House of Representatives

Explanatory Memorandum PART A

(Circulated by authority of the Treasurer, the Hon. P.J. Keating, M.P.)

GENERAL OUTLINE

This Bill will amend:-

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the Fringe Benefits Tax Assessment Act 1986 -

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to modify the rules that require - where the cost basis of valuing car benefits is chosen - substantiation of business use by log book records, and petrol and oil expenses by documentary evidence (proposal announced on 29 October 1986);

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to exempt from tax the following benefits:

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the private use of unregistered motor vehicles used principally for business purposes (29 October 1986 announcement);

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the use of the employer's business equipment on a non-working day or away from the employer's business premises (29 October 1986 announcement);

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benefits provided to employees of a government body who are employed in a public hospital (29 October 1986 announcement);

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benefits in respect of travel costs incurred in attending job interviews (proposal announced on 26 August 1986);

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benefits in respect of specified relocation costs (26 August 1986 and 29 October 1986 announcements);

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motor vehicle parking benefits (29 October 1986 announcement);

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newspapers and periodicals used for business purposes (29 October 1986 announcement);

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compensation for work-related injuries (26 August 1986 announcement);

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medical services provided in work site medical facilities that are operated principally for the treatment of work-related injuries (26 August 1986 announcement);

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benefits in respect of travel costs incurred in travelling from a prescribed developing country to obtain medical treatment (26 August 1986 announcement);

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occupational health and counselling benefits (29 October 1986 announcement);

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benefits provided for immediate relief in times of emergency (29 October 1986 announcement);

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benefits of small value which are infrequently provided and/or difficult to record and value (29 October 1986 announcement);

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long service awards granted in recognition of 15 or more years service provided the value of the award does not exceed a specified ceiling which varies according to length of service (29 October 1986 announcement);

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safety awards provided the value of the award does not exceed $200 (29 October 1986 announcement);

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accommodation and food provided to trainees engaged under the Australian Traineeship System (29 October 1986 announcement);

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accommodation and food provided for live-in domestic employees in religious houses (29 October 1986 announcement);

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accommodation and food provided for live-in help employed to care for elderly or disadvantaged persons (29 October 1986 announcement);

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food provided in the home to non-live-in domestic employees (29 October 1986 announcement);

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to increase the annual exemption per employee for in-house fringe benefits to $500 (29 October 1986 announcement);

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to extend the concessional valuation rules applying to in-house fringe benefits to purchases of an employer's products through independently owned retail outlets (29 October 1986 announcement);

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to increase the existing 40% discount on remote area housing (including home ownership and residential fuel assistance) to 50% (29 October 1986 announcement);

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to replace the statutory formula for valuing remote area housing by a statutory value of $60 per week per unit of accommodation or $15 per week for single person's quarters, those values to be increased annually in line with movements in the rent component of the CPI (29 October 1986 announcement);

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to permit employers to use either the statutory value or market value for each unit of remote area accommodation and to alter the method of valuation each year (29 October 1986 announcement);

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to provide that a 50% discount is to apply to remote area housing benefits provided as rent reimbursements or actual payments of rent incurred by the employee as well as to any assistance provided for the cost of residential fuel for that accommodation (29 October 1986 announcement);

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to liberalise the rules under which a 50% discount is applied to remote area holiday travel (29 October 1986 announcement);

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to apply, in respect of employees posted overseas, a 50% discount concession to the cost of holiday travel subject to a maximum discount equal to 50% of the cost of travel for one return holiday per year to the employee's home country (29 October 1986 announcement);

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to exempt education costs met by employers for children of employees posted overseas for the period of the employee's overseas service (29 October 1986 announcement);

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to reduce the taxable value of fringe benefits provided to employees located overseas for periods of between 3 and 12 months by the percentage of the employee's salary or wage income that is exempt from income tax (26 August 1986 announcement);

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to modify the rules for calculating the reduction in taxable value of a benefit that is used for business purposes to:

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ensure that the reduction is equal to the additional deduction that would have been allowable to the employee had he or she paid for the benefit (variation of 29 October 1986 announcement);

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remove, with effect from the 1987-88 year of tax, the existing exclusion for expenses that would otherwise be subject to the income tax negative gearing rules (consequence of the abolition of the income tax negative gearing rules);

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to provide that employers will no longer be required to obtain declarations from employees in a number of specified circumstances (29 October 1986 announcement);

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to provide that appropriate petty cash entries rather than receipts will now be acceptable proof of business expenses that are not capable of being readily evidenced by receipts (29 October 1986 announcement);

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to permit employers to value a housing benefit on the basis of the current market value of the accommodation as an alternative to the indexed market value (29 October 1986 announcement);

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to exclude from the operating cost of a car the cost of any crash repairs that are met by an insurance company or by the person legally responsible for the damage (29 October 1986 announcement);

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to treat reimbursements of car expenses on a cents per kilometre basis for holiday travel outside remote areas as fringe benefits rather than assessable income of the employee (proposal announced on 18 November 1986);

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to make minor drafting corrections.

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the Income Tax Assessment Act 1936-

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to ensure that an employee is not entitled to an income tax deduction for a contribution to a fringe benefit to the extent that the contribution is, in effect, a payment for the private element of the benefit (29 October 1986 announcement);

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to exclude from the rules that require substantiation of certain expenses, claims within the limits of allowances paid to employees for fares and other transport costs where the allowances are payable pursuant to an award and are not higher in amount than was payable pursuant to the award as at 29 October 1986 (29 October 1986 announcement).