision of the following is subject to FBT (refer Taxation Ruling TR 97/17):

Food or drink consumed on University premises by employees and/or associates
at a social function;

Food or drink consumed on University premises in an in-house dining facility
by employees and/or associates at a social function;

Food or drink consumed on University premises in an in-house dining facility
by associates of employees not at a social function;

Morning or afternoon tea or light lunches to employees where alcohol is
provided (as it constitutes entertainment and this is non-deductible expenditure for
income tax purposes – see Taxation Ruling IT 2675)

Morning and afternoon teas and light lunches to associates of employees;

Food or drink consumed off University premises by employees and/or
associates at a social function or business lunch;

One employee entertains another employee (including an employee of a
company associated with Flinders) and is reimbursed by Flinders;

Where employees dine together at a restaurant and the meal is paid for with a
University credit card (corporate card); and

Any other ‘non deductible’ meal entertainment provided to employees whether
or not on university premises.
What types of expenditure are NOT considered to be entertainment benefits?
Provision of the following is not subject to FBT (refer Taxation Ruling TR 97/17):

Food or drink consumed on University premises in an in-house dining facility
by employees not at a social function;

Morning and afternoon teas and light lunches to employees;

Food or drink consumed on University premises by clients (either at a social
function, or in an in-house dining facility), including morning and afternoon tea and
light lunches;

Food or drink consumed off University premises by clients at a social function
or business lunch;

Alcohol provided at the conclusion of a CPD Seminar with finger food;

Food or drink consumed by employees while travelling, including when dining
with clients and other employees; and

Meals consumed by employees while attending a seminar not held on
University premises, which are incidental to the seminar.
FBT FAQs – updated 5/6/2009
How do we calculate the FBT?
The FBT is automatically calculated monthly. The proportion of the entertainment
provided to employees should be coded :
XX-XXX-XXXXX-2050.
The impact of FBT on your Cost Centre from entertainment
Any FBT on Meals and Entertainment (Acc 2050) will be calculated and allocated to
account 3608 at the end of each month. This allows you to see the financial impact of
FBT on meals and entertainment. The example below illustrates how FBT is calculated.
Take the month’s balance in 2050.
Multiply balance by 10% to get GST
inclusive figure.
The sum of the above will then be multiplied
by ( Type 1 Grossed up rate x FBT rate).
The result of this will be debited to your cost
centre account 3608.
4.
1
Current balance for March is $56.00
2
3
$56.00 x 10% = $56.00 + 5.60 = $61.60
$61.60 x 2.0647 x 46.5% = $59.14 This is the FBT that will be charged to
your Cost Centre account 3608
N.B. 2.0647 x 46.5% = 96%
TRAVEL FRINGE BENEFIT
The University is liable to pay FBT on all travel costs for employees or associates that
are of a private nature and are paid by the university. Flinders pays FBT on airline costs
using a time basis test providing the dominant purpose of travel is business i.e. Travel
must be for University business. The time basis test means if the private component is
equal to or greater than your business component then FBT is payable on a portion of
the flight cost (assuming Flinders has paid for the staff member).
When to use a travel diary?
A travel diary must be kept in respect of fringe benefits relating to:
 travel outside Australia that involves the employee being away from their usual
place of residence irrespective of the duration; or

travel within Australia that involves the employee being away from their usual
place of residence for a continuous period including more than 5 nights, where
the travel was not undertaken exclusively in the course of employment. The
fact that the business travel is such that the employee is required to stay away
over a weekend will not, in itself, mean that the trip is not undertaken
exclusively in the course of his or her employment.
Examples to determine if a travel diary is required:
FBT FAQs – updated 5/6/2009
Any travel inside Australia solely for business purposes (no private component) –
Travel diary not required
Travel includes 5 or less consecutive nights inside Australia with a private component –
Travel diary not required
Travel includes 6 or more consecutive nights inside Australia with a private component
– Travel diary required
All travel outside Australia for full or part University business – Travel diary required
How to calculate FBT on the flight cost?
Example
Travel Ticket cost $550 GST Inclusive. Total days travelling 10 with 5 days being private
Cost of Ticket
Total No of days
Number of Private days
550
10
5
Daily Rate
55.00
Total Private Component - Individual
may elect to pay this amount
275.00
Grossed up Rate for Travel within
Australia
567.79
FBT due. If FU has paid the flight
(46.5%)
264.02
(275*2.0647)
If the private component is less than 5 days in the above example. No FBT is payable
on the flight costs only. Please note if an employee during business travel incurs
expenses (paid by the University) of a private nature such as sightseeing this will incur
FBT, these expenses must be coded to account 2050. Furthermore, any costs (paid by
the University) incurred during the private component such as accommodation and
meals would also incur FBT.
How is FBT calculated?
The FBT rate is 46.5%.
FBT FAQs – updated 5/6/2009
An important point to note in regard to the calculation of fringe benefits tax is that
where an employee makes a payment to the University (as a contribution towards the
cost of providing the fringe benefit), the taxable value is reduced by that particular
payment.
The University is required to classify fringe benefits into two types:
Type 1 – GST creditable; and
Type 2 – non GST creditable.
As the University is liable to GST on almost all benefits provided to employees gross
up rate type 1 must be applied in calculating the taxable value of fringe benefits.
Example: If the University provided a fringe benefit of $110 (GST inclusive amount) to
an employee in the 2009/10 tax year, the cost to the University would be as follows:
Taxable value $110 x (0.465 + 0.10)
(1-0.465) x (1 + 0.10) x 0.465
=
$110 x 2.0647
(Grossed-up taxable value) $227
The formula used to calculate tax payable is:
FBT payable
=
Taxable value x FBT rate
=
$227 x .465
Continuing the example above:
FBT payable
=
$105
Thus on the provision of a fringe benefit of $110 (GST Inclusive) the University pays
FBT of $105 or effectively 96% tax.