Guidance for specific scenarios

New body created

When a new body is created, the state or territory may need to take these three steps.

Step 1: Determine the date the body was created

If the body was created before 21 May in the relevant FBT year, the state or territory can nominate it as an employer in that year.

Where the body is created on or after 21 May, the state or territory cannot nominate the body as an employer in the year it is created. As the state or territory will be the employer from the date the employees were transferred to the new body until the body is nominated, it will need to complete steps 2 and 3.

Step 2: Undertake specific checks

If fringe benefits were provided to the employees in the period between 1 April and the date the new body was created:

• make sure these fringe benefits are included in the FBT return of the body that was the employer before the change occurring
• work out if the employees had reportable fringe benefits amounts for the period before the change.

The change may affect the calculation of the taxable value of any fringe benefits provided to employees. For example:

• if the car fringe benefits provider changes with the transfer of the employees, you may need to obtain odometer readings when the change occurs, or ensure operating costs can be allocated between the two periods
• if you're using a different method to calculate the taxable value of benefits (such as meal entertainment, car parking or housing), make sure that affected staff are aware of the change.

You will also need to work out if a section 135X agreement is needed.

Step 3: Allocate the notional tax to the state or territory

The state or territory must lodge an FBT return for any fringe benefits provided during the period it is the employer. It will be liable to pay any instalments relating to the transferred employees for the period after it became the employer.

The state or territory will need to be allocated the notional tax to pay the instalments. The arrangements for this depend on whether the state or territory was paying instalments before the creation of the state or territory body.

State or territory was paying instalments

If the state or territory was paying instalments before the state or territory body was created, the state or territory will need to vary the FBT instalments shown on its next activity statement. The statement will need to include the notional tax that relates to the transferred employees.

To do this, complete labels F2, F3 and F4 on the activity statement.

The revised notional tax of the state or territory body, which is shown at label F2, is calculated using the following formula:

Notional tax of the state or territory + Notional tax of the ceased body − (Instalments paid by the ceased body − Previous credits claimed by the ceased body)

The amount of the varied instalment for the quarter is shown at label F3. This is calculated using the following formula:

F2 amount × Relevant percentage − (Instalments paid − Previous credits claimed)

The relevant percentage depends on the FBT quarter in which the changes occur. The percentages are:

• 25% for the quarter ending 30 June
• 50% for the quarter ending 30 September
• 75% for the quarter ending 31 December
• 100% for the quarter ending 31 March.

The reason for the variation is inserted at label F4. The relevant code to use is 22.

State or territory did not have a notional tax amount

If the state or territory had devolved all of its FBT responsibilities to nominated bodies, it will not have a notional tax amount at the time the body is created.

Where the state or territory does not have a notional tax amount at the time it becomes an employer, it must advise us of the notional tax allocated to it by completing parts B, C and D of Fringe benefits tax: Nominate or revoke an eligible state or territory body.

Part B requests details of the bodies that are ceasing to be an employer.

Part C requests details of:

• the total amount of instalments the ceased body was required to pay during the FBT year. Input this in column (c)
• the amount of instalments paid by the ceased body during the FBT year. Input this in column (d).

The state or territory will become liable to pay the remaining instalments calculated in column (e).

Part D requests details of the amount of tax to be allocated to the state or territory.

When allocating notional tax because a body has ceased to exist, ensure the total of column (e) in Part C (the amount of unpaid instalments) equals the total notional tax of Part D (the total instalments to be paid for the remainder of the year by the state or territory).

Nominated state or territory body ceases to exist

The four steps below need to be completed when a nominated state or territory body ceases to exist and its employees are transferred to another body.

Step 1: Lodge and pay final FBT return

The nominated state or territory body ceasing to exist will need to lodge a final FBT return and pay the amount of tax due. This return must be lodged by 21 May following the date the state or territory body ceased to exist.

When lodging the final FBT return, print 'N' for 'no' in response to the question about future FBT returns.

Step 2: Work out if the employees have reportable fringe benefits amounts

To work out if the employees have a reportable fringe benefits amount, calculate each employee's share of the reportable fringe benefits for the period from 1 April to the date the nominated body ceased to exist.

If the value exceeds the reporting threshold, the grossed-up taxable value of those benefits must be reported through Single Touch Payroll (STP) for the corresponding income year (1 July to 30 June).

Where an employee has more than one employer during an FBT year as a result of a nominated body ceasing to exist, each of the employers will separately apply the reporting threshold.

Step 3: Work out if a section 135X agreement is needed

Where there is a change in employer, the FBT treatment of certain benefits may be affected. A section 135X agreement allows the treatment of certain benefits to remain the same.

Step 4: Determine requirements that apply to the new employer

The requirements that apply to the new employer depend on whether the employees are transferred to a:

• body eligible for nomination but not yet nominated
• body previously nominated as an employer
• separate government body – employer in its own right.

Body eligible for nomination but not yet nominated

For example, when a new body is created on the day the previous body ceased to exist. If the body is not yet nominated, the state or territory will:

• nominate the new body as the employer if the changes occur before 21 May, or
• allocate the notional tax to the state or territory (refer to steps 2 and 3 of New body created).

Body previously nominated as an employer

The nominated body will need to vary the FBT instalment shown on its next activity statement to include the notional tax that relates to the transferred employees. This may apply when FBT administration functions are transferred from another nominated body.

Separate government body – employer in its own right

If the new employer is a separate government body that does not come within the nomination provisions, it will not become liable to pay instalments in relation to the transferred employees until it lodges an FBT return for the relevant FBT year.

Name of a nominated body changes

A nominated body will not be newly created or cease to exist if it changes its name without changing its functions. It will only need to advise the ATO of the name change.

This can occur at the time the FBT return is lodged by completing the items in the return that ask for the current and previous name.

See Update your details to find out how to change the nominated body's name at other times of the year.

A change of name must be supported by a copy of the documentary evidence (such as gazettal notice, administrative order or Machinery of Government).

Note: The form Fringe benefits tax: Nominate or revoke an eligible state or territory body does not need to be completed when a change in name occurs.

Functions transferred to another nominated body

A change in structure of government bodies may involve a transfer of functions between nominated bodies. This may be associated with a change in name, or another nominated body being abolished. Where this occurs, only the body that is abolished will cease to exist for FBT purposes.

A nominated body that increases or decreases its functions and changes its name will not cease to exist if some of its functions before the restructure remain after the restructure has occurred.

If a department ceases to exist, the state or territory must ensure the steps outlined in Nominated state or territory body ceases to exist are undertaken for that department.

In addition, the department the function is transferred to will need to advise us of the change in name and vary its FBT instalment on the next activity statement.

If employees are transferred to another nominated state or territory body, FBT obligations associated with those employees over the remainder of the year can also be transferred to that body. This will require the nominated state or territory body to vary the FBT instalments shown on its next activity statement to include the notional tax that relates to the transferred employees. To do this, complete labels F2, F3 and F4 on the activity statement.

You can calculate the revised notional tax of the nominated state or territory body, shown at label F2, with the following formula:

Notional tax of the nominated body + Notional tax of the ceased body − (Instalments paid by the ceased body − Previous credits claimed by the ceased body)

The amount of the varied instalment for the quarter is shown at label F3. This is calculated using the following formula:

Amount entered at label F2 × Relevant percentage − (Instalments paid − Previous credits claimed)

The relevant percentage depends on the FBT quarter in which the changes occur. The percentages are:

• 25% for the quarter ending 30 June
• 50% for the quarter ending 30 September
• 75% for the quarter ending 31 December
• 100% for the quarter ending 31 March.

Use the code 22 as the reason for the variation at label F4.

Employees transferred to or from a government body

The arrangements that apply to nominated state or territory bodies do not apply to government bodies that are employers in their own right. The arrangements that apply to bodies that are employers in their own right (such as a statutory bodies) are the same as those that apply to other employers.

For example, they will not be required to pay FBT instalments before they lodge their first FBT returns.

Employees transferred to new statutory body

A change in structure may involve a statutory body being created to undertake functions that a nominated body previously undertook. The statutory body and the previous employer need to take certain steps when employees of the state or territory are transferred to the statutory body.

Statutory body obligations

The steps involved depend on whether the statutory body either:

• comes into existence when the employees are transferred
• is an existing statutory body.

Newly created statutory body

A statutory body that comes into existence at the time the employees are transferred will need to:

• complete and lodge an Application to register for fringe benefits tax
• lodge an FBT return for the fringe benefits provided to employees from the date on which it became the employer until the following 31 March
• determine whether the employees have a reportable fringe benefits amount for the benefits provided during the period it was the employer.

The newly created statutory body will not become liable to pay instalments until after it has lodged its first FBT return.

Transfer to existing statutory body

Where the employees are transferred into an existing statutory body, the statutory body will need to:

• include the fringe benefits provided to the employees during the period it is the employer in its FBT return
• determine whether the employees have a reportable fringe benefits amount for the benefits provided during the period it is the employer.

Depending on when the employees are transferred, the statutory body may need to vary its FBT instalments to include the tax that will relate to the transferred employees.

Previous employer obligations

The previous employer may be the state or territory, or it may be a nominated body. It will need to:

• lodge a final FBT return (if it ceases to exist)
• determine whether the employees have a reportable fringe benefits amount for the benefits provided during the period it was the employer.

If the previous employer lodges a final FBT return, it should print N for 'no' in response to the question about future FBT returns.

Employees previously employed by a statutory body

In some situations, a restructure may result in the state or territory becoming the employer of employees previously employed by a statutory authority. Where this occurs, certain steps need to be taken.

Statutory body obligations

The statutory body will need to:

• lodge a final FBT return (if it ceases to be an employer)
• determine whether the employees have a reportable fringe benefits amount for the benefits provided during the period it was the employer.

If the statutory body lodges a final FBT return, it should print N for 'no' in response to the question about future FBT returns.

State or territory obligations

The steps the state or territory needs to take depend on whether the transferred employees will be performing their duties of employment wholly or principally in a nominated state or territory body.

If they will, the nominated state or territory body will become their employer. It will need to:

• include the fringe benefits provided to the employees during the period it was the employer in its FBT return
• determine whether the employees have a reportable fringe benefits amount for the benefits provided during the period when it was the employer.

Depending on when the changes occur, the nominated state or territory body may need to consider varying their FBT instalments to include the tax that will relate to the transferred employees.

Alternatively, if the transferred employees will not be performing their duties of employment wholly or principally in a nominated state or territory body, the state or territory will need to determine if it wants to nominate an eligible body as the employer of the employees.

The nomination must be made by 21 May of the relevant FBT year. If the change occurs after 21 May, the state or territory will become the employer of the employees from the date of transfer until the end of the FBT year.

The state or territory body will need to:

• include the fringe benefits provided to the employees during the period it was the employer in its FBT return
• determine whether the employees have a reportable fringe benefits amount for the benefits provided during the period when it was the employer.

Depending on when the changes occur, the state or territory may need to consider varying its FBT instalments to include the tax that will relate to the transferred employees.

Find out what a state or territory needs to do for the purposes of managing FBT in different scenarios.