Fringe Benefit Tax
The Fringe Benefit Tax Guideline provides information for staff concerning processing and recording of Fringe Benefit Tax (FBT) transactions; the administration of FBT liabilities for Macquarie University; and legislative obligations to manage FBT risk.
|FBT applies to employees and their associates. For FBT purposes the definition of employee includes current, former and future employees. For FBT purposes the definition of associate includes people and entities closely associated with an employee eg relatives or closely connected companies|
|Expense payment fringe benefit|
An expense payment fringe benefit arises in either of two ways:
Property fringe benefits
Car fringe benefit
The University is a tax-exempt body. A tax-exempt body entertainment fringe benefit arises from entertainment expenses incurred by an employer who
The general scheme of the GST legislation is that the University accounts for GST on the supplies it makes, but get a credit for the GST component of supplies made by others to the University. This credit is called an input tax credit, because it is a credit for tax paid on the University business inputs.
What is FBT
FBT is a tax paid on certain benefits an employer provides to their employees or the employee’s associates (typically family members) in place of, or in addition to salary and wages in respect of their employment.
A fringe benefit may be provided by an associate of the employer or under an arrangement between a third party and the employer.There must be a benefit to the employee and it must be in respect of their employment for FBT to apply eg where a benefit is provided to a past student who is also an employee, FBT would not apply as the employee has received the benefit as a past student, not in respect of their employment.
|When is the FBT Year|
The FBT Year is for the period 1 April to 31 March each year.
Car Fringe Benefit
A car fringe benefit arises when the University makes a vehicle available for the private use of an employee. This includes a car that is owned or leased.What vehicles are included:
The following types of vehicles (including four wheel drive vehicles) are cars:
Employees should also record and maintain supporting documentation of any periods the car is unavailable for their private use and any contributions they have made in maintaining the vehicle. These should be provided to the Tax and Insurance Officer.
What is considered available for private use:
A car is treated as being available for private use by an employee on any day that the car is not at the University’s premises or the employee is allowed to use it for private purposes or the car is garaged at the employee’s home.
A car that is garaged at an employee’s home is treated as being available for the private use of the employee regardless of whether they have permission to use it for private purposes.
As a general rule travel to and from work is private use of a vehicle.
When is a car not available for Private use:
What does entertainment include:
Recreational entertainment may also be provided to employees. You first need to consider whether or not the benefit is entertainment.The provision of entertainment means the provision of:
The following would generally be considered to be entertainment and subject to FBT:
The following would generally not be considered to be entertainment where in respect of the employee:
As the University is a tax-exempt body (ie it does not pay income tax), the minor benefits exemption relating to entertainment will only be available as follows:
Expense, Property or Residual benefits
Where the University reimburses or pays a third party for an expense incurred by an employee an expense benefit payment may arise. A residual benefit includes a benefit provided to an employee which does not specifically fit any of the other categories of fringe benefit. Some benefits are exempted from FBT.Which Expense, Property or Residual benefits are taxable:
As a general rule expenses which are of a private nature will be subject to FBT. The following provides some examples but is not an exhaustive list:
Which Benefits can be exempted from FBT
Car parking - car parking fringe benefits and car parking expense payments are exempted for the University. This applies both to the use of a car parking space and the reimbursement of car parking expenses.
Child care - where childcare is provided on University premises for the benefit of employees, the benefit is an exempt benefit.
Home Phones and Home Internet charges - Home phones and home internet charges paid or reimbursed by the University will be subject to FBT. However, if all or part of the benefit is work related the employee can complete the otherwise deductible declaration, showing the business use percentage. FBT would be payable on the remaining private portion, but may be exempted as a minor benefit if it meets the criterion for a minor benefit exemption.
Long Service Awards - long service awards granted in recognition of 15 years or more service are exempt if within a specified maximum amount. The specified maximum value is $1,000 for 15 years service plus $100 for each additional year eg the maximum value for a first award recognizing 20 years service is $1,500. If the employee has received a previous long service award the exemption for the second award is limited to the amount in recognition of the additional award ie one award at 15 years and another at 20 years, the 20 year award is limited to $500. Where the value of the award exceeds the relevant maximum value, no part of the award is exempt.Membership Fees - Fringe benefits are exempt if they are a professional membership fee, subscription to a trade or professional journal or an entitlement to use an airport lounge membership. The membership or subscription must be for the employee in respect of the employee’s employment ie it could not be for an employee’s associate.
Minor Benefit Exemption
There is no minor benefit exemption in respect of entertainment.
A minor benefit is a benefit which has a GST inclusive taxable value of less than $300. Certain factors, including any similar or associated benefits must be considered when applying the minor benefit exemption.The five criteria to consider when deciding if it would be unreasonable to treat the minor benefit as a fringe benefit are:
The ATO has provided guidance in TR2207/12 to assist organizations to determine when a benefit is an exempt minor benefit.
The Christmas gifts are provided infrequently but on a regular basis (being every Christmas). However the sum of the value of all gifts, where they are identical or similar benefits, in this year and all other years is not considered to be substantial and there are no other associated benefits provided in connection with the gift. There would be no difficulties in determining the value of the benefit and the benefit was not provided to assist the employee deal with an unexpected event. On the facts it is not principally a reward for service.
On balance it would be concluded that it would be unreasonable to treat the benefit as a fringe benefit. Accordingly it is an exempt benefit.
The employee and the partner do not receive gifts from the employer on a frequent and regular basis. Even though the employee and the partner are provided with a gift and also attend the Christmas party the gifts need to be considered separately when applying the minor benefits threshold. In considering whether the gift is a minor benefit the value of the benefit to the employee and the value of the benefit to the partner are each below the minor benefits threshold. It is necessary to consider the criteria listed above to determine if it would be unreasonable to treat each of the minor benefits provided as fringe benefits.
The gifts have been provided infrequently but regularly. However the sum of the value of gifts provided to the employee and the sum of the value of gifts provided to the partner in this year and all other years where there are identical or similar benefits is not considered to be substantial. The gifts are provided in connection with the Christmas party. However the total value of the minor benefit and associated benefit in this year and all other years is not considered substantial. There would be no difficulty in determining the value of the benefit and the benefit was not provided to assist the employee or the partner deal with an unexpected event. On the facts the gifts are not principally a reward for services. On balance it would be concluded that it would be unreasonable to treat the benefit provided to the employee and the partner in the form of gifts as fringe benefits. Accordingly the gifts are both exempt benefits.
Flowers given to employees on special occasions would be considered to be provided on a regular and infrequent basis. There are no other associated benefits provided with the flowers and it is rare for the employee to receive flowers on more than a couple of occasions in any year. There would be no difficulty in determining the value of the benefit and the benefit was not provided to assist the employee with an unexpected event. On the facts, it is not wholly or principally a reward for services.
On balance it would be concluded that it would be unreasonable to treat the benefit as a fringe benefit. Accordingly the benefit provided to the employee is an exempt benefit.
Due to the ad-hoc nature of the recognition of the recognition by the employer, vouchers which are identical or similar are not reasonably expected to be provided to that employee on a regular and frequent basis. The sum of the values of the minor benefit and any associated benefits in this year and other years would not be substantial. There would be no difficulties in determining the value of the benefit, the benefit is not provided to assist with an unexpected event and the benefit is provided principally as a reward for services rendered.On balance it would be concluded that it would be unreasonable to treat the benefit as a fringe benefit. Accordingly the benefit provided to the employee is an exempt benefit.
Many supervisors provide their staff with a small gift as recognition of achievement during the course of a year. Supervisors need to be aware that where this gift is in the form of entertainment that it will be subject to fringe benefits tax regardless of value. The University has made available access to the Red Balloon program for these rewards. The majority of the items available through the Red Balloon program are in the nature of entertainment and are therefore taxable.
Where gifts are provided and that GST inclusive amount of that benefit and any associated benefits is greater than $300 that gift will be taxable.
Where gifts are less than $300 and are not in the nature of entertainment consideration needs to be given to the frequency and regularity of the gift. If it is frequent and regular it will be taxable. As a general rule an ad hoc gift to staff will not be considered regular and frequent unless all staff in a defined section of the University are provided with a gift each year.It is important to note that benefits under $300 are taxable unless it would be unreasonable to treat it as a fringe benefit for reasons outlined in the previous section
|An award genuinely related to occupational health and safety achievements that is granted to an employee is exempt from tax if itsvalue does not exceed $200. Where the University grants more than one award to an employee during the FBT year each award will be exempt provided the aggregate value of the awards does not exceed $200. Where the $200 limit is exceeded no part of the award is exempt unless the minor benefit exemption can be applied.|
Taxi travel is exempt from FBT in the following circumstances:
Work related items
An FBT exemption applies for the following work related items:
Mobile Phones and other Portable Devices
At the time a mobile phone is provided it should be established the mobile phone is primarily for work use, for the exemption to apply. The cost of calls, rental charges and accessories can also be exempted provided the ongoing actual “work use” test is satisfied at the time these are paid or reimbursed. Any personal use should be limited to incidental use only. Factors such as listing of mobile number in internal staff directory, on business cards and emails would aid in demonstrating the mobile is primarily for use in the employee’s employment.The exemption for other portable devices is similarly only available where it can be demonstrated that they are primarily for use in the employee’s employment.
Where an employee moves from one locality to another in the course of employment or in order to commence employment a number of relocation costs may be paid or reimbursed. Whether an FBT exemption or reduction is available in relation to these relocation costs is explained below.
Otherwise Deductible Rule
|The otherwise deductible rule reduces the taxable value of a fringe benefit by the amount the employee would have been entitled to claim an income tax deduction if they had incurred the expense eg the University pays a professional membership fee for an employee. As this membership fee would have been deductible in the employee’s own personal income tax return if the employee had paid the fee, the taxable value of the fringe benefit is reduced to nil.|
FBT is calculated on the grossed up Taxable value of a fringe benefit. The rate of FBT is currently 47%.
Type 1 2.0802 (used where there is an entitlement to a GST credit).Type 2 1.8868 (used where there is no entitlement to a GST credit).
The ATO requires employers to record the taxable value of fringe benefits provided to staff.
Where the total taxable value of an employee’s fringe benefits exceeds $2,000 in an FBT year, the University is required to report an amount on the University’s Payment Summary.Income Tax is not payable by employees on fringe benefits.
|Information to assist when coding Accounts payable invoices|
A detailed Meal Entertainment Help Sheet can assist to determine if FBT applies and which expense/GST code to use. The Help Sheet can be found here.
|General Ledger Expenditure Codes||
Expense code 4200 is for Entertaining – Non FBT|
Expense code 4201 is for Entertaining – FBT
Expense code 4202 is for Entertaining – Non Tax Deductible
Tax and Insurance Officer – Ext 1683|
Assistant Director, Business Services – Ext 1670
|Date Approved||7 August, 2014|
|Approval Authority||Chief Financial Officer|
|Date of Commencement||1 January, 2014|
|Date for Next Review||July 2015|
Procurement Handbook |
Meal Entertainment Help Sheet
Credit Card Procedure
Motor Vehicle Policy
|Documents Superseded by this Document|
|Keywords||FBT, Minor Benefit, Otherwise Deductible rule, Mobile phones, Staff recognition|