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| Fringe benefits |
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Definition A fringe benefit includes any right, privilege, service or facility provided under an arrangement in relation to the performance of work A fringe benefit includes a benefit provided to an employee or associate by their employer, an associate of the employer or third party Exclusions: salary and wages, superannuation contributions to a complying fund & exempt benefits Calculation of FBT
Grossing up the taxable value of the fringe benefit depends upon the type of fringe benefit Reportable Fringe Benefits (RFB’s) From 1 April 2007 individual fringe benefits of $2,000 or less are not reportable Car fringe benefits Statutory Formula method The Statutory Formula method operates on a per-vehicle basis by applying a statutory percentage to the cost price of the vehicle The percentage is based on the number of kilometres travelled during the tax year The availability of the vehicle for private use by the employee and any running cost paid by the employee are also taken into account This method is the default method of valuation Operating Cost Formula method The employer may elect to use the Operating Costs basis of valuation This election may be made each year for each vehicle but is only available if a valid logbook and odometer records are maintained Operating Cost Formula method This method uses the total operating costs of the vehicle during the year of tax These include:
Depreciation is calculated using the following formula: ABC D A = the depreciated or base value of the vehicle B = the rate of depreciation C = the number of days in which the vehicle was held by the benefit provider D = number of days in the year Residual fringe benefits Where a payment that is not covered by another provision is paid on behalf of a recipient, it represents a residual fringe benefit A residual fringe benefit may arise when am employer provides an employee with any right, such as a privilege, service or facility, which is not one of the specific types of fringe benefits previously mentioned |
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Fringe Benefits Tax (FBT) was introduced in 1986 with the creation of the Fringe Benefits Tax Assessment Act 1986
FBT is payable by employers and is designed to tax the wide range of benefits provided by an employer, or on their behalf, to employees or their associates Fringe benefits tax is payable by the employer – s.66(1) The FBT year runs from 1 April to 31 March Fringe benefits tax returns must be prepared and lodged by 21 May following the end of the FBT year - s.68 Determining whether FBT applies
Where GST input tax credit claimable by employer The type 1 gross up factor is: 2.0647 Type 2 Fringe benefit Where GST input tax credit not claimable by employer, or where the cost to the employer of providing the benefit does not include GST The type 2 gross up factor is: 1.8692 Types of Fringe Benefits Car fringe benefits There are two methods which can be used to find the taxable value of a car benefit provided to an employee These are:
Statutory Formula method The statutory formula is: ABC - E  D
A = base value of the vehicle B = statutory rate based on total kms travelled in the tax year C = no. of days available for private use in the tax year D = no. of days in the FBT year E = any employee contributions Statutory rates are:
Operating Cost Formula method For FBT purposes, operating costs are calculated using the following formula: C x (100% - BP) - R C = total operating costs including running expenses, deemed interest, depreciation BP = business use % R = contributions made by employees Loan fringe benefits Loan fringe benefits arise when an employer makes a loan to an employee at a low interest rate or interest-free The employer must calculate the taxable value of the benefit by using the "benchmark" rate prescribed by the ATO - rate is 7.30% for the FBT year 1 April 2006 to 31 March 2007 The taxable value of a loan benefit is the difference between the interest due on the loan at the benchmark rate and the rate provided by the employer Other types of fringe benefits
Exempt fringe benefits The provision of taxis, panel vans, utility trucks and non-passenger vehicles designed to carry loads of = 1 tonne The provision of minor, infrequent benefits (i.e. costing less than $100) Mobile phones used primarily for work, laptop computers, protective clothing, calculators, work related software, tools of trade Trade or professional journal subscriptions, subs to corporate credit cards, subs to airport lounge membership Taxi travel from work to home or a medical practice as a result of sickness |
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