Week 6 - FBT Flashcards
1
Q
What is the FBT year?
A
1 April to 31 March
2
Q
What law governs FBT?
A
Fringe Benefits Tax Assessment Act (1986)
3
Q
Who does FBT apply to?
A
- Employees who are residents of Australia, unless their income is exempt from tax
- Non-resident employees who derive Australian-source income
- Nearly all employers - individuals, partnerships, companies, trusts
- Most tax-exempt bodies.
4
Q
A
4
Q
What are the only entities exempt from FBT?
A
- Have diplomatic or consultate immunity
- Certain international organisations with immunity from Australian tax
- Religious institutions that provide benefits for ministers undertaking pastoral care.
5
Q
What rate is applicable to FBT?
A
Flat 47% of the grossed-up fringe benefits amount (2023/24)
6
Q
What is the lodgement date for FBT returns?
A
If lodged by employer - 21 May
If lodged by tax agent - 25 June
7
Q
When are quarterly instalments required for FBT?
A
When amount of FBT payable is more than $3000
8
Q
What 3 conditions must exist for a non-salary/non-wage benefit to be classified as a fringe benefit?
A
- Provided by an employer, associate or third-party arranger
- Provided to an employee or associate
- Provided in respect of employment
9
Q
What is the definition of benefit for FBT purposes?
A
Right, privilege, service or facility.
Does not include:
- salary and wages
- allowances (except living-away-from-home)
- superannuation fund contributions
- payments from superannuation funds
- benefits under Div 83A share schemes
- ETP’s - early retirement and redundancy
- benefit specifically exempt under FBTAA
10
Q
What does an associate of an employer typically include for FBT purposes?
A
Subsidiary of employer or related company
11
Q
True or false:
A government authority is still considered an employer for FBT
A
True
12
Q
For FBT purposes, who are covered by the term “employees”?
A
- Company directors
- Office holders
- Common law employees
- Recipients of compensation payments
Does not include contractors, clients, customers, shareholders and suppliers.
13
Q
For FBT purposes, who are covered by the term “associates”?
A
Includes relatives of an employee, such as:
- spouse
- children
- parents
- brothers and sisters
- grandparents
- uncles, aunties, cousins etc.
14
Q
For FBT, what is the relevance of “in respect of employment”?
A
Fringe benefit must be provided to employee/associate in respect of employment.
Benefits for clients, custoemrs, consultants or suppliers would not qualify as fringe benefits.
15
Q
What did Payne v FCT (1996) determine for consumer loyalty programs and FBT?
A
Loyalty programs such as frequent flyer points are not assessable to the employee and not subject to FBT.
They arise as a result of personal contractual relationship with the airline, not an employment relationship.
16
Q
What is the difference between an allowance and a reimbursement?
A
Allowance = assessable income and not a fringe benefit. Usually paid before the expense. Employee has discretion whether to use.
Reimbursement = non-assessable, may be FBT if relates to employees private expenses. Compensated after expense incurred.
17
Q
What are the 13 types of fringe benefits?
A
- Car
- Debt waiver
- Loan
- Expense payment
- Housing
- Living-away-from-home allowance
- Board
- Meal entertainment
- Tax-exempt body fringe benefit
- Car parking
- Property
- Residual
- Miscellaneous exempt benefits.
18
Q
For expenditure that is subject to FBT, is it tax deductible to the employer or not?
A
Yes, tax deductible to the employer and able to claim GST input tax credits.
If not subject to FBT, it is not tax-deductible or able to claim GST input tax credits.
19
Q
How long should records relating to fringe benefits tax be kept?
A
5 years.
20
Q
If an associate of the business provides a fringe benefit to an employee of the business, how long do they have to provide copies to the employer?
A
21 days
21
Q
What 3 steps are involved in calculating FBT payable?
A
- Calculate the GST inclusive taxable value of fringe benefits. Round to the nearest dollar.
- Multiply each fringe benefits taxable value by the gross-up factor (either 2.0802 or 1.8868)
- Calculate 47% as the total FBT payable. Include cents.
22
Q
What is the fringe benefits taxable amount commonly called?
A
Grossed-up amount
23
Q
What is a Type 1 fringe benefit?
A
Type 1’s is where the employer is entitled to claim a GST ITC on the benefit provided.
2024 rate = 2.0802
Total is the gst-inclusive amount.
24
What is a Type 2 fringe benefit?
Employer is not entitled to claim a input tax credit on the benefit.
2024 rate = 1.8868
Includes benefits that are GST-free and input-taxed.
e.g. basic food, medical bills, overseas private holiday, residential rent.
25
What is the relevance of employee contributions for FBT purposes?
Fringe benefit taxable value can be reduced by an employee contributions, or the otherwise deductible rule.
26
What is an employee contribution for FBT?
Employee makes an after-tax contribution towards a benefit subject to FBT.
Taxable value of the fringe benefit is reduced accordingly.
Pre-tax salary sacrifice is not valid - must be after-tax.
27
True or false:
A pre-tax salary sacrifice arrangement is a employee contribution and reduces the value of the fringe benefit.
False.
Only after-tax amounts reduce the benefit.
28
What is the otherwise deductible rule?
Fringe benefit value is reduced by the extent that it would have been deductible to the employee.
Does not apply to benefits provided to an associate of the employee.
29
True or false:
An associate of an employee receives a benefit that is otherwise deductible, so this reduces the value of the Fringe Benefit.
False.
Otherwise deductible rule cannot apply to benefits received by the associate of the employee.
30
What must be obtained from an employee if the otherwise deductible rule is involved for FBT purposes?
Must obtain a declaration from the employee, except where:
(a) Expense is incurred exclusively in performing work-related duties
(b) requirement to keep a travel diary
(c) fringe benefit is covered by a recurring fringe benefit declaration.
31
What is a recurring fringe benefit declaration?
Declaration that covers recurring fringe benefits.
* Benefit must be provided no later than 5 years after declaration
* Deductible proportion is not significantly less that the deductible proportion (10%)
* Is identical to the fringe benefit for which the declaration was made.
32
What is an FBT rebatable employer?
Employer who is eligible to claim a notional rebate equivalent to 47% of the employers FBT liability for a FBT year.
33
What are examples of FBT rebatable employers?
* registered charitable institutions (but not PBI's that have FBT exemption)
* certain scientific institutions
* educational institutions including private not-for-profit schools and private universities
* trade unions / registered employee associations
* non-profit organisations for certain purposes:
- music, arts, science, literature
- game, sport or animal race
- community service
- development of aviation or tourism
- Aust info and communications technology resources
- development of agricultural, pastoral, horticultural, fishing, manufacturing or industrial resources for Australia.
34
What is the maximum rebate an FBT rebatable employer can claim per employee?
Grossed-up amount of $30,000 per employee
Anything over this amount is fully subject to FBT.
35
How is the rebate for a FBT rebatable employer calculated?
FBT rate (0.47) x (Gross Tax - Aggregate non-rebatable amount) x (rebatable days in year / total days in year)
36
What is a car fringe benefit?
Car held by employer (either owned outright or leased) - and used by the employee for private purposes.
37
True or false:
A motorcycle can be included as a car fringe benefit.
False.
Cars only - carry a load of less than 1 tonne or less than 9 passengers.
38
Is a zero or low emissions vehicle a car fringe benefit?
Exempt, where is used by employee / associate for the first time after 1 July 2022.
Must be below the luxury car tax threshold for fuel efficient vehicles ($89,332 - 2024)
39
What are the types of zero or low emission vehicles?
* Battery electric
* Hydrogen fuel cell
* Plug-in hybrid (until 1 April 2025)
40
How do you calculate the fringe benefit on cars?
Use the operating cost method.
Total Operating Costs x (100% - business use%) employee contribution.
41
What is covered by operating costs for car fringe benefits?
Fuel, oil, registration, R&M, insurance.
If car is owned, then depreciation of car at 25% diminishing value. 7.77% imputed interest on the GST-inclusive opening written-down value.
If car leased, lease payments included instead of derepciation and imputed interest.
42
When calculating car fringe benefits, is depreciation capped at the car cost limit? ($68,108 in 2024)
No, the depreciation car cost limit is ignored.
43
How is business use percentage calculated for car FBT?
Employer keeps logbook.
(Business km travelled / total km travelled) x 100%
If no logbook kept, business use is zero.
44
What are the conditions for a car parking fringe benefit?
* Car is parked at premises that are owned or leased by employer
* Car is parked for a minimum of 4 hours between 7am and 7pm
* Car is owned by / leased to / under control of employee
* Parking is provided in employee's employment
* Car is parked at or near employees primary place of employment
* Car is used by the employee to travel between home and work
* Commercial parking station that charges a fee for all-day parking within 1km radius
* Commercial parking station fee for all-day parking is more than the car parking threshold
* At the beginning of the FBT year, commercial parking station fee was more than car parking threshold
45
What is the car parking FBT threshold and how is it used?
$10.40 (2024)
Used as the benchmark for comparing commercial parking station rates
46
For car parking FBT to apply, what radius is a commercial car park needing to be located in?
Within 1 kilometre.
47
What are the 5 methods of valuing a car parking fringe benefit? (CMAST)
1. Commercial parking station method
2. Market value method
3. Average cost method
4. Statutory formula
5. Twelve week
48
What is the commercial parking station method for car parking FBT?
Taxable value = the lowest fee charged for all-day parking, within a 1km radius.
Reduced by any employee contribution amount.
49
What is the market value method for car parking FBT?
Taxable value = independent valuation to establish cost that a employee could reasonably be expected to pay under an arm's length transactions.
Reduced by any employee contribution amount.
50
What is the average cost method for car parking FBT?
Taxable value = average of lowest fees charged by commercial operation within a 1km radius.
Use the average of the first day and last day of FBT year.
Reduced by any employee contribution.
51
What is the statutory formula for car parking FBT?
Spaces method.
Daily rate amount (either Commercial, Mkt Value or Average Cost) x the statutory number of car parking benefits.
Assumes there are 228 car parking days from each car parking space.
Reduced by any recipients contribution.
52
What is the 12 week method for car parking FBT?
Employer is required to keep a register for 12 weeks indicating the total car parking benefit provided.
Total value of car parking benefits x 52/12 x number of days of car parking benefits / 366
53
For a small business to be eligible for a car parking FBT exemption, what conditions need to apply?
Must meet all of:
- Parking isn't a commercial car park
- Last income year, aggregated turnover less than $50 million
- Not a government body or a listed public company.
54
What is a debt waiver fringe benefit?
Employer forgives or waives a debt owing by an employee.
Taxable value = gross-up value of the benefit (Type 2 gross up)
55
For debt waiver benefits, is Type 1 or Type 2 used to gross up the value?
Type 2 - as effectively input-taxed.
56
For a loan fringe benefit, do you gross up with Type 1 or 2 rate?
Type 2 rate, as effectively input-taxed.
57
What types of loan are covered by a loan fringe benefit?
* Advance of money
* Provision of credit
* Payment on behalf of a person, that creates an obligation to be paid.
58
When does a loan fringe benefit apply in respect of the interest rate?
If employer loans to employee or associate and the interest rate on the loan is less than the statutory / benchmark rate.
Applies in any year where a balance is owing.
59
What is the taxable value for a loan fringe benefit?
Calculated as the difference between the statutory / benchmark interest rate and the actual rate charged to the employee.
2024 year = 7.77% benchmark rate.
60
True or false:
Benefits received by an associate are able to have the otherwise-deductible rule applies.
False.
Only employees, not associates.
61
What are examples of expense fringe benefits?
Where employer either directly pays the expense or reimburses the employee for the expense.
Examples:
* gym membership fees
* golf club subscriptions
* education fees
* private health insurance premiums
* personal holidays
63
What is the definition of "entertainment" for FBT purposes?
Provision of food, drink or recreation, plus associated travel and accommodation
64
What two methods are used to calculate meal entertainment fringe benefits?
50/50 split between employees and other parties (e.g. customers or suppliers)
12 week register method
65
True or false -
Some meal entertainment concessions exist for not-for-profits and FBT.
True.
66
What is the definition of property for property / in-house benefits purposes
Both tangible and intangible property.
Includes:
* Goods (e.g. computer and furniture)
* Real property (e.g. land and buildings)
* Rights to property (e.g. shares, bonds, securities)
67
What is an in-house property fringe benefit?
Employee or associate is provided the benefit and it was property normally sold as part of the providers business.
67
True or false:
The first $1000 (GST exclusive) provided to each employee as a in-house property fringe benefit is exempt from FBT.
False - but close.
The first $1000 GST INCLUSIVE is exempt.
68
True or false:
The $1000 GST inclusive exemption for in-house property is able to be applied to salary-sacrificed property benefits.
False
69
What are the options to calculate the taxable value of a in-house property fringe benefit?
If employer is a manufacturer -
- lowest arms length GST-inclusive selling price for the same type of goods OR
- 75% of the lowest GST-inclusive price as charged to the public
If employer is a retailer -
- cost of the property to the employer
70
What is a residual fringe benefit?
Benefit that does not fall within any of the other categories.
Includes any right, privilege, service or facility provided in respect of employment.
71
What does a residual fringe benefit depend on?
Whether it is:
- an in-house residual benefit
- an external residual fringe benefit
72
How is the taxable value of a fringe benefit determined?
External -
amount by which the arm's-length amount exceeds the price paid by the employee
In-house -
75% of the lowest price that is charged to the public for the same benefit, less the first $1000 of the taxable value per employee.
73
FBT or not:
Free public transport to current employees where employer carries on the business of providing transport to members of the public.
Exempt from FBT s47(1)
75
For external property benefits, does a $1000 exemption apply?
No. Must be an in-house property benefit (property normally sold as part of the employers business).
76
For external property benefits, what is the value of the fringe benefit?
Cost to the employer
77
FBT or not:
Membership fees for an airport lounge subscription (including life membership)
Exempt from FBT - per 58Y
78
Are smart watches considered a portable electronic advice?
Yes
79
What are important considerations as to whether the minor and infrequent $300 rule applies?
The $300 GST inclusive amount applies to each benefit provided to an employee and their associates, it is not cumulative.
However, must consider that associated benefits are identical or same type - these will be considered in total against the $300 GST inclusive amount.
80
What in-house health care is considered exempt from FBT?
Any in-house health care facilities for employees.
Includes:
- medical treatment
- first aid
- physiotherapy
- diagnostic services
- health counselling
81
What work-related items and benefits are considered exempt from FBT under 58X?
Eligible work-related items to employees (not associates) which are primarily for use in the employee's employment.
FBT exemption is limited to one item from each type per employee, unless a replacement item.
- portable electronic device (phone, diary, PDA, laptop etc).
- item of computer software
- protective clothing
- briefcase
- tool of the trade
82
What is the meaning of "primarily for use" in the employees employment for FBT purposes?
Provided principally to enable the employee to do their job.
Reasonable basis for initial assessment must be used.
83
What FBT exemption rules apply to employees over 15 years service?
Under 58Q, at least 15 years service can be paid a award up to $1000 (GST inclusive).
Over 15 years, amount increases by $100 per year.
Benefit must be solely in recognition of an employees service at > 15 years.
84
85
What is an FBT exempt employer?
One that is exempt from paying FBT on certain fringe benefits.
- endored PBI's
- public and non-profit hospitals
- endorsed health promotion charities
- public ambulance services.
86
What type of cap applies to exempt employers?
Limit per employee which determines the level of exempt fringe benefits.
Cap is based on the gross-up amount of fringe benefits provided to each employee, no the fringe benefits tax value.
87
True or false:
The FBT exempt employer cap is based on the fringe benefits taxable value provided to each employee.
False.
The cap is based on the **grossed-up** amount of fringe benefits.
88
What is the per employee FBT cap in 2023-24 for PBI and health promotion charities?
$30,000 grossed-up per employee.
89
What is a PBI?
Public benevolent institution.
Non-profit institution organised for the direct relief of poverty, sickness, suffering, distress, mistfortune, destitution or helplessness
90
What is the per-employee FBT cap for public / not-for profit hospitals in 2023-24?
Grossed-up value of $17,000 per employee.
91
What is the FBT per employee cap for public ambulance services in 2023/24?
Grossed-up value of $17,000 per employee.
92
93
What is salary packaging or salary sacrificing?
Employer and employee enter into an arrangement
to forgo or sacrifice part of their gross salary in the form of non-salary benefits.
94
To be an effective salary sacrifice arrangement, what needs to occur?
Employee and employment must be entered into before the employee has performed their employment services (TD2001/10)
95
True or false:
An employee and employer can enter into a salary sacrifice retrospectively - i.e. after the employment services have been performed?
False.
Arrangement must be entered **before** services have been performed.
96
To achieve maximum benefit from salary sacrificing, what order should employees consider packaging benefits?
1. Superannuation
2. Benefits that are exempt from FBT. (e.g. laptop, airline subscriptions, in-house childcare).
3. Benefits with no taxable value (otherwise deductible or employee contribution)
4. Concessionally taxed fringe benefits.
5. Fully taxed benefits (e..g gym memberships, private health insurance).
97
Over what level must total GST-inclusive taxable value of fringe benefits be to include reportable fringe benefits on the employee's income statement?
If over $2,000 in GST-inclusive taxable benefits.
98
An employee has a taxable value of $1,999 GST inclusive in fringe benefits.
Will an amount for reportable fringe benefits be included on their income statement?
No.
Only if over $2,000 in GST inclusive benefits does it need to be included on a payment summary.
99
Why is the amount of reportable fringe benefits relevant to the employee?
Reportable fringe benefits are used in a number of calculations, including:
(a) taxpayers liability to the Medicare levy surcharge
(b) entitlement to private health insurance rebate
(c) Division 293 superannuation contributions tax
(d) Government co-contribution for super
(e) Low income super tax offset
(f) Whether taxpayer can offset their business loss against other income
(g) Employee share sceme discount
(h) Study and training support loans (e.g. HELP).
(i) Eligibility for family assistance payments (e.g. Parental Leave, Child Care Subsidy, Family Tax Benefit).
100
If reportable fringe benefits are required to be included on an income statement, what value should be included?
The fringe benefits taxable value grossed-up by 1.8868.
Irrespective of whether a Type 1 or Type 2 fringe benefit.
101
True or false:
The reportable fringe benefits amount needs to include exempt fringe benefits.
False.
Reportable fringe benefits does NOT include exempt fringe benefits.
102
For reportable fringe benefits purposes, what types of benefits are excluded?
Below is excluded, even if subject to FBT.
- Meal entertainment fringe benefits (unless part of salary sacrifice)
- Car parking fringe benefits
- If in a remote area, costs of occassional travel to major city
- individual security and personal safety occupational expenses
