View full document Previous section | Next section

Fringe benefits tax - a guide for employers

This document has changed over time. View its history.

Introduction

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take.

Some of the information in this Guide applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

Primary legislative references

The fringe benefits tax (FBT) legislation consists of the following Acts:

Fringe Benefits Tax Assessment Act 1986 establishes the rules for assessing and collecting the tax. The Act is quite separate from the income tax assessment Acts.
Fringe Benefits Tax Act 1986 imposes tax on the taxable value of fringe benefits. Any change to the rate of tax is effected by amending this Act.
Fringe Benefits Tax (Application to the Commonwealth) Act 1986 ensures that the FBT legislation also applies to Australian Government authorities and departments.

Most of the information in this guide relates to the legislation contained in the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Overview of the Guide

This Guide is our most comprehensive guide to FBT and is divided into three areas:

Chapters 1 to 5 which explain the operation of FBT and your responsibilities as an employer
Chapters 6 to 21 which deal with how to identify and value each type of benefit and the various concessions available, including for not-for-profit organisations
Chapter 22 which explains the meaning of terms used throughout the guide chapters and the primary FBT legislative references referred to throughout the guide.

Below is a list of chapters that comprise the Guide with links to each and a brief summary of their content. A table of any major changes and updates we have made can be found within each chapter.

Chapter 1 – What is fringe benefits tax?

A fringe benefit is a 'payment' to an employee, but in a different form to salary or wages.

According to the FBT legislation, a fringe benefit is a benefit provided in respect of employment. This effectively means a benefit is provided to somebody because they are an employee. This chapter expands on this principle including various ways you can reduce your FBT liability. It also expands on related information in respect of GST, income tax and salary sacrifice and things that are excluded from being a fringe benefit.

Chapter 2 – Calculating fringe benefits tax

Where you provide taxable fringe benefits to employees, there are some distinct steps involved in calculating your FBT liability. When working out your FBT liability you must gross-up the taxable value of benefits you provide, to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax.

Chapter 3 – How fringe benefits tax works

You must lodge an FBT return if you have a liability during an FBT year (1 April to 31 March).

You must lodge your return and pay the total FBT amount you owe for the FBT year ending 31 March by 21 May. However, if a tax agent is preparing your FBT return, different lodgment arrangements may apply.

If you haven't paid FBT before, or if the amount of FBT you had to pay for the previous year was less than $3,000, you only make one payment for the year when you lodge your FBT return. If it isn't your final FBT return and you had to pay FBT or $3,000 or more in the previous year, you must pay quarterly FBT instalments with your activity statement for the next FBT year.

Chapter 4 – Fringe benefits tax record keeping

There is a general requirement that you must keep records that are adequate to enable your FBT liability to be assessed. For FBT purposes, these records must be kept for five years from the date they are prepared, obtained or the transactions completed, and in a form that tax officers can access and understand in order to determine your tax liability.

Chapter 5 – Reportable fringe benefits

As an employer, you must record the value of fringe benefits provided to each of your employees.

If the value of certain fringe benefits provided exceeds $2,000 in an FBT year (1 April to 31 March), you must record the grossed-up taxable value of those benefits on your employee's payment summary or income statement in Single Touch Payroll (STP) by the due date for finalisation for the corresponding income year (1 July to 30 June). You may also have to report the notional value of certain exempt benefits.

Chapter 6 – Not-for-profit organisations and fringe benefits tax

Depending on your type of organisation, certain benefits you provide to employees receive concessional FBT treatment. Charities that want to access FBT concessions must be registered with the Australian Charities and Not-for-profits Commission (ACNC) as a charity and endorsed by us.

Chapter 7 – Car fringe benefits

A car fringe benefit commonly arises where you make a car you own or lease available for the private use of an employee. A car is taken to be made available for private use by an employee on any day the car:

is actually used for private purposes by the employee or associate
is not at your premises, and the employee is allowed to use it for private purposes
is garaged at their place of residence, regardless of whether they have permission to use it privately.

As a general rule, travel to and from work is private use of a vehicle. Private use of a motor vehicle that is not a car may give rise to a residual fringe benefit.

Chapter 8 – Loan and debt waiver fringe benefits

A debt waiver fringe benefit arises where you waive or forgive an employee's debt. For example, if you sold goods to an employee and later told them not to bother about paying the amount invoiced for the goods, you have provided a debt waiver fringe benefit.

A debt owed by an employee that you write-off as a genuine bad debt is not a debt waiver fringe benefit

A loan fringe benefit arises where you provide a loan to an employee and charge a low rate of interest (or no interest) during the FBT year. A low rate of interest is one that is less than the statutory rate of interest. See Fringe benefits tax – rates and thresholds for the current statutory rate of interest.

The use of the term 'loan' is quite broad. For example, if an employee owes you a debt but you don't enforce payment after the debt becomes due, the unpaid amount is treated as a loan to the employee. Such a loan commences immediately after the due date, at the rate of interest (if any) that accrues on the unpaid amount.

Chapter 9 – Expense payment fringe benefits

An expense payment fringe benefit may arise where you:

reimburse an employee for expenses they incur
pay a third party for expenses incurred by an employee.

In either case, the expenses may be business or private expenses, or a combination of both but they must be incurred by the employee.

Chapter 10 – Housing fringe benefits

If you provide an employee with the right to use a unit of accommodation and that unit of accommodation is the usual place of residence of the employee, the right to use the unit of accommodation is a housing fringe benefit.

A unit of accommodation includes:

a house, flat or home unit
accommodation in a house, flat or home unit
accommodation in a hotel, motel, guesthouse, bunkhouse or other living quarters
a caravan or mobile home
accommodation on a ship or other floating structure.

The employee doesn't have to have exclusive use of the accommodation.

Chapter 11 – Living-away-from-home allowance fringe benefits

If you pay an employee a living-away-from-home allowance, you are providing a living-away-from-home allowance fringe benefit.

For FBT purposes, a living-away-from-home allowance is an allowance you pay to an employee. It is intended to compensate for additional expenses incurred and any disadvantages suffered because the employee has to live away from home to perform employment-related duties. Additional expenses don't include expenses the employee could claim as an income tax deduction.

Chapter 12 – Airline transport fringe benefits

Changes were made to the FBT law relating to airline transport fringe benefits. Under these changes, airline transport benefits are now taxed under the in-house benefit provisions.

Chapter 13 – Board fringe benefits

If you provide an employee with accommodation and there is an entitlement to at least two meals a day – the meals may be a board fringe benefit.

Examples include:

meals provided in a dining facility located on a remote construction site, oil rig or ship
meals provided to a live-in housekeeper or to resident teachers in a boarding school.

Chapter 14 – Entertainment and fringe benefits

The provision of entertainment means the provision of entertainment by way of food, drink or recreation. There is no category of fringe benefit called an entertainment fringe benefit, but the following types of fringe benefits may arise from providing entertainment:

a tax exempt body entertainment fringe benefit (only employers who are exempt from income tax, see Chapter 15)
an expense payment fringe benefit – for example, the cost of theatre tickets purchased by an employee and reimbursed by the employer
a property fringe benefit – for example, providing food and drink
a residual fringe benefit – for example, providing accommodation or transport in connection with such entertainment

Chapter 15 – Tax-exempt body entertainment fringe benefits

A tax-exempt body entertainment fringe benefit may arise where you incur entertainment expenses and you are wholly or partially exempt from income tax, or don't derive assessable income from the activities related to the entertainment.

Only entertainment expenditure that is non-deductible for income tax purposes can give rise to a tax-exempt body entertainment fringe benefit.

Chapter 16 – Car parking fringe benefits

Broadly, a car parking fringe benefit may arise where you provide car parking for an employee at or near their place of employment, and:

there is a commercial parking station available for all-day parking within a one-kilometre radius of the premises on which the car is parked, and
that commercial car parking station charges a fee for all-day parking that is more than the car parking threshold.

The car parking threshold is indexed in line with the consumer price index. See Fringe benefits tax – rates and thresholds for the current car parking threshold.

Chapter 17 – Property fringe benefits

A property fringe benefit arises when you provide an employee with free or discounted property.

For FBT purposes, property includes:

goods (including gas and electricity, unless provided through a reticulation system) and animals
real property, such as land and buildings
rights to property, such as shares or bonds.

Benefits specifically covered by earlier chapters of this Guide are excluded from being property fringe benefits.

Chapter 18 – Residual fringe benefits

The term fringe benefit has a very broad meaning. It includes any right, privilege, service or facility provided in respect of employment.

Any fringe benefit that is not subject to the rules outlined in one of the preceding chapters of this Guide is called a residual fringe benefit. Essentially, these are the fringe benefits that remain, or are left over, because they are not one of the more specific categories of fringe benefit.

Chapter 19 – Reductions in fringe benefit taxable value

A number of fringe benefits attract concessional treatment. The concession is a reduction in the taxable value of the fringe benefit that results in a reduced amount of FBT, or even no FBT, being payable.

The taxable value of a fringe benefit is calculated in accordance with valuation rules. Where the 'otherwise deductible' rule applies, the taxable value is then reduced.

If the fringe benefit is of a type that attracts any of the concessions listed in Chapter 19, you may reduce the taxable value further. In some instances there may be special conditions that must be satisfied before the concession applies – for example, keeping certain records.

Chapter 20 – Exempt benefits

A number of benefits are exempt from FBT. Although these are popularly called 'exempt fringe benefits', they are referred to in the FBT legislation as 'exempt benefits' – in fact, by definition, an exempt benefit cannot be a fringe benefit.

Chapter 21 – Employee cars – applying the 'otherwise deductible' rule

Various chapters in this Guide describe a procedure for calculating the reduction in FBT available under the otherwise deductible rule. There is a modified procedure used to calculate the amount that hypothetically would have been allowable as an income tax deduction to the employee where the costs of operating the employee's own car are involved.

Chapter 22 – Definition of key terms

Various chapters in this Guide describe specific terms and processes that are used in FBT legislation. These terms and a brief explanation of each are provided to help establish their application to particular types of fringe benefits and their use in the calculation of taxable value and liability.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 1 - What is fringe benefits tax?

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

Some of the information on this Guide applies to a specific financial year. This is clearly marked. Make sure you have the information for the right year before making decisions based on that information.

1.1 What is a fringe benefit?

A fringe benefit is a 'payment' to an employee, but in a different form to salary or wages.

An employee is a person who is, was, or will be entitled, to receive salary or wages, or benefits in lieu of salary and wages. Benefits provided in respect of someone who has died are not fringe benefits as a deceased person does not meet the definition of 'employee' in the FBT legislation.

The terms 'benefit' and 'fringe benefit' have broad meanings for FBT purposes. Benefits include rights, privileges or services.

As a guide to whether a benefit is provided in respect of employment, ask yourself whether you would have provided the benefit if the person had not been an employee. When we refer to 'you' in this Guide, we are referring to you as an employer.

To simplify the explanations in this Guide, we generally discuss examples where the fringe benefit is provided directly by an employer to an employee. However, a fringe benefit may be provided by an associate of the employer or under an arrangement between a third party and the employer. It may also be provided to an associate of the employee (for example, a relative).

Example – benefit provided in respect of employment

David's employer reimburses him for his home telephone rental costs.

If David was not an employee, the reimbursement would not have been made. Therefore, reimbursement is a benefit provided in respect of employment and, consequently, it is a fringe benefit.

Example – benefit not provided in respect of employment

Sarah, an adult daughter of a business owner, is employed in the family business. Her parents give her a birthday present. The gift is given because of the family relationship and would have been given even if Sarah had not been employed in the family business.

Although the recipient of the gift is an employee, the gift was not provided in respect of employment and, therefore, is not a fringe benefit.

1.2 Who pays the tax?

FBT is paid by the employer.

You will be an employer for FBT purposes if you make a payment to an employee, company director or office holder that is subject to withholding obligations, or if you provide benefits in lieu of such payments. These withholding obligations may apply to payments made to an Australian resident employee working overseas.

If you are an international organisation and provide benefits to employees in Australia, these benefits may be subject to FBT in Australia (keeping in mind that Australia has comprehensive double tax agreements with the United Kingdom and New Zealand, which currently include FBT).

As an employer, you pay FBT irrespective of whether you are a sole trader, partnership, trustee, corporation, unincorporated association, government or government authority.

This is regardless of whether you or another party provides the fringe benefit. FBT is payable whether or not you are liable to pay other taxes such as income tax.

You may claim an income tax deduction for the cost of providing fringe benefits and for the amount of FBT you pay.

1.3 Are you providing fringe benefits?

The following checklist will help you work out if you are already providing a fringe benefit to your employees. If any of the following apply, you may have an FBT liability.

Do you hold any cars or other vehicles that are available to employees for their private use, including a car garaged at the employees' place of residence?
Do you provide loans at reduced interest rates to employees?
Have you released an employee from a debt?
Have you paid for, or reimbursed, an employee's non-business expense?
Do you provide a house or other accommodation to your employees?
Do you provide employees with living-away-from-home allowances?
Do you provide entertainment including food, drink or recreation to your employees?
Do any of your employees have a salary package arrangement in place?
Have you provided your employees with goods at a lower price than they are normally sold to the public?

Fringe benefits have been categorised into 13 different types so that specific valuation rules can be used. These benefits are dealt with separately in their respective chapters in this Guide.

A number of benefits are exempt from FBT. These include certain benefits provided by religious institutions and benefits provided by some international organisations and public benevolent institutions. In addition, there are some specific types of benefits that are exempt from FBT.

There are also a range of concessions available. Some of these concessions reduce the taxable value of a fringe benefit to nil, whereas others provide only a partial reduction. The concessions relevant to each type of benefit are listed in the respective chapters of this guide.

See also:

1.4 Reducing your FBT liability

There are various ways you can reduce your FBT liability – sometimes to nil. You can reduce an FBT liability in the following ways.

Replace fringe benefits with cash salary

An employee pays income tax on the salary or wages, rather than you paying FBT if you replace an employee's fringe benefits with the cash equivalent in the form of salary or wages.

Provide benefits that are exempt from FBT

You will not have an FBT liability if you provide only exempt benefits, or benefits that are not fringe benefits.

Provide tax-deductible benefits

You may not have an FBT liability if you pay for or reimburse an expense an employee would otherwise have been able to claim as an income tax deduction.

Use employee contributions

In most cases, you can reduce your FBT liability if employees make payments towards the cost of providing a fringe benefit. The payment is commonly called an employee contribution.

Generally, the payment is a cash payment made to you or the person who provided the benefit. However, an employee can also make an employee contribution towards a car fringe benefit by paying a third party for some of the operating costs (such as fuel) that you don't reimburse. Contribution of services as an employee is not considered an employee contribution for FBT purposes.

Important points to note about employee contributions are:

the employee contribution must be paid out of the employee's after-tax income
an employee contribution towards a particular fringe benefit can't be used to reduce the taxable value of any other fringe benefit
in certain circumstances, employee contributions can be made by offsetting against amounts owed to an employee
an employee contribution paid directly to you (including those received by offsetting against amounts owed to an employee) is included in your assessable income
an employee contribution paid to a third party who is not an associate (for example, to a mechanic for the servicing of a car) is not assessable to you (and not deductible, because you did not incur the outgoing)
an employee contribution may be treated as consideration for a taxable supply for goods and services tax (GST) purposes. Accordingly, you would have to pay GST on the supply. However, there is no GST payable on an employee's contribution where
- the benefit is GST-free or input taxed
- the GST is paid to a third party (for example, to purchase fuel)
- you (or another provider of the benefit) are not registered or required to be registered for GST
- the benefit is not a taxable supply.

When calculating the taxable value of the benefit, the full amount of the contribution (GST-inclusive amount) is used to reduce the taxable value of the benefit.

1.5 What is not subject to FBT?

Not all benefits provided in respect of employment are fringe benefits. The FBT legislation excludes certain benefits from being fringe benefits.

Salary or wages

Payments of salary or wages are not fringe benefits. The term 'salary or wages' means a payment from which an amount of tax must be withheld.

Employee share schemes

Benefits provided to employees from the acquisition of shares or rights to acquire shares, are not fringe benefits if the share acquisition scheme conforms to the necessary income tax requirements. This exemption extends to relatives of employees.

Superannuation

The following are not fringe benefits:

contributions you make to a complying super fund for an employee. To have reasonable grounds for believing a fund is a complying super fund, you must obtain an appropriate written statement from the fund trustee
contributions you make to a foreign super fund for super benefits for an employee where the employee is a temporary resident when the contribution is made
payments you make to a retirement savings account held by an employee.

However, super contributions you make for an associate of an employee are subject to FBT.

Employment termination payments

Employment termination payments are not fringe benefits. Broadly, employment termination payments are payments made as a result of terminating the employment of an employee (for example, a lump sum paid on retirement). Property you transfer to an employee in relation to terminating their employment is an employment termination payment (for example, a company car you give or sell to an employee on termination).

Payments of a capital nature

Payments of a capital nature for a legally enforceable contract in restraint of trade, or for personal injury to a person, are not fringe benefits.

Dividends

Payments of amounts that are dividends are not fringe benefits.

Payments made to shareholders or their associates of a private company are fringe benefits if they are made in respect of employment.

1.6 What are the GST consequences of providing benefits?

GST (input tax) credits

You are entitled to GST credits for acquisitions made to provide fringe benefits if you are registered or required to be registered for GST. However, there are some exceptions to this general rule, such as where the acquisition relates to a GST-free or input taxed supply.

If you are entitled to a GST credit in providing a fringe benefit, you use the higher gross-up rate (called type 1) to calculate the FBT payable. For more on calculating FBT payable, refer to Chapter 2.

GST on employee contributions

If the fringe benefit or exempt benefit you provide is a taxable supply for GST purposes, and your employee makes an employee contribution towards that benefit, you have to pay GST on the consideration received.

The contribution or payment (excluding recipient's rent – refer to Chapter 10) is the price of that supply. Therefore, the GST you have to pay is 1/11^th of that amount.

Where an employee makes a contribution by paying a third party – for example, they purchase fuel or oil in respect of a car fringe benefit – you don't have to pay any GST. In such cases, GST has already been paid when the third party made the sale to the employee or associate.

Contributions related to GST-free or input taxed supplies are not taxable supplies and, therefore, no GST is payable on any contribution towards these supplies.

If you are not registered or required to be registered for GST, you will not pay GST on an employee contribution.

Example

During the FBT year ending 31 March 2020, a hardware retailer provides their employee, Derek, with a car benefit. The FBT value of the benefit is $7,000. Derek pays $5,500 to his employer on 15 April 2019, and $1,000 in petrol costs and $500 car insurance during the year ending 31 March 2017. Because the total employee contribution of $7,000 equals the FBT value of $7,000, the FBT taxable value of the benefit is zero.

As Derek has contributed $5,500 directly to his employer, the employer is liable for GST of 1/11^th of $5,500 – that is, $500. Derek's payments of $1,500 to third parties are not a contribution for the supply of the benefit for GST purposes and his employer does not have to remit 1/11^th of this contribution.

When calculating the taxable value of a benefit, the value of the fringe benefit is the GST-inclusive value where applicable.

Where the otherwise deductible rule applies, you reduce the taxable value of a fringe benefit by the hypothetical income tax deduction the employee would have been entitled to if they had incurred the expense. In these situations, you take into account the GST-inclusive value where applicable.

1.7 What are the income tax consequences of providing benefits?

The cost you incur when providing a fringe benefit or exempt benefit is usually an allowable income tax deduction. Certain expenses that are prevented by the income tax legislation from being deductible, for example, entertainment expenses, become allowable deductions when subject to FBT. For more information about entertainment and tax deductibility, refer to section 14.15.

You must include any employee contributions paid directly to you in your assessable income, including those contributions received by way of an offset against an amount payable to the employee. Employee contributions paid to a third party who is not an associate (for example, for fuel) are not assessable to you.

The amount of FBT you have paid is generally an allowable income tax deduction. If an employee reimburses you for the FBT paid, the reimbursement is included in your assessable income. However, it is not an allowable deduction for the employee.

A fringe benefit is exempt income for income tax purposes in the hands of the recipient.

Where a GST credit is available in respect of a fringe benefit, the income tax deduction is the GST-exclusive value of the fringe benefit. If no GST credit is available, the income tax deduction is the full amount paid or incurred on the relevant acquisition, including GST where applicable.

Where the benefit provided is a GST taxable supply, and you receive an employee contribution, you include the GST-exclusive value of the contribution in your assessable income.

1.8 Salary sacrifice

What is a salary sacrifice arrangement?

A salary sacrifice arrangement is an arrangement between you and your employee, where your employee agrees to forgo part of their future entitlement to salary or wages in return for you providing them with benefits of a similar value. A salary sacrifice arrangement is commonly referred to as salary packaging or total remuneration packaging.

Under an effective arrangement:

the employee pays income tax on the reduced salary or wages
you, as the employer, may be liable to pay FBT on the fringe benefits provided
salary-sacrificed super contributions are classified as employer super contributions (not employee super contributions) and are taxed in the super fund under tax laws dealing specifically with super contributions.

What are the requirements for an effective salary sacrifice arrangement?

The agreement cannot cover past service

An effective salary sacrifice arrangement is an arrangement between you and your employee specifying the amount of salary or wages income to be sacrificed. The arrangement should be entered into before the work is performed. If the arrangement is put into place after the work has been performed, the salary sacrifice arrangement may be ineffective.

It is advisable that you and your employees have a written agreement including all the terms of any salary sacrifice arrangement.

Employees can renegotiate a salary sacrifice arrangement at any time, subject to the terms of any contract of employment or industrial agreement.

If a fringe benefit has not been provided and is cashed out at the end of a salary sacrifice arrangement accounting period, the amount cashed out is salary and is subject to the normal rules for salary and wages, including PAYG withholding and super guarantee obligations. The amount will be assessable to the employee.

What types of benefits can be included in a salary sacrifice arrangement?

All non-cash benefits can be sacrificed. The important thing is that these benefits form part of the employee's remuneration, replacing what could otherwise have been paid as salary. The types of benefits employers generally provide in salary sacrifice arrangements include super, fringe benefits and exempt benefits.

Superannuation

Super contributions you make under a salary sacrifice arrangement to an employee's complying super fund are not fringe benefits.

Where super contributions are paid for the benefit of an associate of an employee, such as a spouse, they are considered to be a fringe benefit. Similarly, where contributions are paid to a non-complying super fund, they will be considered to be a fringe benefit.

Fringe benefits

Fringe benefits provided in salary sacrifice arrangements are often car fringe benefits and expense payment fringe benefits, such as payment of an employee's loan repayments, school fees, child care costs and home telephone costs.

Exempt benefits

The FBT legislation states that certain benefits are exempt from FBT. For example, expense payments, property or residual benefits arising from the provision of certain work-related items are commonly provided in salary sacrifice arrangements. For more information on the exemption of certain work-related items, refer to section 20.8.

Donations made

Donations made to a deductible gift recipient under salary sacrifice arrangements don't result in employers incurring an FBT liability.

What are the implications of an effective salary sacrifice arrangement for employers?

FBT

You may have FBT obligations when you enter into a salary sacrifice arrangement giving employees non-cash benefits.

Assessable income

The reduced salary amount specified in a salary sacrifice arrangement is the employee's assessable income.

GST

You may be able to claim an input tax credit for GST paid in providing the benefit if you are registered for GST. For expenses incurred to provide fringe benefits that are subject to GST and where you hold a valid GST invoice, you are entitled to claim the GST credit when submitting your activity statement.

Employee contributions

The taxable value of a benefit may be reduced through the payment of employee contributions. The amount sacrificed does not count as an employee contribution when determining the taxable value of any fringe benefits the employee receives. Employee contributions must be paid out of the employee's after-tax income.

PAYG withholding and payment summaries

Tax withheld should be based on gross salary and wages paid and should not include salary-sacrificed amounts. The employee's payment summary or income statement should show the gross amounts of all salary and wages (excluding salary-sacrificed amounts) and the relevant total amount of tax withheld for the year.

Where an employee's individual fringe benefits amount is more than $2,000 (that is, the equivalent grossed-up taxable value of $3,738), you must report the grossed-up value on their payment summary or income statement.

What are the implications of an effective salary sacrifice arrangement for employees?

Assessable income

The employee pays income tax on the cash component of their salary package, not including the salary-sacrificed fringe benefits.

FBT

You are liable for any FBT payable on the benefits received. The FBT payable is determined at the highest marginal income tax rate, including the Medicare levy. However, you may ask the employee to contribute towards the FBT payable.

See also:

Fringe benefits tax – rates and thresholds

Reportable fringe benefits

If the total taxable value of certain fringe benefits received by an employee in an FBT year (1 April to 31 March) exceeds $2,000, you must report the grossed-up taxable value of those benefits on their payment summary or income statement for corresponding income year (1 July to 30 June).

As employees don't pay income tax on fringe benefits, the grossed-up taxable value of a benefit reflects the gross salary that would have to be earned to purchase the benefit from after-tax dollars. This is calculated at the highest marginal tax rate, including the Medicare levy.

See also:

Fringe benefits tax – rates and thresholds

The value of fringe benefits reported on a payment summary or income statement is known as the reportable fringe benefits amount.

The reportable fringe benefits total is not included in the employee's taxable income and does not affect the amount of basic Medicare levy payable. It is, however, included in a number of income tests relating to government benefits and obligations.

See also:

Reportable fringe benefits
Miscellaneous Taxation Ruling MT 2050 Fringe benefits tax: payment of a recipients contribution by journal entry
Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefit
Taxation Ruling TR 2001/10 Income tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 2 - Calculating fringe benefits tax

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to an associate of an employee (for example, a relative).

We do not usually notify you of how much FBT you have to pay. Rather, you self-assess your FBT payable. For more on FBT assessments, refer to section 3.3.

2.1 FBT year

The FBT year is the 12 months beginning 1 April and ending 31 March.

2.2 Rate of tax

The rate of FBT may vary from year to year but we will advise you of the rate each year. For the current FBT rate, see Fringe benefits tax – rates and thresholds.

2.3 How is the amount of tax determined?

Where you provide taxable fringe benefits to employees, there are some distinct steps involved in calculating your FBT liability. With the introduction of the GST, there are two separate gross-up rates used to calculate fringe benefits taxable amounts – a higher (type 1) and a lower (type 2) gross-up rate.

The higher gross-up rate (refer to section 2.11) is used where you (or other benefit providers) are entitled to a GST credit for GST paid on benefits provided to an employee. These benefits are known as GST-creditable benefits (refer to section 2.5 for a full definition of a GST-creditable benefit).

The lower gross-up rate is used where there is no entitlement to a GST credit (refer to section 2.11).

You use the lower gross-up rate to calculate an employee's reportable fringe benefits amount (refer to section 5.4).

2.4 GST and fringe benefits

A GST of 10% applies on most goods and services supplied in Australia and on goods imported into Australia. GST affects the calculation of your FBT liability.

As outlined in section 2.3, you use a higher gross-up rate to calculate your FBT liability where you (or other providers) are entitled to GST credits for GST paid on goods or services acquired to provide the benefits. Where there is no entitlement to a GST credit, the lower gross-up rate is used.

If an employee makes a contribution or payment towards the cost of the fringe benefit provided, this may be treated as consideration for a taxable sale for GST purposes.

2.5 GST-creditable benefits

A GST-creditable benefit arises where the person who provided the fringe benefit (or another member of the same GST group) is entitled to a GST credit for providing the benefit.

A benefit provided in respect of an employee is also a GST-creditable benefit if:

the benefit consists of
- a thing (as defined in the A New Tax System (Goods and Services Tax) Act 1999 (the GST Act))
- an interest in such a thing
- a right over such a thing
- a personal right to call for or be granted any interest in or right over such a thing
- a licence to use such a thing, or
- any other contractual right exercisable over or in relation to such a thing, and
the thing was acquired or imported and the person who provided the fringe benefit (or another member of the same GST group) is entitled to a GST credit because of the acquisition or importation.

Example – travel

An employee travels interstate on business for his employer. His wife accompanies him. They stay an extra few days to visit relatives. Their stay at the motel is a taxable sale and the employee receives a tax invoice when he pays the account. His employer reimburses him on his return by paying him the full cost of their accommodation expenses. The employer is entitled to a GST credit equal to the amount of GST included in the price of the accommodation.

Example – provision of benefits

An employer provides an employee with a home entertainment system for their private use. The employer received a tax invoice when they purchased the home entertainment system. The employer is entitled to a GST credit equal to the amount of GST included in the price of the entertainment system.

2.6 GST-free and input taxed benefits

Any fringe benefits that are wholly GST-free or input taxed, or for which you (or another provider) are not otherwise entitled to a GST credit, are classified as type 2 benefits. They are grossed up at the lower gross-up rate (refer to section 2.11).

2.7 Establishing the individual fringe benefits amount

You must allocate the taxable value of all fringe benefits, except excluded fringe benefits, related to an FBT year to the relevant employee. This is the employee's individual fringe benefits amount. Where you provide benefits to an associate of an employee in respect of that employee's employment, you allocate the value to the employee, not to the associate.

The taxable value of a fringe benefit is established from a series of valuation rules. There are different categories of fringe benefit and each has its own specific rules for calculating the taxable value. These rules are set out in later chapters of this Guide on the specific types of fringe benefits.

There are also different rules for calculating the individual fringe benefits amount and FBT payable if you are a not-for-profit employer, refer to Chapter 6.

2.8 Employee contributions

In most categories, if an employee makes a payment to you as a contribution towards the cost of providing a fringe benefit, the taxable value of that fringe benefit is reduced by the amount of the payment. Such a payment is referred to as an employee contribution (or recipient's contribution).

Some important points to note about employee contributions are:

an employee contribution may be made only from an employee's after-tax income
you can't use an employee contribution towards a particular fringe benefit to reduce the taxable value of any other fringe benefit
in certain circumstances, journal entries in your accounts can be an employee contribution
an employee contribution paid directly to you (including those received by journal entry) are included in your assessable income (as a general rule, the costs you incur in providing fringe benefits are income tax deductible)
an employee contribution paid to a third party who is not an associate (for example, for the servicing of a car) is not assessable to you
when calculating the taxable value of either a type 1 or type 2 benefit, you use the full GST-inclusive amount of the contribution to reduce the taxable value of the benefit.

2.9 Excluded fringe benefits

Excluded fringe benefits are those fringe benefits that don't have to be reported on payment summaries. For a list of these benefits, refer to section 5.2.

2.10 Calculating the fringe benefits taxable amount

Use the following steps to calculate your fringe benefits taxable amount.

Step	Action
1	For each employee, identify those fringe benefits that are GST-creditable benefits. Work out the employee's individual fringe benefits amount (refer to section 2.7) for those benefits.
2	Add up all the individual fringe benefits amounts worked out in Step 1.
3	Identify the excluded fringe benefits (refer to section 2.9) that are GST-creditable benefits.
4	Add up the totals from Steps 2 and 3. This is known as the type 1 aggregate fringe benefits amount.
5	For each employee, identify those benefits that are not taken into account under Step 1. Work out the individual fringe benefits amount for each employee for those benefits.
6	Add up all the individual fringe benefits amounts worked out in Step 5.
7	Identify the excluded fringe benefits that are not taken into account under Step 3 and add up the taxable value of those excluded fringe benefits.
8	Add up the totals from Steps 6 and 7. This is known as the type 2 aggregate fringe benefits amount.
9	Calculate the fringe benefits taxable amount (refer to section 2.11) by grossing up the type 1 aggregate fringe benefits amount and the type 2 aggregate fringe benefits amount and adding them together.
10	Calculate the amount of tax payable as a percentage of the fringe benefits taxable amount.

See also:

Chapter 6 – Not-for-profit organisations and fringe benefits tax

2.11 The fringe benefits taxable amount

Higher gross-up formula (type 1)

The higher gross-up formula was introduced to avoid allowing employers the benefit of GST credits for goods and services purchased for the private use of employees. The higher gross-up rate effectively recovers the GST credit you can obtain in providing a fringe benefit. You use the following formula to calculate the higher gross-up rate:

Type 1 aggregate fringe benefits amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

For the current type 1 gross-up rate, see Fringe benefits tax – rates and thresholds.

The type 1 aggregate fringe benefits amount represents the total taxable values of fringe benefits (including any excluded fringe benefits) that are GST-creditable benefits (refer to section 2.5).

Lower gross-up formula (type 2)

Fringe benefits and excluded fringe benefits that are not type 1 benefits are called type 2 benefits. The lower gross-up rate is used for type 2 benefits. You use the following formula to calculate the rate:

Type 2 aggregate fringe benefits amount	×	1
		1 - FBT rate

For the current type 2 gross-up rate, see Fringe benefits tax – rates and thresholds.

The type 2 aggregate fringe benefits amount represents the total taxable values of all other fringe benefits (including any excluded fringe benefits) that are not type 1 benefits.

Formula for calculating the fringe benefits taxable amount

You calculate your fringe benefits taxable amount as follows:

Type 2 aggregate fringe benefits amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

plus

Type 2 aggregate fringe benefits amount	×	1
		1 - FBT rate

Example – using gross-up rates

An employer provides the following benefits to a single employee.

Car fringe benefit (GST taxable supply with an entitlement to GST credits)	$7,700
Restaurant meals valued as expense payment fringe benefits (excluded fringe benefit with an entitlement to GST credits)	$1,100
School fees valued as expense payment fringe benefits (GST-free supplies with no entitlement to GST credits)	$6,000
Remote area rent reimbursement (excluded fringe benefit with no entitlement to GST credits)	$3,000
Type 1 individual fringe benefits amount (Steps 1 and 2) Type 1 excluded fringe benefits amount (Step 3) Employer's type 1 aggregate fringe benefits amount (Step 4) Type 2 individual fringe benefits amount (Steps 5 and 6) Type 2 excluded fringe benefits amount (Step 7) Employer's type 2 aggregate fringe benefits amount (Step 8)	$7,700 $1,100 *$8,800* $6,000 $3,000 *$9,000*
If the FBT rate is 47% and the GST rate is 10%, the employer's fringe benefits taxable amount is calculated as follows:
$8,800 × [47% + 10%] ÷ [(1 – 47%) × (1 + 10%) × 47%] = $8,800 × 2.0802 (rounded to the nearest dollar)	$18,306
$9,000 × 1 ÷ (1 – 47%) = $9,000 × 1.8868 = (rounded to the nearest dollar)	$16,981
The total fringe benefits taxable amount (Step 9)	*$35,287*

2.12 Calculating the FBT payable

The tax payable is the fringe benefits taxable amount multiplied by the rate of tax.

Example

If the fringe benefits taxable amount is $35,287 and the rate of tax is 47%, the tax payable is $16,584.89 – that is, $35,287 × 47% (Step 10 from section 2.10).

For an explanation of how to calculate FBT if you are a not-for-profit organisation, refer to Chapter 6.

See also:

Miscellaneous Taxation Ruling MT 2050 Fringe benefits tax: payment of recipients contribution by journal entry

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 3 - How fringe benefits tax works

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

3.1 Registration

We recommend you register once you establish that you have to pay FBT. To register for FBT, complete an Application to register for fringe benefits tax and send it to the ATO.

Once you are registered, we will send you additional information to help you lodge your return. You don't need to make your first payment until you lodge your first FBT return.

Your FBT number is the same as your tax file number.

3.2 Annual return

The FBT year runs from 1 April to 31 March each year. You must lodge your annual FBT return with the ATO by 21 May each year, unless you have made an arrangement with us for an extension of time to lodge, or you lodge via a tax agent who has been given another lodgment date. Any returns that we receive later than the first business day after 21 May, without prior arrangement, may incur an administrative penalty. Where 21 May falls on a weekend or a public holiday, your annual FBT return is due on the next business day.

Using the rules explained in this Guide, you can calculate the FBT you have to pay. This amount is shown on your annual return and is the basis of your assessment. You are also required to provide some other brief details on your annual return, such as the different categories of fringe benefits provided, the total taxable value of each category, and the total employee contributions for some categories.

You don't need to lodge an FBT return if your fringe benefits taxable amount for the year is nil. If you are registered for FBT but don't need to lodge an FBT return, you must lodge a Notice of non-lodgment – Fringe benefits tax.

However, if you had FBT instalment obligations during the year and did not vary those instalments to nil, lodging an FBT return will allow us to update your account to ensure these credits are made available to you.

See also:

FBT registration, lodgment, payment and reporting

Request for deferral of time to lodge

If you prepare and lodge your own return and need additional time, phone us before the due date on 13 11 42 between 8am and 6pm, Monday to Friday.

You will be granted a deferral only where there are extenuating circumstances.

Organisations with more than one office or employer

You lodge one FBT annual return, covering the fringe benefits provided to all your employees. This is the case even if you have decentralised operations (for example, you own several branch offices or businesses).

Employers who form part of a corporate group (that is, a group of associated companies) must lodge a separate FBT annual return for each employer in the group that provides employees with fringe benefits.

3.3 FBT assessments

We don't usually issue FBT assessment notices. This is because FBT is self-assessed by employers. In effect, assessment occurs when you lodge a properly completed annual return.

The basis of this self-assessment lies in the following steps that are taken to occur on the day your annual return is lodged with us.

We are regarded as having made an assessment of your fringe benefits taxable amount and also of the total amount of tax payable.
The annual return is regarded as being a notice of our assessment.
The notice of assessment is regarded as having been served on you, the employer.

If you don't lodge a self-assessed FBT return, we may assess your FBT payable and serve notice of that assessment.

3.4 Amendments

If you realise after lodging your return that you have made a mistake, request an amendment as soon as possible.

We may amend an FBT assessment if:

you don't disclose benefits or wrongly valued benefits
you request an amendment to your FBT payable (for example, because you have overpaid or underpaid FBT).

As you may incur a penalty for an incorrect return, it is important to advise us of any mistakes early. An amendment can usually be made only within three years from the date an FBT return is lodged. However, where tax has been avoided, the amendment can be made within six years of lodgment. In cases of fraud or evasion, there is no time limit on when we can amend an assessment.

See also:

Fringe benefits tax returns

3.5 Paying FBT

If you have not previously paid FBT or if the amount of FBT payable in the previous year was less than the instalment threshold (currently $3,000), you pay the tax once a year when you lodge your annual FBT return.

If you had to pay FBT of $3,000 or more in the previous year, you pay the tax quarterly with your activity statement. This is the case even if you estimate you will pay less than $3,000 FBT in the current year.

Instalments on the activity statement

If you have to pay your FBT liability in quarterly instalments, we will send you an activity statement with your instalment amount printed on it. The amount on which instalments are based is called the notional tax amount. Generally, this amount is the same as your previous year's liability.

The instalment amount is simply one quarter of the notional tax amount. For example, if you had to pay $20,000 FBT for the year 1 April 2016 to 31 March 2017, the instalments payable for the following year would be $5,000 each quarter. You make any balancing payment when you lodge your annual return. If your instalments are more than your annual liability and you have no other taxes outstanding, we will refund you the difference.

Varying instalments on the activity statement

If you estimate that your FBT payable will be less than the notional tax amount, you may vary your quarterly instalment on your activity statement. However, you may vary an FBT instalment only if you lodge your activity statement by the due date. To do this, you must record on your activity statement the estimated amount of tax payable for the whole year, the varied FBT instalment and a reason code for the variation.

The amount payable as a varied instalment is a quarter of the estimated FBT liability for the year.

Example

An employer's notional tax amount is $20,000. The instalment ordinarily payable is $5,000. However, before paying the first instalment, the employer estimates that their FBT liability for the year will be $16,000. Provided the variation is notified on the activity statement and the activity statement was lodged on time, the employer may pay varied instalments of $4,000.

If you vary your instalment on the second or third quarter activity statement, you can use the excess paid on any earlier instalments as part payment of the varied instalments. However, the amount of a varied instalment must be sufficient to ensure that:

for the quarter ended 30 June, 25% of your estimated liability for the year is paid
for the quarter ended 30 September, 50% of your estimated liability for the year is paid
for the quarter ended 31 December, 75% of your estimated liability for the year is paid
for the quarter ended 31 March, 100% of your estimated liability for the year is paid.

Example

An employer's notional tax amount is $20,000. They:

pay $5,000 as the first instalment, based on the notional tax amount, and
when the second instalment is due, lodge a variation based on an estimated annual tax payable of $16,000.

The amount payable for the second instalment is half of the estimated liability, less the amount already paid (that is, half of $16,000, less $5,000). Therefore, the amount payable is $3,000.

Similarly, the amount payable for the third instalment is three-quarters of the estimated liability, less the amounts already paid (that is, three-quarters of $16,000, less $8,000.) Therefore, the amount payable is $4,000.

You can lodge more than one variation during the year and can even vary each instalment payment.

It is important to take care when estimating your instalment amount as you may incur a general interest charge if you underpay your FBT liability for the year.

Variation below instalment threshold

Where your notional tax amount (based on your previous year's liability) is more than the instalment threshold, you must pay your annual FBT liability in quarterly instalments. This is the case even where your estimated liability for the year is less than the instalment amount.

Example

The instalment threshold is $3,000.

An employer's notional tax, based on the previous year's liability, is $4,000. At the time of the first instalment, the employer estimates that their liability for the year will be $2,400 and lodges a variation to that amount.

Even though the estimated notional tax is less than the instalment threshold, the employer still has to pay instalments of a quarter of $2,400 (that is, $600).

Reason code for variation

If you vary your FBT instalment amount, you must explain why by showing on your activity statement the reason code that best describes your circumstances.

Codes for variation

Reason for varying	Code
Current business structure not continuing	22
Change in fringe benefits for employees	30
Change in employees with fringe benefits	31
Fringe benefits rebate now claimed	32

See also:

FBT – how to complete your activity statement labels

How to pay

You must pay the total amount of FBT payable by 21 May or the first business day after, unless you have made other arrangements with us.

All FBT payments can be rounded down to the nearest multiple of five cents.

We offer several different payment methods.

See also:

How to pay

Payment difficulties

If you are having difficulty making a payment, you should phone 13 11 42 to discuss your circumstances.

3.6 Objection, review and appeal rights

You can object to a decision relating to an assessment or an amendment to an assessment in the following ways.

Objection

We recommend you use our objection forms. An objection must:

be in writing
be lodged with the Commissioner within certain time limits (if you have not requested an extension of time), and
state the grounds for the objection fully and in detail.

You must lodge objections within four years of the date of your notice of assessment or self-assessment.

If the objection relates to an amended assessment, you must lodge it within four years of the date of the notice of the assessment that was amended, or within 60 days of the notice of the amended assessment, whichever is the later. The time limit may be extended, but this will only be done in limited circumstances – for example, where you can show that the delay in lodging the objection was due to circumstances beyond your control.

When we provide you with our decision on your objection, we will include information that explains what you can do if you are dissatisfied with the objection decision.

See also:

Complete and lodge your objection

Review

If you are dissatisfied with the decision on an objection, you may seek a right of review by the Administrative Review Tribunal or appeal to the Federal Court.

To obtain a review by the Administrative Review Tribunal, you should lodge an appeal directly with the tribunal, generally within 60 days from the date the notice of decision on the objection was served. A referral fee applies, but is refunded if your appeal is successful. If you are dissatisfied with the decision by the Administrative Review Tribunal on a question of law, you have the right to appeal to the Federal Court.

If you appeal to the Federal Court against our decision on an objection, you must lodge an application directly with the Federal Court within 60 days of the date the notice of the decision on the objection was served. You must then serve a sealed copy of the application on the Commissioner of Taxation at the office of the Australian Government Solicitor.

Under either alternative, you can request an extension of the 60-day referral period. In doing this, you must supply full details of the reasons why your request for referral of the matter to the Tribunal or Court was not lodged within the 60-day period. The Tribunal or Court will decide whether an extension of time will be granted.

See also:

If you disagree with an ATO decision

3.7 Taxation rulings

We issue rulings and determinations to advise taxpayers of our views on the interpretation and application of tax law, including FBT law.

Public rulings

A public ruling is a written expression of the Commissioner's opinion of the way in which a relevant tax law applies, or would apply to:

any person in relation to a class of arrangements
a class of persons in relation to an arrangement, or
a class of persons in relation to a class of arrangements.

An 'arrangement' includes a scheme, plan, proposal, course of action, course of conduct, transaction, agreement, understanding, promise or undertaking. It also includes part of an arrangement.

A public ruling is binding on the ATO where the ruling is favourable to you, the employer. For example, if the amount of your tax payable under a proper application of the law is more than the amount payable in accordance with the ruling, your FBT liability is determined as if the ruling were correct.

If there are conflicting public rulings, the ruling most favourable to you applies for the purposes of assessing your FBT liability.

Class rulings

Class rulings are a form of public ruling that enable the Commissioner to provide legally binding advice, in response to a request from an entity seeking advice about the application of a relevant provision to a specific class of persons, in relation to a particular arrangement.

The purpose of a class ruling is to provide certainty to participants and prevent the need for individual participants to seek private rulings.

Private rulings

A private ruling is a written expression of the Commissioner's opinion of the way in which a relevant provision applies, or would apply, to you in relation to a specified scheme. It may deal with anything involved in the application of relevant provision, including issues relating to liability, administration, procedure and collection, and ultimate conclusions of fact.

The difference between a private ruling and a public ruling is the private ruling deals with a specific course of action by a particular person, whereas a public ruling is provided for the information of a person or class of persons generally.

Typically you can apply for a private ruling when you want certainty about the way a tax law applies to your particular circumstances. For example, if you are uncertain about the FBT liability that may arise from an existing or proposed arrangement, you may apply for a private ruling on that arrangement.

You must apply in the approved private ruling application form and provide the required information and supporting documents.

If your affairs are based on a private ruling that applies to you, the Commissioner will be bound to act in the way set out in the ruling even if the private ruling is later found to be incorrect.

See also:

ATO advice and guidance

Objection to a private ruling

You can object to most private rulings in the same way as you can object to a tax assessment. You must lodge your objection before the later of:

60 days after notice of the ruling is served on you, or
four years from the last day allowed for lodging a return for the FBT year covered by the ruling.

If dissatisfied with the decision on the objection, you may apply to the Administrative Review Tribunal for a review of the decision, or appeal to the Federal Court against the decision.

See also:

Dispute or object to an ATO decision

3.8 Compliance measures

There are penalties for lodging incorrect returns or late returns, or failing to lodge returns. A general interest charge applies to all outstanding amounts of FBT, including FBT instalments and understatements of FBT instalments. In addition, there are substantial penalties for underpayments of tax arising from false or misleading statements.

See also:

Interest and penalties
Law Administration Practice Statement PS LA 2008/3 Provision of advice and guidance by the Tax Office

Latest update

November 2024

Section	Changes and updates
Throughout	Updated incorrect hyperlinks
3.6 – Objection, review and appeal rights	Updated to reflect change from Administrative Appeals Tribunal to Administrative Review Tribunal

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 4 - Fringe benefits tax record keeping

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

4.1 General record-keeping requirements

There is a general requirement that you must keep records that are adequate to enable your FBT liability to be assessed. Your records must be written in English or, if in electronic form (for example, on a computer), made readily accessible and convertible into written English. For record-keeping purposes, electronic records (including encrypted records) are subject to the same record-keeping requirements as paper records.

For FBT purposes, these records must be kept for five years from the date they are prepared, obtained or the transactions completed, and in a form that tax officers can access and understand in order to determine your tax liability.

You need to keep records that show the following:

The taxable value of each fringe benefit provided to each employee (that is, its value before it is grossed up). Some examples of records you may need to keep are invoices, receipts, travel diaries, logbooks, odometer records and employee declarations.
The method of allocating the taxable value of a fringe benefit provided to two or more employees. This may include any reasonable agreement between an employer and an employee regarding the apportionment of fringe benefits.
That 100% of the taxable value of the benefits has been allocated to employees. The taxable value of excluded benefits (such as remote area housing assistance) doesn't need to be allocated to individual employees.

Where a fringe benefit is provided by an associate, the associate is required to provide copies of the records to you within 21 days of the end of the FBT year. Both you and the associate are required to keep the records for five years from the date of the relevant transaction.

You must also keep records if you want to take advantage of various exemptions or concessions that reduce your FBT liability. These documents must be kept for five years from when the relevant FBT return is lodged. Examples of these records are:

all documents you are required to obtain from employees, such as declarations, invoices and/or receipts, bills of sale, lease documents, travel diaries, copies of logbooks, and odometer records
where the benefit is a car fringe benefit valued under the operating cost method, fleet management records, logbook records and odometer records.

For some concessions and exemptions, you have to obtain 'documentary evidence' of expenditure by an employee. Broadly, you are required to obtain the original invoice and/or receipt from the employee. This must show the date of the receipt or invoice, the date of the expense, the name of the supplier, what was bought and the amount paid.

You must make elections and declarations and obtain all employee declarations no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return, by 21 May. There is no need to notify us of the election or declaration as your business records are sufficient evidence of this.

4.2 Logbook records and odometer records

Logbook and odometer records are kept when you use:

the operating cost method to calculate the taxable value of a car fringe benefit (refer to section 7.5)
the first method for employee cars when applying the 'otherwise deductible' rule (refer to section 21.1).

In a logbook year, you must keep both types of records. In a year other than a logbook year, you need keep only odometer records.

A logbook year commonly occurs when you use the operating cost method to value a car fringe benefit for the first time. The term is dealt with in more detail in section 7.8.

Logbook records contain a record of business use and are usually maintained for a continuous 12-week period. Odometer records are a record of the total distance travelled during the same 12 weeks that logbook records are maintained, and the total distance travelled each year. The 12-week period chosen should be representative of the car's business use.

You should keep records of additional information such as the car's make, model, registration number and percentage of business use as part of your business records.

Information to be recorded in logbook records

We don't produce an official logbook, but we have provided a sample that you can use. If you prefer, you can design your own logbook or buy one of the many commercial products available. Regardless of which type of logbook you use, all of the following details must be recorded for each business journey:

the dates on which the journey began and ended
the odometer readings at the start and end of each journey
the kilometres travelled
the purpose of the journey.

When recording the purpose of the journey, an entry stating 'business' or 'miscellaneous business' will not be enough. Your entry should sufficiently describe the purpose of the journey so that it can be classified as a business journey.

Your logbook records must be in English and entries should be made at the end of a trip or as soon as reasonably practicable afterwards.

Where two or more business trips are undertaken consecutively on any day, only one entry for the series needs to be recorded in the logbook. For example, an entry for a salesman who called on 10 customers while working in the Bathurst-Orange area of New South Wales could record the odometer readings at the start and end of the consecutive journeys and describe the purpose of the travel as '10 customer calls, Bathurst-Orange area'.

The period during which the logbook is kept must be specified. This continuous period may overlap two tax years. You can keep your logbook for up to five years (assuming there is no major change in the pattern of use). After the fifth year, you will need to keep a new logbook.

Sample car logbook record

Employer name:				FBT year ended 31 March 2020
Make: Holden		Model: Commodore		Engine type: 3,800cc		Registration No: AAA 999
Date trip began	Date trip ended	Odometer start	Odometer end	Kilometres travelled		Purpose of the journey
Date trip began	Date trip ended	Odometer start	Odometer end	Business km	Private km*	Purpose of the journey
06/06/2019	06/06/2019	118,500km	118,570km	70km	0km	Visit mechanic, ATO
07/06/2019	07/06/2019	118,570km	118,580km	0km	10km	Private travel

Private travel is not required to be shown, but you may include it in your records to help with calculations.

You need one logbook per car.

Information to be recorded in odometer records

Odometer records are a record of the total kilometres travelled by a car during the FBT year or for that part of the year when it was used to provide fringe benefits. Odometer records should be kept for the same period for which a logbook is kept.

As with logbooks, we don't produce an official odometer record form. You are entitled to keep records of your own design, or to purchase one of the many commercial products available. However, the following details must be recorded for the beginning of each period (that is, year, part-year or logbook period) and also for the end of each period:

the date the period began, or ended
the odometer reading at the start of the period.

The odometer records must be in English, and the entries should be made at, or as soon as reasonably practicable after, the respective times to which the readings relate.

If you replace a car during the year and the business percentage is transferred to a new car, the odometer records must also include an entry showing odometer readings of the replaced car and the new car on the replacement date.

Sample odometer reading

Employer name:			FBT year ended 31 March 2020
Car make	Model	Registration number	Start		End
			Date	Odometer reading	Date	Odometer reading
Holden	Commodore	AAA 999	01/04/2019	116,000 km	31/03/2020	126,000 km

An odometer record can be used for more than one car.

4.3 Living-away-from-home allowances and benefits

You and your employee must meet certain record-keeping requirements for the relevant living away from home concessions to apply if you provide your employee with:

a living-away-from-home allowance (refer to Chapter 11)
food because their employment duties require them to live away from home (refer to section 19.4)
accommodation because their employment duties require them to live away from home (refer to section 20.4).

Substantiating exempt accommodation and exempt food components

Employee living away from home from 1 October 2012

To reduce your FBT liability on the living-away-from-home allowance by any exempt accommodation component and any exempt food component, your employee must meet certain substantiation requirements:

Your employee must substantiate the accommodation expenses incurred while living away from home in full.
Your employee only needs to substantiate food or drink expenses if the expenses incurred while living away from home exceed an amount the Commissioner considers reasonable – if so, your employee needs to substantiate the full amount of the expenses incurred, not just the excess amount.

We issue advice specifying reasonable amounts for food or drink expenses in an annual Taxation Determination.

Your employee satisfies the substantiation requirements if they give you, before the declaration date for the relevant FBT year, either:

documentary evidence of the expense – that is, either the actual receipt or other evidence as appropriate (for example, receipts, tax invoices, credit card or bank statements), or a copy of these documents, or
an appropriate declaration in a form approved by the Commissioner setting out information about the expense.

If your employee gives you an appropriate declaration, they must retain the relevant documents to substantiate the expense incurred for a period of five years from the declaration date. However, this is not required if your employee gives you the documentary evidence of the expense – in that situation, you must keep the evidence for five years.

Declaration about living away from home

Your employee must give you an appropriate declaration about living away from home in the approved form if any of the following apply:

they maintain a home in Australia at which they usually reside and the fringe benefit relates to the first 12 month period
the transitional rules apply and they are not required to maintain a home in Australia and/or the 12 month period does not apply
they work on a fly-in fly-out or drive-in drive-out basis.

See also:

Living-away-from-home declaration – to download a form, and for an explanation when each should be used

You must obtain all employee declarations no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return, by 21 May.

4.4 The 'otherwise deductible' rule and travel diaries

If you use the otherwise deductible rule, you must have certain documentation to substantiate the extent to which the benefit provided would have been 'otherwise deductible' to the employee. You must obtain the documentation from the employee before lodging the relevant FBT return.

A 'travel diary' is a diary or similar document that you must obtain from an employee where:

you provide a fringe benefit for travel within Australia for more than five consecutive nights and the travel is not exclusively for performing employment-related duties (the fact that the business travel requires the employee to stay away over a weekend will not, in itself, mean the trip is not undertaken exclusively in the course of their employment)
you provide the benefit for travel outside Australia for more than five consecutive nights.

In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.

Example – travel more than five consecutive nights

An employee lives in Brisbane and travels to Hawaii for work purposes. The employee's flight to Hawaii departs from Sydney. The employee leaves their home in Brisbane on 2 April, flies to Sydney, and departs for Hawaii on 3 April. The employee returns directly to Brisbane on 8 April. The employee is away from their home for six nights in total and would need to keep a travel diary.

A travel diary shows where the activity took place, the date and the approximate time when the activity commenced, the duration and the nature of the activity.

If the provision of the expense payment or residual benefit is subject to a consistently enforced prohibition on private use and would result in a taxable value of nil, the requirement to obtain a travel diary will be waived. In such instances, you will then be able to make an annual no private use declaration stating that the benefit which was provided was only for employment related purposes and there was no private portion.

A travel diary is used to substantiate the following fringe benefits:

airline transport (refer to Chapter 12)
expense payments (refer to Chapter 9)
property (refer to Chapter 17)
residual (refer to Chapter 18).

4.5 Reportable fringe benefits

If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year, you must report the grossed-up taxable value of fringe benefits on the employee's payment summary for the corresponding income year (1 July to 30 June). These are called reportable fringe benefits.

You will need to keep records in sufficient detail to be able to report each individual's fringe benefits amount.

See also:

Chapter 5 – Reportable fringe benefits

Correcting an amount on a payment summary already issued

Where you have inadvertently understated an employee's reportable fringe benefits amount by $195 or less, you don't have to amend the employee's payment summary unless the Commissioner is of the view that you deliberately understated the amount of fringe benefits provided to the employee.

To correct a reportable fringe benefits amount on a payment summary already issued to an employee, you need to complete a new payment summary, marking the 'amending a payment summary' box.

When you complete amended payment summaries, you must:

complete all payee, payment and payer information on each amended payment summary
send it to us
give a copy to the payee.

If the employee has already lodged their tax return, they should request an amendment to their reportable fringe benefits amount.

If the change alters the amount of your FBT payable, you also need to request an amendment to your FBT return (refer to section 3.4).

4.6 Electronic records

Electronic record-keeping systems

The information recorded in a computerised accounting system is generally the same as that contained in a manual accounting system. If you choose to keep your business records electronically, your records must be in a form that tax officers can access and understand in order to determine your FBT liability. You can choose at any time to satisfy access requests by providing a printed copy of your electronic records and, where necessary, system documentation.

Essential elements of an electronic record-keeping system

There are important guidelines you need to follow in electronic record keeping. These include the following.

Record retention

You should retain electronic records for the same length of time that you retain paper records. For FBT purposes, this is for a period of five years.

Data security and integrity

You should be able to demonstrate that your electronic records system is secure from both unauthorised access and data alterations.

System documentation

The entire electronic records system should be documented, including physical and logical descriptions of the system's structure and programs, including all inputs and outputs.

Retaining archival copies

It is generally not necessary to keep a hard copy of the information contained in an electronic record unless a particular law or regulation requires you to keep paper copies.

Accessibility

Electronic records should be readily accessible. To this end, you should ensure the conversion of electronic records to a compatible format when upgrading or changing data-processing capabilities.

Storing paper records electronically

Whether you use a manual or a computerised accounting system, you may want to store and keep paper records electronically. Advances in technology, such as the internet, have meant that many business transactions are processed and kept electronically rather than through a paper-based system. This includes encrypted records. These records must be in a form that we can access and understand.

Where paper records are produced or received in the course of carrying on a business you may scan the paper records onto an electronic storage medium, provided the electronic copies are a true and clear reproduction of the original paper records.

Where paper records are scanned and stored electronically, record-keeping requirements are satisfied if the electronic records are:

not altered or manipulated once stored
retained for the statutory period of five years
capable of being retrieved and read at all times by tax officers. You are expected to provide appropriate facilities for viewing electronic records kept in that format and, where necessary, for printing a paper copy or providing an electronic copy.

Paper records that can be scanned and stored include:

invoices, purchase orders, receipts, vouchers, credit notes, delivery dockets and other such records
bank statements and other bank records and documents
any other paper source documents produced or received in the course of carrying on a business.

You don't have to keep original paper records once they have been scanned onto an electronic storage medium.

Internet and electronic data interchange

Many businesses transfer data and information electronically to both internal and external sources. This process is commonly referred to as electronic data interchange (EDI). If you do conduct business transactions through the internet or by EDI you are required to keep records explaining all relevant transfers. All other requirements relating to electronic record-keeping systems explained above still apply.

If electronic information systems are used to conduct business transactions such as those that may be conducted by websites, there will be no evidence of those transactions. Without this evidence your organisation or business may not be considered to have complied with its record-keeping requirements. Some businesses, however, use electronic information systems that have special functionality for maintaining the integrity of the digital data as electronic records over time to conduct business transactions. These organisations will have developed software integration between record-keeping systems and other corporate systems to ensure that data can be seamlessly and deliberately captured as electronic records.

See also:

Taxation Ruling TR 2018/2 Income tax: record keeping and access – electronic records

4.7 Record-keeping exemption arrangements

The record-keeping exemption arrangements provide certain employers with an alternative means of calculating their FBT liability. These arrangements mean that an employer is not required to keep full FBT records.

If you use the record-keeping exemption arrangements, you may still be required to record the value of fringe benefits on employees' payment summaries (refer to Chapter 5).

Who may use the record-keeping exemption arrangements?

You can elect to use the record-keeping exemption arrangements if:

you are not a government body or income tax exempt at any time during the current year
the Commissioner has not issued a notice requiring you to resume keeping records
you were in business for the whole of the base year
you kept FBT records in the base year
you lodged the FBT return for the base year by the due date
the aggregate fringe benefits amount (total of taxable values of all fringe benefits, refer to section 2.10) in the base year did not exceed the exemption threshold
you have elected that the record-keeping exemption arrangements apply in all years from the most recent base year to the current year
the aggregate fringe benefits amount for benefits provided in the current year is not more than 20% greater than it was in the most recent base year, unless the difference is $100 or less, and
the above conditions are also satisfied for all years between the base year and the current year.

The base year

The base year is any FBT year that meets the required conditions. The most recent record-keeping exemption thresholds are available in Fringe benefits tax – rates and thresholds.

Records relating to the base year

Records kept in the most recent base year must be kept for five years after the end of any year in which the record-keeping exemption arrangements applied.

Records relating to years where the exemption arrangements are applied

If you elect to use the record-keeping exemption arrangements, you are required to keep records of benefits provided to employees by your associates.

It is important to note that you may still need to keep records for income tax or other purposes.

Calculating FBT liability under the exemption arrangements

In calculating your FBT liability in the current year, you use the aggregate fringe benefits amount for the most recent base year.

Determine whether the aggregate fringe benefits amount has increased by more than 20%

You use special rules to calculate the taxable value of car fringe benefits under the statutory formula and the operating cost methods to determine whether the aggregate fringe benefits amount in the current year has exceeded the 20% or $100 tolerance limit.

For the statutory formula method (refer to section 7.4) the statutory fraction established for a car in the most recent base year may be used for that car (or a replacement car) in the current year, provided the annualised number of kilometres in the current year is at least 80% of the annualised number of kilometres in the base year.

Where you first provide the car benefit in a year later than the base year, you may use the statutory fraction established in that later year, provided the number of annualised kilometres in the current year is at least 80% of the number of annualised kilometres in the first year.

For the operating cost method (refer to section 7.5), the business use percentage used for calculating a car benefit in the most recent base year may be used for that car (or a replacement car) in the current year, provided the business use percentage in the current year is at least 80% of the business use percentage in the base year.

Where you first provide the car benefit in a year later than the base year, you may use the business use percentage established in that later year, provided the business use percentage in the current year is at least 80% of the business use percentage in the first year.

Employer is not in business throughout current year

If you are not in business for the whole of the current year, you must adjust the aggregate fringe benefits amount in the base year in accordance with the following formula.

Aggregate fringe benefits amount in most recent base year

Number of days in the current year during which the employer carried on business operations

Number of days in current year

4.8 Employee declarations

It is not necessary for you to send employee declarations to us. However, you should keep them as part of your tax records. These declarations must be in a form approved by the Commissioner.

The approved wording and information to be contained in these employee declarations are included throughout this Guide, or by referring to About declarations.

4.9 Electronic declarations

You can receive employee declarations electronically. However, the declaration still must be signed by the employee using an electronic signature.

This means that employees can provide employee declarations to you, in the format approved by the Commissioner, electronically with their electronic signature if:

you consented to the method of electronic signature
the electronic declaration is readily accessible and understandable, and convertible into written English, in order to determine your FBT liability.

Format of declaration and form of electronic signature

The electronic declaration must contain the same information as is required for approved paper declarations.

The electronic declaration must be provided using a secure system, and in a way that clearly identifies the employee and indicates their approval of the information being provided. A secure system could be a system that requires a personal identification number, access code or password to use.

Example – electronic declaration provided from work email address

An employer agrees to an employee declaration being provided to them electronically in the body of an email or as an attachment to an email. This is an acceptable method of receiving the declaration where:

the employees have work email addresses that are password protected
the employee's name appears either in the 'From' line or in the body of the email, or both, as the method for identifying the person and indicating the person's approval of the information communicated.

Example – electronic declaration provided through payroll system

An employer has an electronic form available through their payroll system that allows employees to provide the same information as required by paper declarations. This is an acceptable method of receiving employee declarations where:

the employer agrees to employees providing electronic declarations through this system
in order to complete the form, employees must log on to their account using a password
completion of the form is linked to the employee's user identification or their name, as the method for identifying the person and indicating their approval of the information communicated.

Example – electronic declaration provided from employee's home email address

An employer agrees to an employee providing their employee declaration from their home email address. This would be an acceptable method of receiving an employee declaration where the employer is satisfied that the declaration was provided by the employee, using a secure system.

Example – electronic declaration provided on behalf of another employee using their work email address

An employer has an email system that allows employees to action emails on behalf of other employees. Pam Smith, an employee, is given permission by her manager Jim Jones, to action emails on Jim's behalf while Jim is on leave. The 'From' line of emails actioned for Jim appears as 'Pam Smith on behalf of Jim Jones'. An employee declaration received via email with the 'From' line 'Pam Smith on behalf of Jim Jones' would not be acceptable because it doesn't contain the employee's approval of the information communicated.

See also:

Taxation Ruling TR 2018/2 Income tax: record keeping and access – electronic records
Taxation Ruling TR 96/7 Income tax: record keeping – section 262A – general principles
Taxation Determination TD 2019/7 Fringe benefits tax: reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 for food and drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit for the fringe benefits tax year commencing on 1 April 2019

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 5 - Reportable fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

As an employer, you must record the value of fringe benefits provided to each of your employees.

If the value of certain fringe benefits provided exceeds $2,000 in an FBT year (1 April to 31 March), you must record the grossed-up taxable value of those benefits on your employee's payment summary or through Single Touch Payroll (STP) by the due date for finalisation for the corresponding income year (1 July to 30 June). You may also have to report the notional value of certain exempt benefits.

Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee, for example, a relative.

5.1 Benefits included in the reporting requirements

The value of all fringe benefits other than excluded fringe benefits (refer to section 5.2) must be allocated to the relevant employees.

You must allocate to the relevant employees the notional taxable value of benefits that are exempt solely because an employee either

works in or for a
- public benevolent institution
- health promotion charity
- hospital
- public ambulance service, or
is a live-in residential care worker.

See also:

section 20.5 – Religious and not-for-profit organisation exemptions

These benefits are known as quasi-fringe benefits and although reportable, they remain exempt from FBT.

Any references in this chapter to 'taxable value' and 'fringe benefits' include 'notional taxable value' and 'quasi-fringe benefits' respectively.

The value of benefits exempted by other provisions (refer to Chapter 20) is exempt from these allocation and reporting requirements.

5.2 Excluded fringe benefits

Fringe benefits that are excluded from the reporting requirements are still subject to FBT.

You do not have to allocate the following excluded benefits to employees or report them on payment summaries. The benefits are excluded by provisions of the FBTAA and the Fringe Benefits Tax Assessment Regulations 2018 (the Regulations).

Excluded by subsection 5E(3) of the FBTAA are:

entertainment by way of food and drink, and benefits associated with that entertainment, such as travel and accommodation (regardless of which category is used to value the benefit). However, if these benefits are provided under a salary packaging arrangement on or after 1 April 2016, they are not excluded from the reporting requirements
car parking fringe benefits (not including car parking expense payment benefits – refer to section 9.9)
hiring or leasing entertainment facilities such as corporate boxes. However, if these benefits are provided under a salary packaging arrangement on or after 1 April 2016, they are not excluded from the reporting requirements
remote area residential fuel where the value of the benefit is reduced in accordance with the conditions in section 19.2
remote area housing assistance where the value of the benefit is reduced in accordance with the conditions in section 19.2
remote area home ownership schemes where the value of the benefit is reduced in accordance with the conditions in section 19.2
remote area home repurchase schemes where the value of the benefit is reduced in accordance with the conditions in section 19.2
costs of occasional travel (being that which occurs from time to time and not at regular intervals) to a major Australian population centre by employees and their families living in a remote area
freight costs for food provided to employees living in a remote area
fringe benefits provided to address certain security concerns relating to the personal safety of an employee, or an associate of the employee, arising from the employee's employment.

Excluded by the Regulations pursuant to paragraph 5E(3)(i) of the FBTAA are:

emergency or other essential health care provided to an employee or associate who is an Australian citizen or permanent resident, while the employee is working outside Australia and no Medicare benefit is payable
certain Australian Government overseas living allowance payments, for example, cost of living adjustment, post adjustment, child supplement, child reunion supplement
certain benefits provided to Defence Force members, for example, particular forms of housing assistance, reunion travel, assistance provided for removing and storing household effects, allowances paid to families with special needs, education assistance for children in critical years of schooling, elements of overseas living allowances, and removal expenses of a spouse due to marriage breakdown
certain benefits provided to police officers, for example, particular forms of housing assistance, assistance provided for removing and storing household effects, certain relocation assistance and certain car benefits arising from travel between home and work by police officers using unmarked police vehicles that are fitted with a police radio and concealed or portable warning lights and sirens
certain car benefits arising from travel between home and work by police officers, ambulance officers and fire fighters using marked emergency vehicles
from 1 April 2007, car benefits arising from an employee's private use of pooled or shared cars
living-away-from-home allowances provided to Commonwealth employees on or after 1 April 2012
taxable benefits provided on or after 1 April 2012 relating to accommodation provided to Commonwealth employees whose duties of employment require them to live away from their normal residence.

Pooled or shared cars

All of the following requirements must be met in order for the benefit to be an excluded benefit:

the benefit provided to the employee must be either a car fringe benefit or an exempt car benefit
there must be an additional use of the same car during the year which gives rise to a car fringe benefit or a exempt car benefit for a different employee
the employer must direct, or consent to, the use of the car by each employee.

In these circumstances, the car will be a 'pooled or shared car' during the FBT year and the reporting exclusion will apply to an employee's use of that car.

The use of a car can vary from year to year and accordingly the legislation requires that the conditions for the reporting exclusion for pooled or shared cars must be determined and met for each car and FBT year.

5.3 Individual fringe benefits amount

You must allocate the value of all benefits subject to these reporting requirements to the relevant employees. The total value of all such benefits provided to a particular employee in an FBT year is known as their individual fringe benefits amount.

Where benefits are provided to an associate of an employee, in respect of that employee's employment, you allocate the value to the employee, not to the associate.

5.4 Reporting reportable fringe benefits amounts

You only report an amount relating to an employee if the total taxable value of certain fringe benefits you provided to them exceeds $2,000 for the FBT year (1 April to 31 March).

This amount is known as a reportable fringe benefits amount (RFBA) and is calculated using the following formula:

Individual fringe benefits amount

(1 – FBT rate)

This is the same as multiplying the individual fringe benefits amount by the lower (type 2) gross-up rate. The higher gross-up rate formula is not used to calculate an employee's reportable fringe benefits amount (refer to section 2.11).

You can report an employee's RFBA through STP by including it in a Pay event or submitting a separate Update event. You can choose whether you report RFBA by:

updating year-to-date RFBA throughout the year when you provide fringe benefits to your employee, or
reporting a single RFBA annual figure between the end of the FBT year and the time you submit a declaration that you have finalised your reporting for that employee for the financial year.

An employee's RFBA that you report through STP will be displayed to the employee on their STP Employment income statement. To access their Income statement, the employee will need a myGov account linked to ATO online services.

If you cannot (or choose not to) report RFBA through STP, you must provide this information to your employee on a payment summary and provide us with a PAYG payment summary annual report. The payment summary should not include amounts you have already reported through STP.

Example – grossing-up amounts to include in STP reporting or on a payment summary

The total value of benefits provided to an employee during the FBT year 1 April 2018 to 31 March 2019 is $3,500. The rate of tax is 47%. The value of reportable fringe benefits is calculated as follows:

$3500	=	$6,603 (in whole dollars)
(1 – 0.47)

$3,500

1.8868

$6.603 (in whole dollars)

You include the reportable fringe benefits amount relating to benefits provided during the FBT year (1 April to 31 March) in your STP reporting or on a payment summary for the corresponding income year. For example, you include the value relating to benefits provided during the FBT year 1 April 2019 to 31 March 2020, in your STP reporting or on a payment summary for the income year 1 July 2019 to 30 June 2020.

Example – working out amounts to include in STP reporting or on a payment summary

Between 1 April 2018 and 31 March 2019 (the 2018-19 FBT year) you provide an employee with:

a work car, with a taxable value of car fringe benefits totalling $1,440
holiday accommodation with a taxable value of $600
a briefcase primarily for use in their employment ($200)
a mobile phone primarily for use in their employment ($300)
reimbursement of the employee's Higher Education Loan Program (HELP) debt ($300).
reimbursement of spouse's HELP debt ($550).

The total taxable value of fringe benefits for this employee is $2,890. The total excludes the briefcase and mobile phone as they are exempt and are not considered to be fringe benefits. However it includes the reimbursement of the spouse's HELP debt as fringe benefits provided to an employee's spouse are allocated to the employee.

The reportable fringe benefits amount will be included in the employer's STP reporting, or on a payment summary issued to the employee, for the income year ending 30 June 2019.

$2,890

1.8868

$5,452 (in whole dollars)

$5,452 will be included in the employer's STP reporting, or on a payment summary issued to the employee for the income year ending 30 June 2019.

Section 57A

The exemption under section 57A of the FBTAA is limited to the following types of entities and circumstances:

registered public benevolent institutions endorsed by the Commissioner as eligible for exemption from FBT
government bodies where the employee's duties are exclusively performed in or in connection with
- a public hospital, or
- a hospital carried on by a society or association that is a rebatable employer
registered health promotion charities endorsed by the Commissioner as eligible for exemption from FBT, or
public ambulance services and the employee is predominantly involved in providing that service.

If you report RFBA through STP there are two amount fields – 'exempt' and 'non-exempt'. These fields represent:

RFBA reportable by an employer that is exempt from FBT under section 57A of the FBTAA, and
RFBA reportable by an employer that is not exempt from FBT under section 57A of the FBTAA.

If your entity is exempt, include the RFBA you need to report in the 'exempt' field even if you provided the employee with fringe benefits in excess of the relevant capping threshold. See section 6.3 for an explanation of the capping thresholds.

Otherwise you should report RFBA in the 'non-exempt' field.

If you include RFBA on a payment summary rather than reporting it through STP, there is only one amount label and you need to complete the following indicator box:

Select Yes if you are eligible for exemption from FBT under section 57A for the benefits provided as a:

registered public benevolent institution that is endorsed by the Commissioner as eligible for exemption from FBT
government body and the employee's duties are exclusively performed in or in connection with
- a public hospital, or
- a hospital carried on by a society or association that is a rebatable employer
registered health promotion charity that is endorsed by the Commissioner as eligible for exemption from FBT, or
public ambulance service and the employee is predominantly involved in providing that service.

If your organisation is one of these entities you should select Yes even if you provided the employee with fringe benefits in excess of the relevant capping threshold. See section 6.3 for an explanation of the capping thresholds.

Otherwise, select No.

If you do not have any reportable fringe benefits amounts to report, you should leave both boxes blank.

An employee may change roles within an organisation that is eligible for exemption under section 57A. For instance, an employee of a state health department may work as a nurse in a hospital (exempt duties) for part of the FBT year and, in an administration role at head office (non-exempt duties) for the remainder. If an employee performs both exempt and non-exempt duties during the year while receiving reportable fringe benefits, the employer will have to provide two payment summaries.

If the combined value of the exempt and non-exempt fringe benefits exceeds $2,000 in the FBT year, you must provide the grossed-up taxable value of each fringe benefit on a separate payment summary. On one payment summary you will show the section 57A exempt reportable fringe benefits amount and select Yes. On the other payment summary you will show the non-exempt reportable fringe benefits amount and select No.

No more than two payment summaries are required, even if the employee has several periods of exempt and non-exempt service. You should report all of the exempt amounts in one payment summary and all of the non-exempt amounts in a second payment summary.

5.5 What is RFBA included in STP reporting or on a payment summary used for

Even though a reportable fringe benefits amount is shown on an online STP Employment income statement or on a payment summary, it is not included in the employee's assessable income. It is, however, used to assess the employee's eligibility for transfer payments and other tax concessions as well as an employee's liability to certain levies and surcharges, including:

Medicare levy surcharge
private health insurance rebate
Additional tax on concessional contributions (Division 293) – information for individuals for superannuation contributions
tax offset for eligible spouse superannuation contributions
government co-contribution for personal superannuation co-contributions the employee made
Higher Education Loan Program (HELP) and Student Financial Supplement Scheme (SFSS), Student Start-up Loan (SSL), ABSTUDY Student Start-up Loan (ABSTUDY SSL) and Trade Support Loan (TSL) repayments
child support obligations
entitlement to certain income-tested government benefits.

Example – Medicare levy surcharge

In the 2017-18 income year, an employee has a taxable income of $70,000 and a reportable fringe benefits total of $40,000. The employee's spouse has a taxable income of $70,000 and a reportable fringe benefits total of $10,000. Therefore, the couple's family income is $190,000. They have three dependent children. No one in the family is covered by private hospital insurance.

The couple's family threshold for the surcharge is $183,000 (($180,000 + $1,500) × 2) for the 2017-18 income year. As their family income ($190,000) exceeds their family surcharge threshold and they are both liable to pay the Medicare levy, the Medicare levy surcharge would apply to both individuals. The amount of surcharge payable by the employee for the 2017-18 income year would be $1,100 (the Tier 1 surcharge rate (1%) multiplied by the employee's taxable income + reportable fringe benefits, that is 1% of $110,000). The amount of surcharge payable by the employee's spouse for the 2017-18 income year would be $800 (1% of $80,000).

Example – HELP debt

An employee has a HELP debt of $10,000, taxable income of $45,000 (including a net rental loss of $2,000), and a total reportable fringe benefits amount of $17,000. In the 2017-18 income year, they would have to make HELP repayments of $2,880 (being 4.5% of the employee's Australian repayment income of $64,000 ($45,000 + $2,000 + $17,000)).

5.6 Employee's share

An employee's individual fringe benefits amount must include their share of any benefit provided to more than one employee, for example, a boat that may be used by a number of employees during the FBT year.

The legislation does not specify what method you must use to allocate the value of the benefit to each employee. It does, however, require you to reasonably allocate the taxable value between the recipient employees, taking into account all relevant factors.

The portion of the taxable value you allocate to each employee must reasonably reflect the amount of the benefit in respect of each employee's employment. In addition, you must allocate the total taxable value of the benefit among the relevant employees.

Example – allocating the benefit – holiday package

An employer gives two employees a holiday package as a fringe benefit. The package is for two people and cannot be taken as two single holidays. The taxable value of the package is $5,000.

It would be reasonable for the employer to allocate the taxable value between the employees on a 50-50 split basis. Therefore, each employee's share would be $2,500.

Example – allocating the benefit – residual fringe benefit

An employer has a motorbike that is used for business purposes and is available for unlimited private use by 10 employees, who benefit equally from use of the motorbike. The taxable value of the residual fringe benefit is $4,500.

The employer could calculate each employee's share as:

Total taxable value

Number of recipients

$4500	=	$450
10

5.7 What happens when an employee ceases employment and has reportable benefits?

Where an employee ceases employment between 1 April and 30 June in a particular year and you have provided them with reportable benefits since 1 April in that year, you must show the amount of the reportable benefit in your STP reporting or on a payment summary for that employee for the income year ended 30 June in the following year. This is the case even though you have not paid them salary or wages during that income year.

When an employee ceases employment and has a reportable fringe benefits amount, you can report this in the same way you would if they still worked for you.

You do not have to submit a declaration that you have finalised your reporting for that employee for the financial year, or provide them with a payment summary, before the end of the income year covered by that declaration or payment summary.

Example

An employee ceases employment with a particular employer on 15 May 2019. Between 1 April 2019 and 15 May 2019 the employee was provided with fringe benefits with a reportable value of $4,000.

The reportable amount of $4,000 must be included in the employer's STP reporting for the income year ended 30 June 2020 or shown on a payment summary covering that income year.

5.8 Who must have RFBA included in STP reporting or be issued with payment summaries?

For FBT purposes, the definition of 'employee' has been extended to include former employees, future employees and those who receive benefits, but no salary or wages, in return for employment type services.

Anyone provided with reportable fringe benefits must be have an RFBA reported through STP or be issued with a payment summary, even if they are not paid salary or wages during that income year.

Example

As part of his remuneration package, a company manager was granted the use of a company-owned house for life. The manager retired in 2006 and continues to occupy the company house. The market rental value of the house is $15,000 for the FBT year 1 April 2018 to 31 March 2019.

The reportable fringe benefit that must be included in the employer's STP reporting (or shown on a payment summary) for the income year ending on 30 June 2019 is $28,302, calculated as follows:

$15,000 × 1.8868 = $28,302

5.9 Correcting an amount you have already reported

Where you have inadvertently understated an employee's reportable fringe benefits amount by $195 or less, you do not have to amend your STP reporting or the payment summary you have issued to the employee unless the Commissioner is of the view that you have deliberately understated the amount of fringe benefits provided to the employee.

To correct a reportable fringe benefits amount that you have included in STP reporting, you should submit an Update event as soon as possible to include the correct information.

If you:

identify that the RFBA you have reported through STP is not correct, and
you do not yet know what the correct information is, and
you have already submitted a declaration that you have finalised your reporting for that employee for the financial year

you should submit an Update event with the previous details and the finalisation indicator removed. This will advise your employee that the current information is not final and that they should be cautious of including that information in their tax return.

When you determine what the correct information is, you should submit another Update event that includes the correct information and make another declaration that you have finalised your reporting for that employee.

You can only make changes to information reported through STP up to five years after the end of financial year.

To correct a reportable fringe benefits amount on a payment summary already issued to an employee, you need to complete a new payment summary, marking the amending a payment summary box.

When you complete amended payment summaries, you must:

complete all payee, payment and payer information on each amended payment summary
send it to us
give a copy to the payee.

If the employee has already lodged their tax return, they should request an amendment to their reportable fringe benefits amount.

If the change alters the amount of your FBT payable, you also need to request an amendment to your FBT return (refer to section 3.4).

5.10 Special rule – employers using the record-keeping exemption arrangements

You may have chosen to lodge FBT returns under the record-keeping exemption arrangements (refer to section 4.7). Under these arrangements, your aggregate fringe benefits amount in a base year may form the basis for calculating your FBT liability in a following year. If you use this method of calculation in a following year, you cannot exclude any benefits when allocating the value of benefits to individual employees. You have to allocate the entire aggregate fringe benefits amount from the base year among the employees to whom you provided benefits in that following year.

Your method of allocation must be reasonable, having regard to the fringe benefits provided in that year in respect of each employee's employment.

5.11 Relationship with employees

As the provision of fringe benefits could affect an employee's obligations and entitlements, you may wish to discuss with employees such issues as:

which fringe benefits they receive, as some employees may not identify some items as being fringe benefits
the actual or approximate value of fringe benefits provided (employees may not be aware of fringe benefits valuation rules)
the method used to reasonably apportion the value of shared benefits (where you and your employees can agree on a suitable method, this may reduce the need for detailed record keeping).

In some cases, an employee may wish to reduce the reportable fringe benefits amount reported for them through STP or shown on their payment summary for future years. Where you and the employee agree, the following options may be considered:

replacing fringe benefits with cash salary
providing benefits that are exempt from FBT
providing benefits that the employee would otherwise have been able to claim as an income tax deduction
making employee contributions to reduce the taxable value of a fringe benefit.

The contributions must be made from an employee's after-tax income, and employee contributions towards a particular benefit cannot be applied to reduce the taxable value of any other fringe benefit.

More information

For more information, refer to:

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 6 - Not-for-profit organisations and fringe benefits tax

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

If your organisation provides a fringe benefit to its employees or to associates of its employees, your organisation may have an FBT liability. Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee (for example, a relative).

6.1 Employees, independent contractors or volunteers

It is important to determine whether an individual is an employee, volunteer or contractor of your organisation. This status may affect the tax treatment between the individual and the organisation. You should always consider the facts and circumstances of each individual when determining whether they are an employee, volunteer or independent contractor.

Employees

For the purposes of FBT, an employee is a person who receives (or is entitled to receive) salary or wages in return for work or services provided.

If an organisation provides non-cash benefits to employees in lieu of salary or wages, FBT can apply.

Independent contractors

An independent contractor is an entity (such as an individual, partnership, trust or company) that agrees to produce a designated result for an agreed price.

For more information about determining if workers are employees or contractors, refer to How to work it out: employee or contractor

Volunteers

A volunteer is not paid for work. Reimbursing a volunteer for out-of-pocket expenses does not cause them to become an employee. Generally, benefits provided to volunteers don't attract FBT. For more information, refer to Volunteers and FBT.

6.2 FBT concessions and endorsement

The FBT concessions which specifically apply when the employer is a not-for-profit organisation are:

FBT exemption
FBT rebate
certain benefits provided by registered religious institutions and not-for-profit companies
car parking
remote area concessions.

For these concessions to apply to a not-for-profit entity that is a charity, the entity must be registered with the ACNC and endorsed by us.

A charity which is registered by the ACNC as a charity is a registered charity. The ACNC also registers each registered charity in a sub-type according to its charitable purposes. The relevant sub-types for FBT purposes are:

registered health promotion charity (charitable institution whose principal activity is to promote the prevention or the control of diseases in human beings)
registered public benevolent institution (charitable institution that is a public benevolent institution)
registered religious institution (charitable institution that is a religious institution).

Endorsement of a registered charity is also required to access:

FBT exemption for public benevolent institutions
FBT exemption for health promotion charities
FBT rebate for Registered Charities

To apply for endorsement, see the Application for endorsement for charity tax concessions.

Registered charities who are applying for endorsement can indicate on their application form the type of FBT concession and the date from which it applies.

A registered charity's endorsement details are recorded on the Australian Business Register.

6.3 FBT exemption – subject to capping

Subject to certain conditions, some organisations are exempt from FBT. These organisations include:

registered public benevolent institutions endorsed by the ATO for FBT concessions
registered health promotion charities endorsed by the ATO for FBT concessions
public and not-for-profit hospitals
public ambulance services

Benefits provided by these organisations may be exempt where the total grossed-up value of certain benefits (which are benefits not otherwise exempt) provided to each employee during the FBT year is equal to, or less than, the capping threshold. If the total grossed-up value of fringe benefits provided to an employee is more than that capping threshold, your organisation will need to pay FBT on the excess.

Table 1 – capping thresholds

Organisation	Capping threshold
Registered public benevolent and health promotion charities	$30,000 per employee
Public and not-for-profit hospitals and public ambulance services	$17,000 per employee

The full capping threshold applies even if the employer did not employ the employee for the full FBT year. For example, if a registered public benevolent institution employed an employee between October and March and the total grossed-up value of benefits provided was $25,000, FBT will not be payable.

If an organisation is a registered public benevolent institution and a public or not-for-profit hospital, the hospital capping threshold applies. The organisation cannot be endorsed for FBT concessions as a registered public benevolent institution and cannot apply the $30,000 capping threshold.

The term 'public hospital' includes government-run hospitals and most not-for-profit privately controlled hospitals operating for the benefit of the public. Whether a hospital is a public hospital, is a question of fact taking all circumstances into account. A major factor is whether its purpose is directed toward the public, not whether it is publicly or privately controlled.

Example – not-for-profit privately owned hospital is a public hospital

A hospital is privately owned and is funded in the form of payments based on a fee for the service provided to patients. The hospital does not operate for the purpose of distributing gain or profit to its members. The Government does not control the hospital. Its main activities involve the provision of acute medical and surgical care and associated accommodation and nursing services on the premises of the hospital. Private patients are entitled to access the hospital and, while the public has no right of admission, they are entitled to the services of the hospital provided they pay the corresponding fee for the services.

The hospital, while privately owned, is a public hospital and even if the public hospital is a registered public benevolent institution, the hospital capping threshold of $17,000 applies.

The term 'not-for-profit hospital' includes not-for-profit hospitals operated by a charity.

Hospital organisations that provide certain entertainment benefits under salary packaging arrangements may be eligible for a separate exemption cap. Refer to section 6.5 for further information.

FBT exemptions are also available to registered religious institutions and not-for-profit companies. These exemptions are not subject to capping. For more information see sections 6.6 and 20.5.

For information about:

hospitals, see Health organisations
registered public benevolent institutions (other than public or not-for-profit hospitals), see Is your organisation a public benevolent institution?
registered health promotion charities, see Is your organisation a health promotion charity?
the meaning of the word 'public', see Taxation Ruling TR 2000/10 Income tax: public libraries, public museums and public art galleries

6.4 FBT rebate

The FBT rebate is an entitlement to a rebate equal to a percentage of the gross FBT payable, subject to a capping threshold. Organisations that qualify for the FBT rebate are referred to as 'rebatable employers'. Rebatable employers are certain non-government, not-for-profit organisations. Organisations that may qualify for the FBT rebate include:

registered charities (other than public benevolent institutions or health promotion charities) that are an institution, not established under a government law and are endorsed by us as a tax concessions charity
certain scientific or public educational institutions
certain trade unions and employer associations located in Australia exempt from income tax
not-for-profit tax exempt organisations established for
- musical purposes
- community service purposes
not-for-profit tax exempt organisations established for the encouragement of
- science
- animal racing
- art
- a game or sport
- literature
- music
not-for-profit tax exempt organisations established for the purpose of promoting the development of
- aviation or tourism
- Australian information and communications technology resources
- Australia's agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources.

Registered charities must be endorsed by us to access the FBT rebate. The FBT rebate is only available to registered charities that are institutions.

The FBT rebate is not available to:

registered charities that are funds
registered charities that are institutions established by a government law. A government law is a law of the Commonwealth, a State or a Territory. Examples are public universities, public museums and public art galleries
registered public benevolent institutions and registered health promotion charities – these organisations are eligible for the FBT exemption

A registered charity is an entity who is registered by the ACNC as a charity.

For more information refer to Getting endorsed.

Other not-for-profit organisations can self-assess their entitlement to the FBT rebate provided they are a rebatable employer.

The FBT rebate is an entitlement to a rebate equal to a percentage of the gross FBT payable, subject to a capping threshold as follows.

FBT rebate percentage and capping threshold

FBT year ending	Rebate percentage	Capping threshold
31 March 2019 and later years	47%	$30,000

Note: The rebate percentage is the FBT rate for each relevant FBT year. If the total grossed-up taxable value of fringe benefits provided to an employee is more than the capping threshold, a rebate cannot be claimed for the FBT liability on the excess amount. The capping threshold applies even if the rebatable employer did not employ the employee for the full FBT year. For example, if the total grossed-up value of benefits provided to an employee between October and March was $15,000, a rebate applies to all of the FBT payable for providing these benefits.

The organisations that provide certain entertainment benefits under salary packaging arrangements may access a separate capping threshold. Refer to section 6.5 for further information.

6.5 Separate cap for salary packaged entertainment benefits

A separate single grossed-up cap of $5,000 applies to fringe benefits that are salary packaged meal entertainment and entertainment facility leasing expenses. This cap is available to employers able to access an FBT exemption or rebate for the FBT year ending 31 March 2017 and subsequent years. See sections 6.3 and 6.4 for information about the rebate.

Salary packaging

The separate cap only applies to meal entertainment or entertainment facility leasing benefits provided under a salary packaging arrangement. A salary packaging arrangement generally involves an arrangement between you and your employee, whereby your employee agrees to forgo part of their future entitlement to salary or wages in return for you providing them or an associate with benefits of a similar value. A salary packaging arrangement is commonly referred to as salary sacrifice or total remuneration packaging.

Entertainment

The following types of salary packaged entertainment are subject to the cap:

entertainment by way of food or drink
accommodation or travel in connection with, or to facilitate the provision of, such entertainment
entertainment facility leasing expenses.

Refer to Chapter 14 and Chapter 15 for more information about what is entertainment.

Separate cap

Salary packaged entertainment provided is now included in the capping thresholds referred to in sections 6.3 and 6.4. However, if these capping thresholds are exceeded in a particular year, it is raised by the lesser of:

$5,000, and
the total grossed-up taxable value of salary packaged entertainment benefits.

This means employers are provided with a single grossed-up cap of $5,000 per employee each FBT year for salary packaged entertainment benefits which remain eligible for concessional FBT treatment. The $5,000 cap is available even if you did not employ the employee for the full FBT year.

Grossing-up and the $5,000 cap

The $5,000 separate cap for meal entertainment and entertainment facility leasing expenses is the grossed-up amount. It is important to work out which gross-up rate to use to calculate whether or not the $5,000 cap has been exceeded. For more information, refer to Goods and Services Tax Ruling GSTR 2001/3 Goods and Services Tax: GST and how it applies to supplies of fringe benefits.

Exceeding the $5,000 cap

The amount of those benefits exceeding the separate grossed-up cap of $5,000 are included in calculating whether the value of all benefits an employee receives during the FBT year exceeds their general FBT exemption or rebate cap.

Remember, this separate cap only applies to fringe benefits that are meal entertainment and entertainment facility leasing expenses if they are under a salary packaging arrangement.

See section 6.9 for more information.

6.6 Concessions available for registered religious institutions

Your organisation is a registered religious institution if it is:

a registered charity with the ACNC
registered with the ACNC under the charity sub-type 'advancing religion', and
an institution.

For more information refer to Registered religious institutions: access to tax concessions.

FBT rebate

Religious institutions are eligible for the FBT rebate when they are a registered charity. If a religious institution is a charity it must be registered with the ACNC as a charity and endorsed by us as a charitable institution to access the FBT rebate.

For more information see section 6.4.

Other concessions

Registered religious institutions may also be eligible for FBT concessions for benefits they provide to:

religious practitioners
live-in carers
domestic employees.

A registered religious institution does not need to be endorsed by us to access these concessions, but it must be registered with the ACNC as a charity with a sub-type 'advancing religion'.

For more information refer to section 20.5 and also Taxation Ruling TR 2019/3 Fringe benefits tax: benefits provided to religious practitioners.

6.7 Not-for-profit companies and live-in residential carers

The following not-for-profit organisations that provide care for elderly or disadvantaged people, can provide certain FBT exempt benefits to live-in carers:

a company that is a registered charity
a not-for-profit company that is not a charity (referred to in the FBT legislation as a non-profit company).

The exemption is for live-in carers where the carer resides with the elderly or disadvantaged person in residential accommodation you provide. The benefits that may be exempt include the employees' live-in accommodation, residential fuel, meals or other food and drink.

For your organisation to be a not-for-profit company:

it must be a company that is not carried on for the purposes of profit or gain to its individual members
its constituent documents must prohibit it from making any distribution, whether in money, property or otherwise, to its members.

Your organisation can be a not-for-profit company and still make a profit. However, any profits it makes must be used to carry out its purposes. The profits must not be distributed to the members.

The prohibition on distributions applies while the organisation is operating, and on its winding up. If it permits the organisation's members to transfer the assets to themselves on winding up, it is not a not-for-profit company.

A not-for-profit company can make payments to its members as bona fide remuneration for services they have provided to it, and as reasonable compensation for expenses incurred on behalf of the organisation.

An organisation carried on for the joint or common benefit of members can qualify as a not-for-profit company. An example would be a professional association established to advance the professional interests of its members.

6.8 Other concessions

Car parking

A car parking fringe benefit and car parking expense payment fringe benefit is exempt from FBT when provided by:

registered charities
a scientific institution (other than an institution run for the purposes of profit or gain to its shareholders or members)
a public educational institution.

Remote area concessions

An extended definition of 'remote' applies to housing benefits provided for employees of:

a public hospital
a government body where the duties of the employee are exclusively performed in, or in connection with, a public hospital or a not-for-profit hospital
a hospital carried on by a not-for-profit society or a not-for-profit association that is a rebatable employer
a registered charity
a public ambulance service
a police service.

This means that more areas will be considered remote for the purposes of the:

remote area housing exemption explained at section 10.8
remote area residential fuel reduction explained at section 19.2.

6.9 Calculating FBT – benefits excluded from FBT capping thresholds

The following fringe benefits, which are excluded benefits for reporting purposes, are also specifically excluded from an employee's individual fringe benefits amount and, as such, are not included in the calculation for certain employer's respective capping thresholds:

car parking fringe benefits when provided by:
- registered public benevolent institutions
- registered health promotion charities
- public hospitals
- not-for-profit hospitals (including those carried on by a society or association that is a rebatable employer) and
- public ambulance services
meal entertainment (not salary packaged) – the provision of benefits that constitute the provision of meal entertainment that is not under a salary packaging arrangement, whether or not the employer elected to value the benefits as meal entertainment fringe benefits. This applies to meal entertainment provided by:
- registered public benevolent institutions
- registered health promotion charities
- public hospitals
- not-for-profit hospitals (including those carried on by a society or association that is a rebatable employer), and
- public ambulance services
entertainment facility leasing expenses (not salary packaged) when incurred by:
- registered public benevolent institutions
- registered health promotion charities
- public hospitals
- not-for-profit hospitals (including those carried on by a society or association that is a rebatable employer), and
- public ambulance services.

For rebatable employers, other than hospitals mentioned above, these benefits are not taken into account when determining the aggregate non-rebatable amount. They are, however, taken into account when determining the gross tax. See section 6.11 Calculating the FBT rebate for more information.

6.10 Calculating the FBT exemption

Where your organisation (registered health promotion charity or registered public benevolent institution or public or not-for-profit hospital or public ambulance service) provides employees with benefits above the capping threshold), you are subject to FBT on the aggregate non-exempt amount.

In order to calculate your FBT payable, you must first calculate the individual grossed-up type 1 and type 2 non-exempt amounts. To calculate the individual grossed-up type 1 and type 2 non-exempt amounts, and the FBT payable, you will need the following rates.

FBT year	FBT rate	Type 1 gross-up rate	Type 2 gross-up rate
Ending 31 March 2019 (and later years)	47%	2.0802	1.8868

Table 1 – Calculating the individual grossed-up type 1 and 2 non-exempt amounts

Step

Action

Result

Establish what the employee's individual fringe benefits amount would be if the capping concession was not available.

The individual fringe benefits amount is the value of all benefits, other than excluded benefits. For a list of excluded fringe benefits, refer to section 5.2.

$xxx

Identify the amount of GST-creditable fringe benefits included in the amount for Step 1.

$xxx

(Amount 1)

Identify those fringe benefits not taken into account under Amount 1.

(That is, the result from Step 1 minus the result from Step 2.)

$xxx

(Amount 3)

Determine the employee's share of the benefits that would be excluded fringe benefits if the capping concession was not available. For a list of excluded fringe benefits, refer to section 5.2.

Excluded benefits specifically not to be included in this calculation are listed in section 6.9.

$xxx

Identify the GST-creditable fringe benefits included in Step 4.

$xxx

(Amount 2)

Identify those excluded fringe benefits that are not taken into account under Amount 2.

(That is, the result from Step 4 minus the result from Step 5.)

$xxx

(Amount 4)

Add Amount 1 and Amount 2.

(That is, the result from Step 2 plus the result from Step 5.)

Type 1 individual base non-exempt amount

Use the following formula:

Type 1 individual base non-exempt amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 7 multiplied by type 1 gross-up rate.)

Individual grossed-up type 1 non-exempt amount

Add Amount 3 and Amount 4.

(That is, the result from Step 3 plus the result from Step 6.)

Type 2 individual base non-exempt amount

Use the following formula:

Type 2 individual base non-exempt amount	×	1
		1 - FBT rate

(That is, the result from Step 9 multiplied by type 2 gross-up rate.)

Individual grossed-up type 2 non-exempt amount

Calculating your FBT payable

After calculating the individual grossed-up type 1 and type 2 amounts, you can then calculate your FBT payable.

If	Then
you have not provided entertainment benefits under a salary packaging arrangement	follow the steps in Table 2a.
you have provided entertainment benefits under a salary packaging arrangement to your employees	follow the steps in Table 2b.

Table 2a – Use this table if you did not provide salary packaged entertainment benefits

Step	Action	Result
1	For each employee add: the individual grossed-up type 1 non-exempt amount (from Table 1, Step 8) the individual grossed-up type 2 non-exempt amount (from Table 1, Step 10).	The result is the individual grossed-up non-exempt amount.
2	Subtract the appropriate capping threshold from the individual grossed-up non-exempt amount for each employee. Refer to section 6.3 for the appropriate capping threshold.	If the individual grossed-up non-exempt amount is less than or equal to the appropriate capping threshold, the amount calculated under this step is nil.
3	Add together all the amounts calculated under Step 2 for each employee.	The total is your aggregate non-exempt amount.
4	Multiply the result in Step 3 by the FBT rate.	The result is your FBT payable.

Table 2b – Use this table if you provided salary packaged entertainment benefits

Step

Action

Result

For each employee add:

the individual grossed-up type 1 non-exempt amount

(from Table 1, Step 8)
the individual grossed-up type 2 non-exempt amount

(from Table 1, Step 10).

The result is the individual grossed-up non-exempt amount.

Subtract the appropriate capping threshold from the individual grossed-up non-exempt amount for each employee.

Refer to section 6.3 for the appropriate capping threshold.

$xxx

If the individual grossed-up non-exempt amount is less than or equal to the appropriate capping threshold, the amount calculated under this step is nil.

If this amount is positive, continue to Step 3.

If this amount is nil or less do not continue.

From Step 2 at Table 1 (Amount 1), determine how much of that amount relates to salary packaged meal entertainment and entertainment facility leasing expense benefits.

$xxx

GST-creditable salary packaged entertainment benefits

Use the following formula:

Type 1 individual base non-exempt amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 3 multiplied by the type 1 gross-up rate.)

The result is the grossed-up GST creditable salary packaged entertainment benefits

From Step 3 at Table 1 (Amount 3), determine how much of that amount relates to salary packaged meal entertainment and entertainment facility leasing expense benefits.

$xxx

Non-GST creditable salary packaged entertainment benefits

Use the following formula:

Non-GST creditable salary packaged entertainment benefits	×	1
		1 - FBT rate

(That is, the result from Step 5 multiplied by the type 2 gross-up rate.)

Grossed-up non-GST creditable salary packaged entertainment benefits

Add the grossed-up GST creditable and grossed-up non-GST creditable salary packaged entertainment benefit amounts.

(That is, the result from Step 4 plus the result from Step 6.)

Grossed-up salary packaged entertainment benefits

Subtract from the amount calculated at Step 2 the lesser of:

$5,000 and
the amount calculated at Step 7.

(That is, the result from Step 2 minus $5,000 or the result from Step 2 minus the result from Step 7.)

$xxx

If the result is less than $0, include $0 here.

Add together all the amounts calculated under Step 8 for each employee.

The total is your aggregate non-exempt amount.

Multiply the result in Step 9 by the FBT rate.

The result is your FBT payable.

Example – FBT exemption capping threshold exceeded

An employee of a registered health promotion charity receives the following benefits during the FBT year ending 31 March 2019:

Car fringe benefit	$7,700	GST taxable supply with an entitlement to GST credits.
Salary packaged restaurant meals	$3,300	Valued as expense payment benefits. Exempt benefits under section 57A with no entitlement to GST credits.
Reimbursement of school fees	$6,000	Expense payment fringe benefit. GST-free supplies with no entitlement to GST credits.
Remote area rent reimbursement	$3,000	Excluded fringe benefit for payment summary reporting purposes only. No entitlement to GST credits.

In order to calculate their FBT payable, the registered health promotion charity must first calculate the individual grossed-up type 1 and type 2 non-exempt amounts.

Table 1 – Calculating the individual grossed-up type 1 and 2 non-exempt amounts

Step

Action

Result

Establish what the employee's individual fringe benefits amount would be if the capping concession was not available.

The individual fringe benefits amount is the value of all benefits other than excluded fringe benefits.

The individual fringe benefits amount =

Car fringe benefit + salary packaged restaurant meals + reimbursement of school fees.

$7,700 + $3,300 + $6,000 = $17,000

The individual fringe benefits amount is $17,000.

Identify the amount of GST-creditable fringe benefits included in the amount for Step 1.

$7,700

(Amount 1)

In this example, the employer is entitled to GST credits for the car fringe benefit.

Identify those fringe benefits not taken into account under amount 1.

(That is, the result from Step 1 minus the result from Step 2.)

$17,000 - $7,700 = $9,300

(Amount 3)

Determine the employee's share of the benefits that would be excluded fringe benefits if the capping concession was not available. These excluded fringe benefits are listed in section 5.2.

Excluded benefits specifically not to be included in this calculation are listed in section 6.9.

$3,000

The excluded fringe benefit is the remote area rent reimbursement.

Identify the GST-creditable fringe benefits included in Step 4.

$0

(Amount 2)

The employer is not entitled to GST credits for the remote area rent reimbursement.

Identify those excluded fringe benefits that are not taken into account under Amount 2.

(That is, the result from Step 4 minus the result from Step 5.)

$3,000 - $0 = $3,000

(Amount 4)

Add Amount 1 and Amount 2.

(That is, the result from Step 2 plus Step 5.)

$7,700 + $0 = $7,700

The type 1 individual base non-exempt amount is $7,700.

Use the following formula:

Type 1 individual base non-exempt amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 7 multiplied by type 1 gross-up rate.)

$7,700 × 2.0802 = $16,018

(rounded to the nearest dollar).

The individual grossed-up type 1 non-exempt amount is $16,018.

Add Amount 3 and Amount 4.

(That is, the result from Step 3 plus Step 6.)

$9,300 + $3,000 = $12,300

The type 2 individual base non-exempt amount is $12,300.

Use the following formula:

Type 2 individual base non-exempt amount	×	1
		1 – FBT rate

(That is, the result from Step 9 multiplied by type 2 gross-up rate.)

$12,300 × 1.8868 = $23,208

(rounded to the nearest dollar).

The individual grossed-up type 2 non-exempt amount is $23,208.

After calculating the individual grossed-up type 1 and type 2 amounts, the registered health promotion charity will calculate their FBT payable by following the steps in Table 2b.

Table 2b – Calculating the FBT payable

This table is used as the registered health promotion charity provided salary packaged entertainment benefits.

Step

Action

Result

For each employee add:

the individual grossed-up type 1 non-exempt amount

(from Table 1, Step 8)
the individual grossed-up type 2 non-exempt amount

(from Table 1, Step 10).

$16,018 + $23,208 = $39,226

The individual grossed-up non-exempt amount is $39,226.

Subtract the appropriate capping threshold from the individual grossed-up non-exempt amount for each employee.

The capping threshold for the FBT year ending 31 March 2019 for the registered health promotion charity is $30,000.

$39,226 - $30,000 = $9,226

From Step 2 at Table 1 (Amount 1), determine how much of that amount relates to salary packaged meal entertainment and entertainment facility leasing expense benefits.

The GST-creditable salary packaged entertainment benefits is $0.

Use the following formula:

Type 1 individual base non-exempt amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 3 multiplied by type 1 gross-up rate.)

The grossed-up GST creditable salary packaged entertainment benefits is $0.

From Step 3 at Table 1 (Amount 3), determine how much of that amount relates to salary packaged meal entertainment and entertainment facility leasing expense benefits.

$3,300 – salary packaged restaurant meals

The non-GST creditable salary packaged entertainment benefits is $3,300

Use the following formula:

Non-GST creditable salary packaged entertainment benefits	×	1
		1 – FBT rate

(That is, the result from Step 5 multiplied by type 2 gross-up rate.)

$3,300 × 1.8868 = $6,226

(rounded to the nearest dollar)

The grossed-up non-GST creditable salary packaged entertainment benefits is $6,226.

Add the grossed-up GST creditable and grossed-up non-GST creditable salary packaged entertainment benefit amounts.

(That is, the result from Step 4 plus the result from Step 6.)

$0 + $6,226

= $6,226

The grossed-up salary packaged entertainment benefits is $6,226.

Subtract from the amount calculated at Step 2 the lesser of:

$5,000 and
the amount calculated at Step 7 ($6,226).

(That is, the result from Step 2 minus $5,000 or the result from Step 2 minus the result from Step 7.)

$9,226 - $5,000 = $4,226

Add together all the amounts calculated under Step 8 for each employee.

As there is only one employee, the result is the same as for Step 8. The aggregate non-exempt amount is $4,226.

Multiply the result in Step 9 by the FBT rate.

$4,226 × 0.47

= $1,986.22

The FBT payable is $1,986.22.

6.11 Calculating the FBT rebate

Use the following formula to calculate the rebate available to you:

FBT rebate percentage	×	(gross tax – aggregate non-rebatable amount)	×	rebatable days in year
				total days in year

FBT rebate percentage is the FBT rate for the relevant FBT year.
Gross tax is the FBT you would have paid if you had not been entitled to claim a rebate.
Rebatable days in the year are the number of days during the FBT year that you qualified as a rebatable employer.

For the purpose of calculating the rebate, the total days in the year means the number of days you were an employer. It does not refer to the total number of days in the year.

The aggregate non-rebatable amount is the proportion of the taxable value of fringe benefits for which you can't obtain a rebate.

In order to calculate your FBT payable, you can use the steps in the tables below.

To calculate your FBT payable, you need to first calculate your gross tax (see Table 1). You also need the following rates.

Table – FBT Rate, gross-up rates, rebate percentage and cap

FBT year ending	FBT rate	Type 1 gross-up rate	Type 2 gross-up rate	FBT rebate percentage	FBT rebate cap	Salary packaged meal entertainment and entertainment facility leasing cap
31 March 2018 (and onwards)	47%	2.0802	1.8868	47%	$30,000	$5,000

Table 1 – Calculating your gross tax

Follow the steps below to calculate your gross tax.

Step

Action

Result

Establish the employee's individual fringe benefits amount. The individual fringe benefits amount is the value of all benefits other than excluded benefits.

For a list of excluded fringe benefits, refer to Reportable fringe benefits.

$xxx

Identify the amount of GST-creditable fringe benefits included in the amount for Step 1.

$xxx

(Amount 1)

Identify those fringe benefits not taken into account in the calculation for Amount 1.

(That is, the result from Step 1 minus the result from Step 2.)

$xxx

(Amount 3)

Determine the employee's share of the benefits that would be excluded fringe benefits. These excluded fringe benefits are listed in Reportable fringe benefits.

$xxx

Identify the GST-creditable fringe benefits included in Step 4.

$xxx

(Amount 2)

Identify those excluded fringe benefits that are not taken into account under Amount 2.

(That is, the result from Step 4 minus the result from Step 5.)

$xxx

(Amount 4)

Add Amount 1 and Amount 2.

(That is, the result from Step 2 plus the result from Step 5.)

Type 1 individual fringe benefits taxable amount

Use the following formula:

Type 1 individual fringe benefits amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 7 multiplied by type 1 gross-up rate.)

Individual grossed-up type 1 fringe benefits taxable amount

Add Amount 3 and Amount 4.

(That is, the result from Step 3 plus the result from Step 6.)

Type 2 individual fringe benefits taxable amount

Use the following formula:

Type 2 individual fringe benefits amount	×	1
		1 - FBT rate

(That is, the result from Step 9 multiplied by type 2 gross-up rate.)

Individual grossed-up type 2 fringe benefits amount

For each employee add:

the individual grossed-up type 1 fringe benefits amount
the individual grossed-up type 2 fringe benefits amount.

(That is, the result from Step 8 plus the result from Step 10.)

Individual fringe benefits taxable amount

Add together the individual fringe benefits taxable amount calculated for every employee.

(That is, the result from Step 11 for every employee.)

Total fringe benefits taxable amount

Multiply the total fringe benefits taxable amount by the FBT rate.

(That is, the result from Step 12 multiplied by FBT rate.)

Gross tax

You need to then calculate your FBT rebate (see Table 2, following).

If	Then
you do not provide any of the following benefits: benefits that would be a car parking fringe benefit benefits that constitute the provision of meal entertainment or entertainment facility leasing expenses; and not provided under a salary packaging arrangement	enter the amount calculated at Step 12 in Table 1 into Step 11 in Table 2 below complete Step 12 in Table 2 below then move on to Table 2a or Table 2b then move on to Table 3.
you do provide any of the following benefits: benefits that would be a car parking fringe benefit benefits that constitute the provision of meal entertainment (and that are provided under a salary packaging arrangement benefits attributable to entertainment facility leasing expenses (and that are provided under a salary packaging arrangement	start from Step 1 in Table 2 below.

Table 2 – Calculating your FBT rebate

Follow the steps below to calculate your FBT rebate.

Step

Action

Result

Establish the employee's individual fringe benefits amount.

The individual fringe benefits amount is the value of all benefits other than excluded benefits. These excluded fringe benefits are listed in Reportable fringe benefits.

(This will be the same amount calculated in Table 1, Step 1.)

$xxx

Identify the amount of GST-creditable fringe benefits included in the amount for Step 1.

(This will be the same amount calculated in Table 1, Step 2.)

$xxx

(Amount 1)

Identify those fringe benefits not taken into account in the calculation for Step 2.

(That is, the result for Step 1 minus the result for Step 2.

This will be the same amount calculated in Table 1, Step 3.)

$xxx

(Amount 3)

Determine the employee's share of the benefits that would be excluded fringe benefits. These excluded fringe benefits are listed in Reportable fringe benefits.

Excluded benefits specifically not to be included in this calculation are listed in section 6.9.

$xxx

Identify the GST-creditable fringe benefits included in Step 4.

$xxx

(Amount 2)

Identify those excluded fringe benefits that are not taken into account under Step 5.

(That is, the result for Step 4 minus the result for Step 5.)

$xxx

(Amount 4)

Add Amount 1 and Amount 2.

(That is, the result from Step 2 plus the result from Step 5.)

Type 1 individual base non-rebatable amount

Use the following formula:

Type 1 individual base non-rebatable amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 7 multiplied by type 1 gross-up rate.)

Individual grossed-up type 1 non-rebatable amount

Add Amount 3 and Amount 4

(That is, the result from Step 3 plus the result from Step 6.)

Type 2 individual base non-rebatable amount

Use the following formula:

Type 2 individual base non-rebatable amount	×	1
		1 - FBT rate

(That is, the result from Step 9 multiplied by type 2 gross-up rate.)

Individual grossed-up type 2 non-rebatable amount

For each employee add:

the individual grossed-up type 1 non-rebatable amount for the FBT year

(That is, the result from Step 8.)
the individual grossed-up type 2 non-rebatable amount for the FBT year

(That is, the result from Step 10.)

The result is the individual grossed-up non-rebatable amount for the employee.

Subtract the FBT rebate cap from the individual grossed-up non-rebatable amount for each employee.

(That is, the result from Step 11 minus the FBT rebate cap.)

If the individual grossed-up non-rebatable amount for an employee is equal to or less than the FBT rebate cap, the amount calculated under this step is nil.

The steps you continue with to calculate your rebate depend on whether you have provided salary packaged meal entertainment and entertainment facility leasing expense benefits to your employees.

If	Then
you have not provided meal entertainment or entertainment facility leasing expense benefits under a salary packaging arrangement	follow the steps in Table 2a.
you have provided meal entertainment or entertainment facility leasing expense benefits under a salary packaging arrangement	follow the steps in Table 2b.

Table 2a – Calculating the FBT rebate continued

Use this table if you did not provide salary packaged entertainment benefits

Step

Action

Result

Add together the amounts calculated at Table 2, Step 12 for each employee.

$xxx

Multiply the total amount calculated under Step 1 by the FBT rate.

The result is your aggregate non-rebatable amount for the FBT year.

Use this formula:

FBT rebate percentage	×	(gross tax – aggregate non-rebatable amount)	×	number of days in FBT year you were a rebatable employer
				total days in FBT year

That is:

FBT rebate percentage	×	(table 1, Step 13 minus Table 2a Step 2)	×	rebatable days in year
				total days in year

The result is your FBT rebate.

You then need to calculate your FBT payable (see table 3, following).

Table 2b – Calculating the FBT rebate continued

Use this table if you provide salary packaged entertainment benefits

Note: If the amount calculated at Table 2, Step 12 is nil, you can enter $0 at Step 7 in the table below for that employee and continue to Step 8.

Step

Action

Result

Determine how much of the employee's individual fringe benefits amount relates to salary packaged entertainment benefits.

(That is, how much of the amount at Table 1, Step 1 relates to salary packaged meal entertainment and entertainment facility leasing expense benefits.)

$xxx

Determine how much of the employee's individual fringe benefits amount relates to GST creditable salary packaged entertainment benefits.

(That is, how much of the amount at Table 1 Step 2 relates to GST creditable salary packaged entertainment benefits.)

$xxx

GST creditable salary packaged entertainment benefits

Determine how much of the individual grossed-up non-rebatable amount relates to non-GST creditable salary packaged entertainment benefits

(That is, the result for Step 1 minus the result for Step 2.)

$xxx

Non-GST creditable salary packaged entertainment benefits.

Gross up the GST creditable salary packaged entertainment benefits using the following formula:

GST creditable salary packaged entertainment benefits	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 2 multiplied by type 1 gross-up amount.)

Individual grossed-up GST creditable salary packaged entertainment benefits amount.

Gross up the non-GST creditable salary packaged entertainment benefits using the following formula

Non-GST creditable salary packaged entertainment benefits	×	1
		1 - FBT rate

(That is, the result from Step 3 multiplied by type 2 gross-up rate.)

Individual grossed-up non-GST creditable salary packaged entertainment benefits.

Add the Individual grossed-up GST creditable and Individual grossed-up non-GST creditable salary packaged entertainment benefits.

(That is, add the amount calculated at Step 4 and Step 5.)

Individual grossed-up salary packaged entertainment benefits

Subtract from the amount calculated at Table 2, Step 12 the lesser of:

$5,000 and
the amount calculated at Step 6.

(but not below nil)

$xxx

Use nil if the result is less than $0.

Add together the amounts calculated at Step 7 for each employee.

$xxx

Multiply the amount calculated under Step 8 by the FBT rate.

The result is your aggregate non-rebatable amount for the FBT year.

Use the following formula:

FBT rebate percentage	×	(gross tax – aggregate non-rebatable amount)	×	number of days in FBT year you were a rebatable employer
				total days in FBT year

That is:

FBT rebate percentage	×	(Table 1, Step 13 minus Table 2b Step 9)	×	rebatable days in year
				total days in year

The result is your FBT rebate.

You then need to calculate your FBT payable (see Table 3).

Table 3 – Calculating your FBT payable

Use the following step to calculate your FBT payable.

Step

Action

Result

Gross tax – FBT rebate

(That is, the result from Table 1, Step 13 minus the result from Table 2a, Step 3 or Table 2b, Step 10.)

The result is your FBT payable.

Example – FBT rebate capping threshold exceeded

A rebatable employer provides the following benefits to a single employee during the FBT year. The employer was an employer for the full year and a rebatable employer from 31 October 2018 in the FBT year ending 31 March 2019.

Car fringe benefit	$7,700	GST taxable supply with an entitlement to GST credits.
Salary packaged restaurant meals	$3,300	Valued as expense payment and there is an entitlement to GST credits.
Reimbursement of school fees	$6,000	Expense payment fringe benefit. GST-free supply with no entitlement to GST credits.
Remote area rent reimbursement	$3,000	Excluded fringe benefit for payment summary or income statement reporting purposes only. No entitlement to GST credits.

To calculate their FBT payable, the rebatable organisation needs to first calculate their gross tax (see Table 1).

Table 1 – Calculating the gross tax

Step

Action

Result

Establish the employee's individual fringe benefits amount. The individual fringe benefits amount is the value of all benefits other than excluded benefits.

Car fringe benefit + restaurant meals + reimbursement of school fees

$7,700 + $3,300 + $6,000 = $17,000

The individual fringe benefits amount is $17,000.

Identify the amount of GST-creditable fringe benefits included in the amount for Step 1.

$11,000

(Amount 1)

In this example, the employer is entitled to GST credits for the car fringe benefit and salary packaged restaurant meals.

Identify those fringe benefits not taken into account in the calculation for Amount 1

(That is, the result from Step 1 minus the result from Step 2.)

$17,000 - $11,000 = $6,000

(Amount 3)

Determine the employee's share of the benefits that would be excluded fringe benefits.

$3,000

The excluded fringe benefit is the remote area rent reimbursement.

Identify the GST-creditable fringe benefits included in Step 4.

$0

(Amount 2)

In this example, the employer is not entitled to GST credits for the remote area rent reimbursement.

Identify those excluded fringe benefits that are not taken into account under Amount 2

(That is, the result from Step 4 minus the result from Step 5.)

$3,000 - $0 = $3,000

(Amount 4)

Add Amount 1 and Amount 2

(That is, the result from Step 2 plus the result from Step 5.)

$11,000 + $0 = $11,000

The type 1 individual fringe benefits taxable amount is $11,000.

Use the following formula:

Type 1 individual base non-exempt amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 7 multiplied by 2.0802.)

$11,000 × 2.0802 = $22,882

(rounded to the nearest dollar)

The individual grossed-up type 1 fringe benefits taxable amount is $22,882.

Add Amount 3 and Amount 4

(That is, the result from Step 3 plus the result from Step 6.).

$6,000 + $3,000 = $9,000

The type 2 individual fringe benefits taxable amount is $9,000.

Use the following formula:

Type 2 individual fringe benefits amount	×	1
		1 – FBT rate

(That is, the result from Step 9 multiplied by 1.8868.)

$9,000 × 1.8868 = $16,981

(rounded to the nearest dollar)

The individual grossed-up type 2 fringe benefits amount is $16,981.

For each employee add:

the individual grossed-up type 1 fringe benefits amount
the individual grossed-up type 2 fringe benefits amount

(That is, the result from Step 8 plus the result from Step 10.)

$22,882 + $16,981 = $39,863

The individual fringe benefits taxable amount is $39,863.

Add together the individual fringe benefits taxable amount calculated for every employee

(That is, the result from Step 11 for every employee.)

There is only one employee, so the total fringe benefits taxable amount is $39,863.

Multiply the total fringe benefits taxable amount by the FBT rate

(That is, the result from Step 12 multiplied by 47%.)

$39,863 × 0.47 = $18,735.61

The gross tax is $18,735.61.

The employer then needs to then calculate their FBT rebate (see Table 2).

Table 2 – Calculating your FBT rebate

Step

Action

Result

Establish the employee's individual fringe benefits amount.

The individual fringe benefits amount is the value of all benefits other than excluded benefits.

(This will be the same amount calculated in Table 1, Step 1).

$17,000

(From Table 1, Step 1)

Identify the amount of GST-creditable fringe benefits included in the amount for Step 1.

(This will be the same amount calculated in Table 1, Step 2).

$11,000

(Amount 1)

(From Table 1, Step 2)

Identify those fringe benefits not taken into account in the calculation for Step 2

(That is, the result from Step 1 minus the result from Step 2.

This will be the same amount calculated in Table 1, Step 3).

$6,000

(Amount 3)

(From Table 1, Step 3)

Determine the employee's share of the benefits that would be excluded fringe benefits. These excluded fringe benefits are listed in Reportable fringe benefits.

Excluded benefits specifically not to be included in this calculation are listed in section 6.8.

$3,000

(The $3,000 is the remote area rent reimbursement. The restaurant meals of $3,300 are provided under a salary packaging arrangement and are not excluded in this FBT year).

Identify the GST-creditable fringe benefits included in Step 4.

$0

(Amount 2)

(The employer is not entitled to GST credits for the remote area rent reimbursement).

Identify those excluded fringe benefits that are not taken into account under Step 5.

(That is, the result from Step 4 minus the result from Step 5.)

$3,000 - $0 = $3,000

(Amount 4)

Add Amount 1 and Amount 2.

(That is, the result from Step 2 plus the result from Step 5.)

$11,000 +$0 = $11,000

The type 1 individual base non-rebatable amount is $11,000.

Use the following formula:

Type 1 individual base non-rebatable amount	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 7 multiplied by 2.1463.)

$11,000 × 2.0802 = $22,882

(rounded to nearest dollar)

The individual grossed-up type 1 non-rebatable amount is $22,882.

Add Amount 3 and Amount 4

(That is, the result from Step 3 plus the result from Step 6.)

$6,000 + $3,000 = $9,000

The type 2 individual base non-rebatable amount is $9,000.

Use the following formula:

Type 2 individual base non-rebatable amount	×	1
		1 – FBT rate

(That is, the result from Step 9 multiplied by 1.8868.)

$9,000 × 1.8868 = $16,981

(rounded to the nearest dollar)

The individual grossed-up type 2 non-rebatable amount is $16,981.

For each employee add:

the individual grossed-up type 1 non-rebatable amount for the FBT year

(That is, the result from Step 8.)
the individual grossed-up type 2 non-rebatable amount for the FBT year

(That is, the result from Step 10.)

$22,882 + $16,981 = $39,863

The individual grossed-up non-rebatable amount is $39,863.

Subtract $30,000 from the individual grossed-up non-rebatable amount for each employee.

$39,863 - $30,000 = $9,863

Table 2b – Calculating the FBT rebate continued

The employer must use Table 2b to calculate the FBT rebate as they provided salary packaged entertainment benefits.

Step

Action

Result

Determine how much of the employee's individual fringe benefits amount relates to salary packaged entertainment benefits

(That is, how much of the amount at Table 1, Step 1 relates to salary packaged meal entertainment and entertainment facility leasing expense benefits.)

$3,300

The salary packaged restaurant meals of $3,300 are meal entertainment.

Determine how much of the employee's individual fringe benefits amount relates to GST creditable salary packaged entertainment benefits

(That is, how much of the amount at Table 1 Step 2 relates to GST creditable salary packaged entertainment benefits.)

$3,300

That salary packaged restaurant meals are GST creditable salary packaged entertainment benefits.

Determine how much of the individual grossed-up non-rebatable amount relates to non-GST creditable salary packaged entertainment benefits

(That is, the result for Step 1 minus the result for Step 2.)

$3,300 - $3,300 = $0

There are no non-GST creditable salary packaged entertainment benefits.

Gross up the GST creditable salary packaged entertainment benefits using the following formula:

GST creditable salary packaged entertainment benefits	×	FBT rate + GST rate
		(1 – FBT rate) × (1 + GST rate) × FBT rate

(That is, the result from Step 2 multiplied by type 1 gross-up amount.)

$3,300 × 2.0802 = $6,864.66

The Individual grossed-up GST creditable salary packaged entertainment benefits amount is $6,864.66.

Gross up the non-GST creditable salary packaged entertainment benefits using the following formula

Non-GST creditable salary packaged entertainment benefits	×	1
		1 – FBT rate

(That is, the result from Step 3 multiplied by type 2 gross-up rate.)

$0 × 1.8868 = $0

The Individual grossed-up non-GST creditable salary packaged entertainment benefits amount is $0.

Add the Individual grossed-up GST creditable and Individual grossed-up non-GST creditable salary packaged entertainment benefits

(That is, add the amount calculated at Step 4 and Step 5.)

$6,864.66 + $0 =$6,864.66

The Individual grossed-up salary packaged entertainment benefits is $6,864.66.

Subtract from the amount calculated at Table 2, Step 12 the lesser of:

$5,000 and
the amount calculated at Step 6 ($6,864.66).

$9,863 - $5,000 = $4,863

Add together the amounts calculated at Step 7 for each employee.

There is only one employee, so this amount is $4,863.

Multiply the amount calculated under Step 8 by the FBT rate.

$4,863 × 0.47 = $2,285.61

The aggregate non-rebatable amount is $2,285.61.

Use the following formula:

FBT rebate percentage	×	(gross tax – aggregate non-rebatable amount)	×	number of days in FBT year you were a rebatable employer
				total days in FBT year

That is:

FBT rebate percentage	×	(Table 1, Step 13 minus Table 2b Step 9)	×	rebatable days in year
				total days in year

0.47 × ($18,735.61 - $2,285.61) × 152/365 0.47 × $16,450 × 152/365 = $3,219.69

The FBT rebate is $3,219.69.

The employer then needs to calculate their FBT payable

Use the following step to calculate your FBT payable.

Step

Action

Result

Gross tax – FBT rebate

(That is, the result from table 1, Step 13 minus the result from Table 2b, Step 10.)

$18,735.61 - $3,219.69 = $15,515.92

The FBT payable is $15,515.92.

6.12 Reportable fringe benefits

If the value of certain fringe benefits provided to your employees or their associates exceeds $2,000 in an FBT year, you must record the grossed-up taxable value of those benefits on their payment summaries for the corresponding income year.

This FBT reporting requirement applies even if you organisation is not liable to pay FBT. For a list of benefits that are excluded from the reporting requirements, refer to Reportable fringe benefits.

More information

For more on:

reportable fringe benefits, refer to Reportable fringe benefits – facts for employees
the FBT gross-up rates, refer to Taxation Ruling TR 2001/2 Fringe benefits tax: The operation of the new fringe benefits tax gross-up formula to apply from 1 April 2000
the interaction between FBT and GST, refer to Goods and Services Tax Ruling GSTR 2001/3 Goods and Services Tax: GST and how it applies to supplies of fringe benefits
charities, refer to Taxation Ruling TR 2011/4 Income tax and fringe benefits tax: charities.

Latest update

May 2024

Section	Changes and updates
6.9	Information added to clarify how the benefits excluded from the capping thresholds applies to not-for-profit hospitals and also rebatable employers.

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 7 - Car fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

Where a vehicle is provided or made available to your employee (or their associate) for their private use, it may be a 'car benefit' or a 'residual benefit'. This Chapter deals with the provision of a car benefit.

A car benefit (as defined in section 7.1) is subject to FBT where it is provided in respect of employment and is not an exempt benefit.

Like all fringe benefits, you, as the employer, will be required to calculate and pay the FBT liability in relation to the car fringe benefit. This Chapter helps you to work out the taxable value of a car fringe benefit.

7.1 What is a car benefit?

Where you, or an associate of yours, make a car available to an employee (or their associate) for private use, a car benefit may arise. A car benefit may also arise where you, or an associate of yours, have organised someone else to make that car available. In some circumstances, the FBT rules will also deem that a car is being made available to an employee.

A car fringe benefit will generally arise if a car which is held by the employer is:

used for private purposes by the employee or their associate, or
taken to be available for private use by an employee or their associate.

Note: The car needs to be provided in respect of the employment of the employee.

All subsequent references to an 'employee' in this Chapter are references to the employee and their associates.

If a vehicle you (or your associate) provide does not satisfy the above requirements, you may provide a residual benefit. This will most commonly arise where the vehicle that you have provided is not a 'car' as defined in the FBT rules. Miscellaneous Taxation Ruling MT 2034 Fringe benefits tax: private use of motor vehicles other than cars outlines when use of a vehicle other than a car will give rise to FBT. Section 18.6 explains how to calculate the taxable value of a residual benefit.

The following table will help you to determine whether a car benefit is provided and how to calculate the 'taxable value' of the car fringe benefit.

7.1.1 Working out if a car benefit is provided and the taxable value of the car fringe benefit

Table 1: Working out if a car benefit is provided and the taxable value
Step	Action	Detail	Decision
1	Is the vehicle a 'car'?	Section 7.2 outlines what is a car for the purposes of determining if you provide a car benefit.	No: A car benefit is not provided but you may provide a residual benefit. MT 2034 deals with vehicles that fall within the residual benefit rules. Section 18.6 explains how to calculate the taxable value in respect of the vehicle. Yes: Go to step 2.
2	Is the car held by you or your associate?	You hold a car when you own it or lease it. Alternatively, you or your associate may enter into an arrangement with another party for them to provide the car to your employee. Section 7.3 outlines when a car is held by you.	No: A car benefit is not provided. Yes: Go to step 3.
3	Do you provide a car for your employee to use for private use or is the car available for the employee's private use? And The car is provided or made available to the employee in respect of their employment?	A car is used by your employee for private use even if they have done so in accordance with the directions given by you or another person. A car is available for private use if: it is garaged or parked, at or near your employee's residence, or the car is not parked at your business premises and either your employee is entitled to use the car for private use, or your employee has the keys to the car even when they are not working. See sections 7.3 and 7.4 to determine if you provide or make available a car for your employee's private use.	No: A car benefit is not provided. Yes: Go to step 4.
4	Is the car an emergency service car?	Section 7.4.4 outlines the special rules that apply to emergency service cars.	No: Go to step 5. Yes: If the car is not used for private use a car benefit is not provided. If the car is used for private use, go to step 5.
5	Is the car registered?	Section 7.6 outlines the requirements of certain exemptions from FBT.	No: A car benefit is not provided. Yes: Go to step 6.
6	Is the car a taxi, panel van or utility truck designed to carry a load of less than 1 tonne? Or Another road vehicle that is not designed principally to carry passengers and is designed to carry a load of less than 1 tonne?	Section 7.5 outlines where certain cars are exempt from FBT provided employee's private use of these vehicles is limited.	Yes: Go to step 7. No: Go to step 8.
7	Is the car used by the employee only to travel from their place of residence to their place of employment and while on work?	Section 7.5 outlines where certain cars are exempt from FBT provided employee's private use of these vehicles is limited.	Yes: A car benefit is exempt from FBT if it is only used for home to work travel, and any other private use is minimal and ad hoc. If the car is used privately and that private use is more than minimal and ad hoc, go to step 8. No: Go to step 8.
8	Are you a personal service entity that provides more than one car?	Section 7.6 outlines special rules that apply to personal service entities.	Yes: You do not provide a car benefit for the second and subsequent cars you provide. Go to step 9 to determine if you provide a car benefit for one of the cars you provide. No: Go to step 9.
9	Is the car provided as part of a salary package arrangement?	If the car is not provided as part of a salary packaging arrangement, the car may be exempt from FBT if: the car is provided for private use minimally and on an ad hoc basis, and the notional taxable value of the benefit in the FBT year is less than $300 (determined as if the benefit was a residual fringe benefit). Section 20.8 outlines when the minor benefits exemption applies.	Yes: Go to step 10. No: If the use is minor, you do not provide a car fringe benefit. If the use is not minor go to step 10.
10	Did you elect to use the operating cost method to value the benefit which needs to be made prior to 21 May for the FBT year that you provided the car?	See section 7.7 for the requirements to be satisfied to make the election and for the records you are required to keep for both methods.	No: Use the statutory formula method to value the benefit. See section 7.8. Yes: Use the operating cost method to value the benefit. See section 7.9. Note that if the statutory formula method results in a lower taxable value, the statutory formula method will apply, even if you elect to use the operating cost method.

7.2 What is a car?

A car is:

a road vehicle powered by a motor (petrol, diesel, hybrid or electric)
designed to carry a load of less than one tonne, and
designed to carry fewer than 9 passengers (for example, a people mover that is designed to carry 9 or more passengers is not a 'car').

A car is not:

a motorcycle, electric bicycle, scooter or moped
a hearse
a semi-trailer
a station wagon, panel van or ute designed to carry more than one tonne
a motor vehicle which is not a road vehicle, such as a boat, train, tram, or aeroplane, or
motor vehicles which cannot be registered for use on a public road because of their design, such as
- motorised skateboards and kick-scooters, which are only permitted to be used on separated pedestrian and bicycle paths
- golf carts or go-karts, which may only be used on roads in very limited circumstances.

7.2.1 How do I work out if the vehicle is designed to carry a load of less than one tonne?

Table 2: Working out if the vehicle is designed to carry a load of less than one tonne
Step 1	Work out the gross vehicle weight. This is specified in the vehicle's compliance plate. It is the maximum the vehicle can weigh when fully loaded as specified by the manufacturer with all of its fluids, oils, coolants, a full tank of fuel and passengers.
Step 2	Work out the basic kerb weight. Basic kerb weight is the weight of a vehicle without passengers and goods, with all of its fluids, oils, coolants, a full tank of fuel and all standard equipment.
Step 3	Subtract the basic kerb weight from the gross vehicle weight. This gives you the designed load capacity and this is the carrying capacity of the vehicle. Gross vehicle weight – (basic kerb weight) = (designed load capacity)

Designed load capacity takes into account accessories fitted by the manufacturer that are standard equipment for the particular vehicle. The designed load capacity does not change by modifying a vehicle with options or accessories after manufacture even if those parts are genuine accessories supplied by the manufacturer.

A vehicle's designed load capacity is distinct from its towing capacity. Where a vehicle is capable of towing a load on a trailer, the load carrying capacity of the motor vehicle does not include the towing capacity.

Example 1 – where a vehicle is a car

You provide an employee with use of a vehicle under a salary packaging arrangement.

Under the arrangement you propose to provide your employee with use of the following:

Campervan XYZ, with a gross vehicle weight of 2,000 kg
basic kerb weight of approximately 1,400 kg
manufacturer designed to carry 4 passengers.

The Campervan XYZ has been modified to add various items such as a kitchen with a sink and microwave oven, table, TV, fridge, water tanks, a lounge which converts to an electric roll-down bed, shower, toilet, and so on. The designed load capacity of 600 kg is not impacted by these modifications.

The Campervan XYZ is a motor-powered road vehicle designed to carry a load of less than one tonne and less than 9 passengers. It therefore satisfies the definition of a car.

Example 2 – unregistered vehicle that is a car

Kim drives a 4-wheeled drive motor vehicle provided by his employer.

Although the vehicle is eligible for registration as a road vehicle, it has not been registered for the time it has been held as it has not been required to be used on a public road or for work. The vehicle seats 8 passengers, including the driver, and has a load carrying capacity of 900 kg.

On most days, Kim drives the vehicle around his farm, and he attaches a trailer to the vehicle which can carry an additional 1,500 kg.

The vehicle's carrying capacity is less than one tonne, as the weight carried by the trailer is not included in the vehicle's load carrying capacity, because the trailer does not form part of the vehicle's standard equipment.

Although the car is not registered for use on public roads, its design is that of a road vehicle such that it may still be used on a public road if registered. The vehicle is a car.

Example 3 – modifying of a vehicle does not change its classification as a car

You provide cars to your employees that are primarily sold as passenger cars.

To improve the utility of these vehicles in your business, you modify the cars to essentially convert them into 4-door 'panel vans'. The conversion involves removal of the rear seats, welding a steel cage to the back of the front seats and lining the interior with heavy duty rubber flooring. These changes are permanent and change the design of the car such that its principal design is no longer to carry passengers.

The modifications leave 2 seats available for the driver and a single passenger and are intended to create significant storage space. The vehicles are designed to carry a load of less than one tonne.

The modifications do not change the classification of the vehicle as a car.

As the car may now be classified as a 'panel van', use of the panel van may be exempt from FBT (see section 7.5).

7.3 Who 'holds' the car provided?

To be a car benefit, the provider of the benefit must hold the car. A car may be 'held' by you, an associate of yours or a third party with whom you (or your associate) make an arrangement.

A car is held by a provider where the car is:

owned (includes cars acquired under hire-purchase arrangements which are considered to be owned by the hirer from the start of the hire purchase agreement)
leased (or let on hire), or
otherwise made available to the provider.

A car is not considered to be held by the provider where the car:

has been destroyed
is in a workshop for extensive repairs following an accident (however, a car is considered to be held and available for private use where it is in a workshop for routine servicing or maintenance), or
is owned by the employee themselves and not by you or your associate.

You can work out who 'holds' the car by looking at the car:

registration papers
insurance policies, or
leasing documents.

7.3.1 Special rule for cars on hire

A car will not be held by a provider (and therefore not provided by the provider) where the car is:

a taxi let on hire, or
a car that you hire on a short-term basis.

A car is held on a short-term basis where there is no 'substantial continuity' to the hire arrangement.

If you provide a hire car or taxi for a total period of less than 3 months for your employee to use, it will not be a car benefit but it may still be a residual fringe benefit.

Determining whether there is 'substantial continuity' in hire arrangements is a question of fact that may be difficult to determine. Where you provide a hire car or taxi under successive hire arrangements and the total hire period across those hire arrangements exceeds 3 months, you will be taken to have provided a car and a car benefit will arise (if the other requirements are satisfied).

7.4 Private use

A car which is held by you or your associate is a car benefit, where the car is

applied for the employee's private use, or
taken to be available for the employee's private use.

The circumstances in which a car is either applied or taken to be available for the private use of the employee can vary significantly.

7.4.1 When does an employee apply a car for private use?

Private use is everything else other than in the exclusive course of working, running a business or otherwise earning income. This means that private use of a car includes any use that is dual purpose and has both private and business aspects to it.

The term applied means actual private use of the car by your employee or where your employee (or a third party) has used the car in accordance with the directions given by you or another person that the car be used for their private use. Private use means any use. It does not just mean driving the car.

Example 4 – car with advertising decals

Freddie is provided a car by her employer. It is wrapped in advertising decals to promote the employer's fitness business. Freddie and her employer enter into an agreement whereby Freddie agrees to drive the car along certain routes and to popular shopping, eating and entertainment precincts to maximise exposure to the eye-catching decals. Freddie gets paid an amount to do so. According to the agreement, Freddie is able to use the car for private purposes while driving it in accordance with the agreement.

Freddie uses the car to drive along the routes which includes her local supermarket and her favourite restaurant. When Freddie uses the car to do her shopping at the local supermarket or has a meal at her favourite restaurant, the use of the car in this way, while it has a business use, is considered private use as the business use is mixed with private use.

Example 5 – car not applied for private use under a salary packaging arrangement when garaged at employer's business premises

Jerry is provided with the use of a car by his employer under a salary packaging arrangement. Jerry agrees to sacrifice part of his fortnightly income (registration, insurance and fuel costs are included) in exchange for the use of a car owned by his employer. In this particular year, Jerry takes some long service leave and is absent from the workplace for 3 months. Jerry and his employer document an agreement in an email to garage the car at his employer's premises for the period of the long service leave. Under the agreement, Jerry (and his associates) are not entitled to use the car during the 3 months, the vehicle may not be used by other employees during this time, and Jerry voluntarily surrenders the car to his employer (including giving the employer the keys). He does not drive the car for the period of his long service leave, having garaged it during this time as per the agreement.

The salary packaging agreement continues during the period of his long service leave. However, under the agreement entered with the employer to garage the car at the employer's premises, Jerry is not able to access and use the vehicle.

In this scenario, the employer holds the car for the purpose of providing fringe benefits and there is no private use of the vehicle by Jerry (or his associates) during this time.

7.4.2 When is travel in the ordinary course of business?

The following table operates as a general guide about when travel in a car is in the course of working, running a business or otherwise earning income.

Table 3: When is travel in the ordinary course of business?

Travel in the course of working, running a business or otherwise earning income

Travel that is not in the course of working, running a business or otherwise earning assessable income

Travel from the employee's home to somewhere other than their regular place of work (an alternative work location), where their duties of employment require it.

Travel between the employee's home and regular place or places of work.

Travel from the employee's home (or another private location) to a place of regular work when they are 'on call' and all of the following factors are present:

the employee's duties have substantively commenced at their home (or another private location) and the employee is required to travel to a regular place of work to complete those particular duties
undertaking the work in 2 locations is a necessary obligation arising from the nature of the duties, and
the travel to the workplace is not part of a normal journey to work that would have occurred anyway.

For example, where a doctor is 'on call' at their residence and commences care of a patient by issuing instructions from their residence and then directly travels to the hospital to complete the treatment.

Travel from the employee's home to a regular place of work, when their employment duties have not commenced.

This includes where an employee waits at home for advice from their employer whether they are required to work, where they are in a sense on 'standby', but no substantive duties commence until they arrive at their workplace.

This is so even if an employee performs minor work-related tasks en-route such as picking up the mail, or the travel is outside normal working hours.

Travel to a meeting or client's premises from the regular place of work.

Travel between places of work for different employers or businesses.

Travel by an employee who has no fixed or predicted place of work and is considered to be an itinerant worker (where the employee has no fixed place of work).

Travel by an itinerant worker who also transports a family member (for example, school drop-off and pick-ups) in the course of their journey.

Travel by an employee where the nature of their job creates a practical necessity to transport bulky tools or work equipment by car between home and work.

Example 6 – private travel between home and a regular work location

Nikia travels between home and work in a car provided to her by her employer.

Nikia travels daily to her employer's office, and often manages work problems out of ordinary work hours.

Nikia frequently checks and responds to work emails at home. She may at times spend an hour or more working at home either before driving into the office or after she returns home in the evening. While driving to or from work, Nikia responds to work phone calls.

Nikia's use of the employer's car for these purposes constitutes private use because:

Nikia is not required to start work at home and to travel to continue work at the office – she has chosen to start work at home, rather than at her regular office, and
the trip between Nikia's home and the office is a normal daily journey, reflecting her private choice about where to live.

Example 7 – travel to alternative workplace not private use

Duy works for a company in Launceston, where he lives. During the year, the company requires Duy to work from their Devonport office which is located 70 minutes' drive from his regular place of work. Duy's presence at the Devonport office is ad-hoc and irregular.

Duy travels to Devonport directly from his home to the office and back home at the end of the day in a car provided to him by his employer. The Devonport office is considered to be an 'alternative work location' for Duy, as it is not his regular workplace.

Duy's use of the car to travel to Devonport is not considered to be private use.

Example 8 – travel after direction to commence duty

Michelle is a coding specialist who normally travels daily between home and work using a car provided by her employer. Michelle is supervising a major upgrade of a computer facility.

When away from the office, Michelle is 'on call'. This requires her to be available at all hours to receive telephone calls from colleagues working at the office and to give them advice over the phone when problems arise regarding the operation of the computer facility. For this purpose, Michelle is given IT equipment to install at her home that enables her to connect to the central computer to try to resolve the matter. If the problem cannot be resolved at home, Michelle travels to the office in order to progress the matter further.

When Michelle receives a call outside of her normal work hours, she commences her employment duties at that time and is subject to her employer's direction and control. Michelle commences substantive work before leaving home and then completes that work once she attends the office. Michelle does not choose to do part of the work of her job in 2 separate places, but rather the 2 places of work are a fundamental part of Michelle providing specialised support because of the nature of her special duties.

On the occasions when Michelle commences duty out of normal business hours and drives to her employer's office because of a call to assist, she is travelling between work locations. This is not private use.

Example 9 – travel to a work location when on standby

Luke is a dental assistant and travels between home and work in a car provided to him by his employer. Luke is sometimes required to be on 'standby' duty. If Luke is called by his employer while he is on standby duty and asked to work, he travels from his home to the dental surgery and starts his shift once he gets there.

No substantive duties are commenced until he arrives at work. The use of the car is private.

7.4.2.1 Travel related to income from residential investment properties

Travel by an employee to a residential premises that they own, and from which they derive rental income, is not considered private use for the purposes of car fringe benefits. Different considerations apply in determining an entitlement for an income tax deduction in respect of travel to residential investment premises. In particular, an income tax deduction is usually not available where a privately owned car is used to travel to or from residential rental investment properties.

Example 10 – travel to rental investment premises is not private use

Mischa is a specialist computer technician and her employer provides her with a car. The car is garaged at Mischa's home when she is not working. Mischa is provided with the car to travel to alternative workplaces.

Mischa is also an investor who owns several residential rental premises from which she derives assessable income. Mischa occasionally uses the car provided by her employer to attend property inspections, pay bills and engage with her letting agent.

The travel to engage in Mischa's rental investment property activities is not private use and Mischa therefore does not use the car for private use. However, as the car is garaged at Mischa's home, the car will be taken to be available for her private use and a car benefit will be provided.

See also:

Law Companion Ruling LCR 2018/7 Residential premises deductions: travel expenditure relating to rental investment properties
Miscellaneous Taxation Ruling MT 2027 Fringe benefits tax: private use of cars: home to work travel
Taxation Ruling TR 2021/1 Income tax: when are deductions allowed for employees' transport expenses?
Taxation Ruling TR 95/34 Income tax: employees carrying out itinerant work – deductions, allowances and reimbursements for transport expenses
Rental properties and travel expenses

7.4.3 When is a car 'taken to be available' for private use?

A car benefit can arise where a car is taken to be, or made available, for the employee's private use (whether or not the employee actually uses it).

Two circumstances commonly arise where a car is made available to the employee for private use:

the car is garaged or kept at or near the employee's residence
the car is not at your business premises and the employee has use, custody or control of the car, or is entitled to use it for their private use.

A car will not be taken to be available for the employee's private use where:

the car is somewhere other than your business premises (such as in a commercial storage facility)
the custody and control of the car has been removed from the employee, and
the employee is not entitled to use the car for private use.

Where your employee's place of residence and place of employment are the same, the car is made available for the private use of the employee. An employee's place of residence is the place where they live or have sleeping accommodation. It does not matter whether it is permanent or temporary or if they share the place with someone else.

A car can be taken to be available for private use even where the car is used in accordance with the directions, instructions or wishes of a person (including you or your associate, employee or another person).

If you have rules in place to disallow private use of company or business cars, they must be clear and straightforward. A general instruction or understanding between you and your employee is not sufficient. We recommend that you:

put these rules in writing
have a plan or course of action that checks and verifies odometer readings and private use, and
always enforce these rules against private use.

You must consistently enforce any rules that you have that disallow private use of the car, otherwise the car may still be taken to be available for private use.

The issuing of a minute or a directive stating the rules without further training, auditing and enforcement is not considered to be sufficient for employers to access this exemption.

A car benefit will not arise if the employer removes custody and controlof the car from the employee. An employee must relinquish possession (for example, by surrendering the keys) to divest themselves of custody and control.

Where a car is in a workshop for extensive repairs (for example, following a motor vehicle accident) it is not available for private use of the employee. However, a car is considered to be available for private use where it is in the workshop for routine servicing or maintenance.

Example 11 – garaging a car at home taken to be available for private use

John is provided a car by his employer to attend client meetings. According to the employer's car use policy, while John can take the car home and keep it in his garage, he is not permitted to use the car for private use. The garaging of the car at John's home means that the car will be made available for private use. It does not matter that John does not use the car privately or that the employer has a policy preventing John from using the car for private use.

Example 12 – car taken to be available for private use when garaged at motel

Robert is based in Melbourne but is required to fly to an alternative workplace in Sydney and stay there for the week leading up to the implementation of a new project. Robert works from the Sydney office during this time, staying in motel accommodation and is provided a car by his employer to travel between the airport and motel. Robert garages the car at the motel car park and commutes to the Sydney office by ferry. Robert has the keys to the car even though he does not use the car other than to travel back to the airport at the end of the week. The car, being garaged at the motel, means that the car is made available for private use. The motel is a place of residence for Robert while he is staying there even though it is only on a temporary basis.

Example 13 – car not taken to be available where car is in a safe storage

Robert, as outlined in Example 12, is based in Melbourne. Prior to beginning his week trip to Sydney, he used the employer's pool car to drive from work to Melbourne airport and parks the car at the Melbourne airport car park. The Melbourne airport car park is not business premises of the employer or their associate, and is not near his residence in Melbourne.

As per the employer car policy, Robert dropped the keys in to the safe deposit box at Melbourne airport. The safe deposit has a rolling pin code that resets each day. Robert (or his associate) is not permitted to access the keys or use the car until he returns from Sydney. The car will not be taken to be available to Robert until his return from Sydney, when he will be issued with that day's pin code and he can access the car keys. Therefore, for the period when the car is parked at Melbourne airport car park, it is not made available for private use.

See also:

Taxation Determination TD 94/16 Fringe benefits tax: where an employee is provided with a car by the employer and the car is kept in safe storage (e.g. in a commercial garage) while the employee is travelling, under what circumstances is that car taken to be available for private use under section 7 of the Fringe Benefits Tax Assessment Act 1986?
Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises'.

7.4.4 Special rule for emergency service cars

Your employee can keep certain types of emergency service cars at or near their place of residence and not attract FBT. A car benefit will only arise where the employee actually uses the car for private use other than if that private use is exempt (see section 7.5).

To qualify for the special rule, at the time the emergency vehicle is kept at or near the employee's place of residence, it must be used by an ambulance, police or firefighting service. The car must also be fitted with exterior markings indicating that it is being used by that service and also be equipped with a flashing warning light and horn, bell or alarm.

7.5 When is the provision or use of certain cars exempt from FBT?

If you provide (or make available) one of the following cars to your employee, it will be exempt from FBT in certain circumstances:

a taxi, panel van or utility truck designed to carry a load of less than one tonne, or
any other road vehicle that is not designed principally to carry passengers and is designed to carry a load of less than one tonne.

Dual-cab vehicles must meet these requirements to fall within this exemption (see section 7.5.4).

To be exempt, the employee's private use of such a vehicle must be limited to:

Home-to-Work Travel: travel between the employee's place of residence and the employee's place of employment (see section 7.5.1)
Incidental-Work Travel: incidental travel in the course of performing employment-related duties (see section 7.5.2), and
Minor-Private Travel: the other private use of that car is minor, infrequent and irregular. For example, occasional use of the vehicle to remove domestic rubbish (see section 7.5.3).

See also:

Eligible vehicles
Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel
Taxation Determination TD 94/19 Fringe benefits tax: is the method outlined in Taxation Ruling MT 2024 appropriate for determining whether a vehicle, other than a dual or crew cab, is 'designed for the principal purpose of carrying passengers' and thereby ineligible for the work-related use exemption available under subsection 8(2) of the Fringe Benefits Tax Assessment Act 1986?

Where the vehicle is designed to carry one tonne or more, you may be eligible for an exemption under the motor vehicles – residual fringe benefits exemption (see section 18.6).

7.5.1 What is Home-to-Work Travel?

Travel between the employee's place of residence and place of employment includes travel to the regular place of employment, or travel to a temporary place of employment (an alternative work location).

An employee's place of employment relates only to the employment relationship under which the car benefit is provided. Where you provide a panel van or utility (car) to your employee, travel by the employee to a second employer is private use.

Travel between the employee's place of residence and place of employment must be undertaken by a current employee only. If an associate of the employee travels with the employee, the exemption will not apply.

Example 14 – travel to separate places of employment is private use

Joe is a current employee of Company A and Company B. The companies are unrelated.

During the FBT year, a car benefit is provided to Joe by Company A. The relevant car is a utility truck designed to carry a load of less than one tonne. Joe uses the truck to travel between his home and his workplace with Company A on Monday to Friday. This travel is between Joe's place of residence and his place of employment with Company A.

Joe also performs work for Company B on Saturday morning. Joe uses the utility truck to travel between his home and his workplace with Company B on Saturday morning. This travel is private use. The use is not exempt as the travel to Joe's workplace with Company B is not incidental to his travel in the course of his employment with Company A and is not considered to be minor, infrequent or irregular.

7.5.2 What is Incidental-Work Travel?

Private use will be incidental to travel in the course of employment when it is considered minor or subordinate to the main purpose of the travel – being for employment. For example, travel that is considered incidental to employment related travel would include a stop at the newsagency on the way in to work to buy a newspaper, or a trip through a drive through café or fast food outlet to purchase a coffee on the way to a meeting with a client – as long as neither stop requires your employee to depart significantly from their ordinary route.

Travel will be incidental when it does not change the main reason for the travel, rather it is an add-on to the main purpose of the travel. Private use is not incidental to travel in the course of employment when the employee transports a family member.

7.5.3 What is Minor-Private Travel?

Private use by the employee needs to be minor, infrequent and irregular – all 3 terms must be met.

Private use that is minor, infrequent and irregular is travel that can be described as all of the following:

travel that is small or insignificant in distance and time compared to business travel
travel that does not happen very often, or is not the norm, and
travel that does not happen regularly or at fixed regular intervals.

Example 15 – minor, infrequent and irregular use

Robin takes the company panel van (with a carrying capacity of less than one tonne) home each night. Robin has only used the vehicle privately on one occasion during the year to move some furniture when Robin moved house. Robin's private use of the van to move the furniture is considered to be minor, infrequent and irregular and would be exempt from FBT.

Example 16 – not minor, infrequent and irregular use

Rose is an employee of the local Council and takes the Council's utility (with a carrying capacity of less than one tonne) home each night after work. Rose also takes the utility home on weekends. Rose uses the utility, regularly, for shopping trips and taking her husband to the football on most Saturdays during the football season. This private use of the utility is not minor, infrequent and irregular.

Example 17 – minor, infrequent and irregular use

Charlie, an employee of a plumbing company, has employment duties that are itinerant in nature. Charlie takes the utility (with a carrying capacity of less than one tonne) home at night. On several occasions during the year, Charlie uses the utility to drop her child to childcare on her way to work – when her partner is ill and cannot do it. This private use of the utility is minor, infrequent and irregular.

Example 18 – not minor, infrequent and irregular use

Jim is a washing machine repairman who is provided with a panel van by his employer. He drives the panel van home each night and each morning he drives the panel van to his first job or his employer's supply depot. This travel is between Jim's place of residence and his place of employment, or an alternative place of employment. On one occasion, when the regular family car was unavailable, Jim used the panel van to pick up groceries. The once-off weekend trip to the supermarket is minor, infrequent and irregular.

If on school days, Jim drives his children to school in the panel van on the way to his first job, even if the school is on his direct route to work, this private use would not be minor, infrequent and irregular unless it meets the requirements of Practical Compliance Guideline PCG 2018/3 Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles (see 7.5.3.1).

7.5.3.1 Car exemptions – Commissioner's special administrative approach

We understand that it can often be difficult to identify when use of a vehicle falls within incidental or minor, infrequent and irregular use. To provide you with some certainty, we have developed some limits that you can choose to work within and be assured that you will not be subject to audit action.

See also:

Practical Compliance Guideline PCG 2018/3 Exempt car benefits and exempt residual benefits: compliance approach to determining private use of vehicles.

7.5.4 How do I work out if my dual cab vehicle falls within this exemption?

Dual cabs are not considered to be 'utility trucks'. Dual cabs are not designed to carry more than 8 passengers.

Therefore, dual cabs (with a load capacity of less than one tonne) only fall within this exemption if they are not designed primarily to carry passengers.

You can work this out by using the steps in the following table:

Table 4: Working out if the dual cab car falls within this exemption
Step 1	Work out the gross vehicle weight. This the maximum the vehicle can weigh when fully loaded as specified by the manufacturer with all of its fluids, oils, coolants, a full tank of fuel and passengers.
Step 2	Work out the basic kerb weight. This is the weight of a vehicle without passengers and goods, with all of its fluids, oils, coolants, a full tank of fuel and all standard equipment.
Step 3	Subtract the basic kerb weight from the gross vehicle weight. This gives you the designed load capacity and this is the carrying capacity of the vehicle. (Gross vehicle weight) – (basic kerb weight) = (designed load capacity)
Step 4	Work out the designed seating capacity (including the driver's seat) and multiply it by 68 kg. This gives you're the total passenger weight. (Designed seating capacity) × 68 = (total passenger weight)
Step 5	Subtract the total passenger weight from the designed load capacity. This gives you the remaining 'load' capacity. If the total passenger weight exceeds the remaining load capacity, the vehicle is designed primarily to carry passengers and is ineligible for this exemption.

This calculation only applies to dual cab vehicles.

Example 19 – dual cab vehicles

A dual cab vehicle with a gross vehicle weight of 1,950 kg, a basic kerb weight of 1,400 kg and a designed seating capacity of 5 would be considered a vehicle designed principally for carrying passengers. This is because the majority of the total load capacity (340 kg (5 × 68 kg) of a total of 550 kg) would be absorbed by its designed passenger-carrying capacity.

Dual cabs (with a load capacity of more than one tonne) are eligible and fall within this exemption as long as private use of the vehicle is limited (see sections 7.5.1 to 7.5.4).

See also:

Miscellaneous Taxation Ruling MT 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work-related travel.

7.5.5 What other vehicles fall into this exemption?

Where a car is permanently modified (for example, the alterations cannot be readily undone), such that its principal purpose is no longer the carriage of passengers, the exemption will apply. For example, where a station wagon is transformed into a hearse.

See also:

Miscellaneous Taxation Ruling MT 2033 Fringe benefits tax : application of sub-section 8(2) exemption to modified cars.

7.6 Special circumstances exemptions

7.6.1 Unregistered vehicles

If a car is unregistered for the whole of the FBT year when the car was held and was used wholly or principally in direct connection with your business operations, any private use is exempt from FBT.

Example 20 – unregistered car used on the farm

Toni works on a farm and drives her employer's car (which is principally designed for the purpose of carrying passengers) while undertaking employment duties on her employer's business premises. The car has always been unregistered, and Toni's employer does not permit the car to leave the farm premises.

Outside of work hours, when the car is not required by her employer, Toni is given private use of the car, to travel from her place of work on the farm to her own car which is also parked on the farm premises, as part of Toni's normal journey home. This enables Toni to return home sooner and more safely. The employer's car is then parked on the farm, such that it is still accessible to, and available for, use by her employer.

As Toni's use of the car will not detract from its principal use in the business operations of the farm, this private use of the car is an exempt benefit.

7.6.2 Where more than one car benefit is provided by a personal services entity

If the personal services entity rules prevent the personal services entity from claiming car expenses for the car, the use of the car is an exempt benefit.

A personal services entity is limited to the car expenses it can deduct. Deductions are not allowed for more than one car for private use per individual whose personal services income is included in the personal services entity.

Example 21 – personal services entity provides cars to worker

Software Development Co Pty Ltd provides software development services. Rob is employed by Software Development Co Pty Ltd and does all of the work in providing those services. Software Development Co Pty Ltd's income from providing the services is Rob's personal services income because it is a reward for his personal efforts and skills. This makes Software Development Co Pty Ltd a Personal Services Entity.

Software Development Co Pty Ltd provides Rob with 3 cars. Car 1 is solely for business trips and is not available for private use. Cars 2 and 3 are used for private purposes. Software Development Co Pty Ltd can deduct all the car expenses for Car 1. It is also able to claim deductions for all the car expenses it incurs, for its choice, of either Cars 2 or 3. Software Development Co Pty Ltd chooses to claim deductions for Car 2, as well as the FBT it pays for that car. Expenses in relation to Car 3 are not deductible and the car benefit being provided by Software Development Co Pty Ltd to Rob is exempt from FBT. As Car 1 is not available for private use, a car benefit will not be provided.

See also:

Taxation Ruling TR 2003/10 Income tax: deductions that relate to personal services income
Allowable deductions when receiving PSI.

7.7 Taxable value – summary of calculation methods

If you have provided a car fringe benefit to an employee, you need to work out its taxable value. The law provides different ways in which you can calculate the value of the car.

The first step in calculating the taxable value of a car fringe benefit is to make a choice between the ways available to you. There are 2 ways you can calculate the taxable value of a car fringe benefit. Each method has special requirements and particular record keeping rules. These requirements are summarised in the following table:

Table 5: Taxable value – summary of calculation methods
Method	Special requirements	Records you must keep
Statutory Formula Method	Based on the car's cost price (see section 7.8.)	Employee must provide you with receipts/invoices for expenses they have paid for and which are not reimbursed by you. Employee declarations in relation to petrol and oil costs. You have to obtain any relevant declarations on or before the due date for lodging your annual FBT return or, if you do not have to lodge a return, by 21 May. Normal purchase records to establish base value, including invoices/tax invoices, receipts, journal entries, bills of sale, and lease documents. These records should illustrate the purchase price and date of purchase. Record of days the car is used or available for private use.
Operating Cost Method	Based on the costs of operating the car (see section 7.9) You must make a written election to use this method on or before the day your FBT return is due to be lodged, or 21 May if you don't lodge an FBT return. Your election to use this method can be made for some or all of your cars. You must make the election for each FBT year you choose to value your car fringe benefits under this method.	Employee must provide you with receipts or invoices (or both) for expenses they have paid for. Employee declarations in relation to petrol and oil costs. You have to obtain any relevant declarations on or before the due date for lodging your annual FBT return or, if you do not have to lodge a return, by 21 May. Record of days the car is used or available for private use. Records showing business and personal use. In a log book year, keep a log book for a continuous period of 12 representative weeks, recording the odometer records travelled during that period and during the year in total. Take into account variations in the patterns of business use. In a non-log book year, keep odometer records of the business use during that year and those travelled in the year in total. Business records to support that you made the election in time and that the taxable value in your return was calculated based on this method. You do not need to notify us of the method you have chosen.

7.8 Statutory formula method

You calculate the taxable value using the steps in the following table.

Table 6: Statutory formula method
Step 1	Work out the base value of the car.
Step 2	Multiply the base value of the car by 0.2.
Step 3	Work out the number of days during that FBT year when the car was used or available for private use of an employee. Multiply the Step 2 amount by this number of days. If the car is used or available for private use for the full year, then you do not need to do anything at this step. Go to Step 5.
Step 4	Divide the Step 3 amount by the number of days in the FBT year (either 365 or 366 if a leap year).
Step 5	Reduce your Step 4 amount by any recipient's payments (employee contributions).

7.8.1 Step 1: work out the base value of the car

Table 7: Work out the base value of the car

If you or your associate own the car...

The base value of a car you or your associate own is:

the original cost price you or your associate paid (excluding registration and stamp duty)
the cost of any fitted non-business accessories, and
dealer delivery charges.

All costs and charges include goods and services tax (GST) and luxury car tax where appropriate.

Any non-business accessories added after you or your associate bought the car increases the base value of the car for the year in which they are added and for subsequent years.

The cost price is reduced by the value of any trade-ins or cash deposits and may also be reduced by fleet discounts or manufacturer rebates.

Non-business accessories are fitted accessories, being optional items that are not required to meet the special needs of the business. Non-business accessories do not include standard accessories or features. An example of a business accessory is a fitted GPS in a salesperson's car. Examples of non-business accessories include alloy wheels, rear spoilers, seat covers, paint protection, fabric protection, rust protection, window tinting and personalised licence.

Do not include insurance, registration and stamp duty.

Do not include non-business accessories paid for and installed by your employee.

Do not include payments for extensions to the new car warranty.

Do not reduce the cost price of a car by any recipient's payments (employee contribution).

The luxury car (depreciation) limit is irrelevant for FBT purposes and is ignored when establishing the cost base of the car. For example, if you purchase a vehicle for $110,000 which is then used for the employee's private use, the base value is taken to be $110,000 and not the depreciable value maximum for that income tax year.

See also:

Taxation Ruling TR 2011/3 Fringe benefits tax: meaning of 'cost price' of a car, for the purpose of calculating the taxable value of car fringe benefits.
Miscellaneous Taxation Ruling MT 2023 Fringe benefits tax: taxable value of new demonstrator motor vehicles and used car stock of motor vehicle dealers available for private use of employees.

If you or your associate lease the car...

If the lessor bought the car and leased it to you or your associate around the same time – the base value is the cost price of the car (as calculated above when the car is owned) to the lessor.

Any non-business accessories added after the lessor bought the car increases the base value of the car for the year in which they are added and for subsequent years.

If the lessor acquired the car at some other time, the base value is the amount a person could reasonably be expected to have paid to buy the car under an arm's length transaction (that is, market value, including GST and luxury car tax) at the first time the car was leased by you.

Where you previously provided a car to an employee under an earlier lease agreement and that agreement comes to an end and the employee:

purchases the car, or
enters another novated lease agreement for the same car with you, but with a different lessor,

the base value will be the cost to you or your associate under the first lease arrangement, being the earliest time that you or your associate first held the car.

Note that you will also need to consider whether the lease is a bona fide lease as this may impact on your FBT liability.

See also:

Car leasing fringe benefits.

If you or your associate have rented the car on a short-term basis...

Short-term rental cars hired for more than 3 months and cars under a novated lease are subject to the same car fringe benefit valuation rules as other cars you or your associate lease.

If you or your associate have owned or leased the car for at least 4 years...

You can reduce the base value of a car by one-third in the FBT year that starts after you or your associate have owned or leased the car for 4 years.

The reduction applies from 1 April after the fourth anniversary of the date on which you or your associate first owned or leased the car (the car does not need to be held continuously).

The reduction applies only once for a particular car and you then use the reduced base value for subsequent years. The reduction does not apply to non-business accessories added after you or your associate acquired the car.

Example 22 – working out the base value of a new car

Sports Co purchases a new car in 2019 and determines its base value at the time of purchase to be $35,000. Sports Co provides the car to Sam, an employee, for both private and business use. After 12 months, Sports Co and Sam enter into a sale agreement for the car. Sam agrees to purchase the car under a novated lease from Sports Co at its 2020 market value, being $28,000.

The base value of the car is determined at the earliest holding time. This is when the car was first owned by Sports Co in 2019 for $35,000.

Example 23 – working out the base value of a leased car

Sports Co leases another car and provides that car to another employee. The car was brand new on commencement of the lease and the cost price to the leasing company was $39,000 at that time. Sports Co added non-business accessories to the car in the middle of the second FBT year, at a total cost of $4,000.

The car's base value during the first year is determined at the earliest holding time. This is when the car was first leased by Sports Co for $39,000. From the second year, Sports Co will include the cost of the non-business accessories of $4,000 to the base value. It does not matter that the accessory did not remain on the car during the entirety of the second year.

Once the car has been held for 4 years, the base value of the car may be reduced by $13,000, being one third of the car's base value excluding the value of the non-business accessories.

Example 24 – working out the base value of a hire car leased for more than 3 months

During the FBT year, Sports Co enters into a 2-month lease on another car (first lease arrangement) and provides it to an employee. To meet business demands, Sports Co enters into a subsequent 2-month lease on the same car within a few days of concluding the first lease.

The base value of the car will be the arm's length or market value of the car, determined at the point in time the car was first held, being at the commencement of the first lease arrangement.

Example 25 – foreign car company, holding time and cost price

Big Co is a foreign car manufacturing company with an Australian subsidiary, Big Aust Co. Big Co manufactures its cars outside of Australia and supplies cars to Big Aust Co. Big Aust Co then provides some of those cars to its employees for their business and private use.

Big Aust Co is the provider of the car benefits and holds the car. Where an associate of the employer (Big Co) owns the car before the employer (Big Aust Co) the base value of the car is determined according to when Big Co first held the car. Big Co commenced holding the car at the time the manufacturing process was complete and the car came into existence. The 'earliest holding time' which Big Aust Co must use in determining the base value of each car provided is, therefore, the day on which Big Co completes the manufacturing process of the car.

The cost price of these cars is calculated on the wholesale price of the car at the time the car was applied to the manufacturer's (Big Co) own use. That is, the amount Big Co could reasonably expect to receive if they had sold the car by wholesale under an arm's length transaction, at the time of the car's sale. In the event that Big Aust Co purchases the cars from Big Co and then imports them into Australia, the costs of transport, customs duty and import duty are not incurred by Big Co and do not form part of the wholesale price of the car.

Example 26 – reducing the base value after 4 years – employer continuously holding car

Blackacre Co purchases a car for $31,000 (including GST) on 1 July 2016, which includes a DVD player added as an optional extra for $1,000. Blackacre Co provides the car to an employee under a novated lease agreement with Car Lease 1 Pty Ltd, to be used by the employee for their business and private use. In July 2018, the employee purchases the car from Car Lease 1 Pty Ltd, and subsequently enters into a new novated lease agreement with Blackacre Co and Car Lease 2 Pty Ltd for the same car.

After applying the one-third reduction, the base value of the car from the FBT year beginning 1 April 2021 will be $21,000 (a reduction of $10,000 calculated as one-third of the base value exclusive of the value of non-business accessories). The reduction will apply beginning 1 April 2021 as it has been 4 years since Blackacre Co first held the car.

7.8.1.1 Base value may be deemed if not at arm's length

Where transactions are not at arm's-length, the expenditure is deemed to be the amount that would have been expected to have been paid if the transaction was at arm's length. If the property is acquired or a benefit is obtained for no expenditure, then for the purpose of determining the base value of a car, the property or benefit is deemed to have been obtained for expenditure equal to its market value. For example, if a car is provided for free; the employer would be deemed to have paid the market value of that car.

See also:

Taxation Determination TD 94/28 Fringe benefits tax: for the purposes of the statutory formula method of valuing car fringe benefits, when is the 'cost price' or 'leased car value' reduced under subsection 9(2) of the Fringe Benefits Tax Assessment Act 1986?

7.8.2 Step 2: multiply the base value of the car by 0.2

A flat statutory rate of 20% applies to all car fringe benefits you provide.

7.8.2.1 Exception for pre-existing commitments prior to 7.30 pm AEST on 10 May 2011

There is an exception to the 20% statutory rate where a financially binding commitment to provide a car is in place before 7.30 pm AEST on 10 May 2011 (pre-existing commitment)). The statutory percentages for car fringe benefits provided before that time, or where you have a pre-existing commitment in place to provide the car after this time, are as follows:

Table 8: Statutory percentages for car fringe benefits – pre-existing commitment
Total kilometres travelled during the year	Statutory percentage
Less than 15,000	26
15,000 to 24,999	20
25,000 to 40,000	11
More than 40,000	7

You can continue to use these statutory rates for all pre-existing commitments unless there is a change to that commitment.

7.8.3 Steps 3 and 4: calculation where car is acquired or available for only part of the FBT year

If the car is held for a full FBT year, then you do not need to do anything at this step. Go to Step 5.

If a car is owned or leased or available for private use by your employee for only part of an FBT year, use the steps in the following table:

Table 9: Car used for private use for part of an FBT year
Step 3.1	Determine how many days during that FBT year the vehicle was used or made available for private use.
Step 3.2	Multiply the Step 2 amount by the number of days determined in Step 3.1.
Step 4	Divide that amount by the number of days in the FBT year (either 365 or 366 if a leap year).

The number of days includes where the car is taken to be available for private use. For example, if an employee takes a car home on Friday after work, garaging it at their home before returning the car on Monday to work, and there is no other private use of the car for that FBT year, the number of days is 4 days.

7.8.4 Step 5: reduce your Step 4 amount by any recipient's payments (employee contributions)

A recipient's payment (employee contribution) is:

a payment from the recipient of a car benefit (that is, your employee) from after-tax income, or
in respect of a car expense (such as registration, insurance, maintenance or fuel for the car) incurred either by you or the provider of the car during the holding period of the car.

The recipient payment is calculated by following these steps:

Table 10: Calculation of recipient payment
Step 5.1	Work out the sum of the expenses paid by the recipient (your employee) during the FBT year to which the expense relates.
Step 5.2	From that amount, subtract any amount paid or payable to the recipient by way of reimbursement of those expenses during the corresponding FBT year.

Where an employee pays an amount directly to you, you will need to look at the terms of any agreements and contracts in place to determine whether the payment is a recipient payment or not.

7.8.4.1 Records of any recipient's payments you must keep

Where the expense is incurred by the recipient of the car benefit, the recipient must provide to you (before the date of lodgment of the return, or if lodgment is not required, then by 21 May):

Where the car expense is in respect of fuel or oil, a declaration of the amount in a form approved by the Commissioner, or documentary evidence of the expense.
Where the car expense is not in respect of fuel or oil, documentary evidence of the expense.

See also:

Employee declarations.

7.8.4.2 Does a recipient's payment need to be included in your assessable income?

Where an amount is paid directly to you (as an employer) by an employee for use of a car – the recipient's payment must be included in your assessable income.

An amount paid by the employee to a third party for some of the car's operating costs (for example, fuel) are not included in your assessable income.

Recipient's payment and GST

A recipient's payment is treated as consideration for a taxable supply for GST purposes. Therefore, you have to pay GST on the supply. You reduce the taxable value of the fringe benefit by the GST-inclusive amount of the recipient payment.

A recipient's payment does not have any GST implications for you if either:

it is made through payment of an amount by the employee for some of the car's operating costs (for example, fuel), or
you are neither registered nor required to be registered for GST.

Example 27 – GST implications for employee payments and car expenses

Naomi is provided with a car by her employer that has a taxable value of $5,500 (before being reduced by the recipient payment).

Naomi makes a cash payment to her employer for $1,100 in respect of use of the car during the year.

During the year in which the benefit was provided, Naomi also pays $700 (inclusive of GST) for fuel, oil and car wash expenses at her local fuel station.

The taxable value of the car fringe benefit provided to Naomi can be reduced by $1,800 ($1,100 + $700) provided Naomi provides a declaration or documentary evidence (such as invoices and receipts) for the fuel and oil expenses. Naomi's employer (who is registered for GST) will also include $1,100 in their assessable income, and remit $100 (being one-eleventh of $1,100) of Naomi's cash payment for use of the car as GST. The taxable value of the car fringe benefit will be $3,700.

See also:

Section 1.6 What are the GST consequences of providing benefits? of Chapter 1 What is a fringe benefit?
Taxation Ruling TR 2001/2 Fringe benefits tax: the operation of the new fringe benefits tax gross-up formula to apply from 1 April 2000.

Journal entries

Journal entries in your accounts can be a recipient's payment only if all of the following are met:

the employee has an obligation to make a contribution to you
you have an obligation to make a payment to the employee, and
you and the employee agree to set-off the employee's obligation to you against your obligation to the employee.

Even if a recipient payment is made by way of journal entry, it is still assessable income to you.

See also:

Miscellaneous Taxation Ruling MT 2050 Fringe benefits tax: payment of recipients contributions by journal entry.

Example 28 – calculating the taxable value using the statutory formula method

An employer purchases a car for $60,000 (including GST) on 1 August 2020. However, it was only available for private use by the employee for 182 days from 1 October 2020. The employee pays fuel costs of $1,000 and provides the employer with the necessary declaration.

Table 11: Calculating taxable value using the statutory formula method
Step 1	Work out the base value of the car. Base value = $60,000
Step 2	Multiply the base value of the car by 0.2. $60,000 × 0.2 = $12,000
Step 3	Work out the number of days during that year of tax when the car was used or available for private use of the employee. Multiply the days available by the Step 2 amount. Number of days available = 182 $12,000 × 182 = 2,184,000
Step 4	Divide amount at Step 3 by total number of days in FBT year. 2,184,000 ÷ 365 = $5,983
Step 5	Reduce your Step 4 amount by any recipient's payments. $5,983 - $1,000 = $4,983

The taxable value of the car fringe benefit using the statutory formula method is $4,983.

7.9 Operating cost method

You calculate the taxable value using the steps in the following table:

Table 12: Operating cost method
Step 1	Work out the operating costs of the car for the year.
Step 2	Identify the business use and private use percentages of the car for the year.
Step 3	Multiply the operating costs by the percentage of private use.
Step 4	Reduce the amount by the recipient's payment (employee's contribution).

Note: If you elect to use the operating cost method and later find out that the statutory formula method produces a lower taxable value, then you can set aside your election and rely on the taxable value calculated by the statutory formula method instead.

7.9.1 STEP 1: work out the operating costs of the car for the year

The taxable value of a car fringe benefit worked out under the operating cost method only relates to that part of the year when the car was held by you or the provider to provide a car benefit. Similarly, recipient payments which do not arise during that same period will not reduce the taxable value of the benefit. For example, if a car is only owned to provide a car benefit to an employee for half of the year, then the cost of depreciation and insurance and so on for the year will be apportioned to reflect this. Where repairs or maintenance are undertaken on the car whilst it is not held to provide a benefit, those costs will not be included in the benefit's taxable value.

Table 13: Working out the operating costs of the car for the year

Step 1.1

Add up all of the following costs (inclusive of GST) for the car during the period of time that you, or the provider, owned or leased the car and the car was used to provide fringe benefits:

all repairs, including smash repairs
maintenance and service costs
fuel
payments for insurance, registration and extended warranties.

Include all operating costs you incur, or are deemed to have incurred, as well as all expenses incurred by the employee who receives the car.

The following are not included in your operating costs:

Cost of repairs to a car that are paid for by a third party or insurance provider, as a result of an insurance or compensation claim (you do not incur these costs).

Where the car is leased to the provider, any car expenses incurred by the lessor pursuant to the lease agreement (for example, the payment of insurance premiums by the lessor to insurance companies).

Costs for the purchase of the car, and other related costs such as stamp duty, dealer delivery and on-road costs.

Road tolls, car parking fees or fines related to the car (for example, parking or speeding fines, defect notices).

Improvements or add-ons to the car, such as costs for new rims, ute canopies, liners or lids, tow bars, roof racks, window tinting.

Step 1.2

If you or your associate have leased the car, add to the Step 1.1 amount so much of the charges paid or payable under the lease agreement as are attributable to the year or part of the year you used it to provide fringe benefits.

You have now worked out your operating costs for the car if you or your associate leased it.

Step 1.3

If you or the provider owned the car (or the car was otherwise made available) add to the Step 1.1 amount the deemed depreciation costs using the following as a guide.

You calculate deemed depreciation on the following basis regardless of how you treat depreciation for income tax purposes:

A. Work out the depreciated value of the car at the start of the FBT year.

If you or the provider acquired the car in this FBT year, the depreciated value of the car is the cost price incurred by you or the provider, including the cost of non-business accessories fitted at the time of acquisition for the car. The cost price includes GST and luxury car tax, if applicable. You also include dealer delivery charges (including GST) in this calculation. The cost price is reduced by the value of any trade ins or cash deposits and may also be reduced by fleet discounts or manufacturer rebates.

Do not include registration and stamp duty.

Do not include non-business accessories paid for by your employee.

Do not include payments for extensions to the new car warranty.

If you or the provider acquired the car in an earlier FBT year, the depreciated value of the car is the cost price of the car reduced by deemed depreciation over the period of ownership.

B. Multiply the depreciated value of the car by the depreciation rate that applied at the time the car was purchased. From 1 April 2008, the depreciation rate for cars acquired on or after 10 May 2006 is 25%.

C. You also include deemed depreciation on non-business accessories fitted to the car after its purchase. This is calculated separately and as if the accessory is a car. An example of a business accessory is a two-way radio in a sales representative's car, while alloy wheels and seat covers are non-business accessories.

D. If you do not use the car to provide fringe benefits for the full year, apportion the depreciation to reflect the period it is so used.

The income tax depreciation cost limit does not apply for FBT purposes.

A recipient payment (employee contribution) towards the running costs of the car does not reduce the cost price of the car as it is consideration for the provision of the car fringe benefit.

See also:

Taxation Ruling TR 2011/3 Fringe benefits tax: meaning of 'cost price' of a car, for the purpose of calculating the taxable value of car fringe benefits.

Step 1.4

Add to the Step 1.3 amount deemed interest costs, using the following as a guide.

A. Multiply the depreciated value of the car at the beginning of the FBT year (if you or the provider owned it at that time) by the statutory interest rate. Otherwise, you multiply the cost price of the car by the statutory interest rate.

See also:

Fringe benefits tax – rates and thresholds.

You calculate deemed interest on this basis regardless of any actual interest costs associated with purchasing the car.

B. You also include deemed interest on non-business accessories fitted to the car after its purchase. This is calculated separately on and as if the accessory is a car.

C. If you do not use the car to provide fringe benefits for the full year, apportion the amount of interest to reflect the period it is so used.

You have now worked out your operating costs for the car.

7.9.1.1 Operating costs may be deemed if not at arm's length

In working out operating costs for a car, where transactions are not at arm's-length, the expenditure is deemed to be the amount that would have been expected to have been paid if the transaction was at arm's length.

If the property is acquired or a benefit is obtained for no expenditure, then for the purpose of determining the operating cost of a car, the property or benefit is deemed to have been obtained for expenditure equal to its market value. For example, if a car service or petrol is provided for free the employer would be deemed to have paid the market value of the car service or petrol.

7.9.2 STEPS 2 and 3: identify the business use and private use percentages of the car for the year; multiply the operating costs by the percentage of private use

You work out private use by comparing the total kilometres travelled and minus the business kilometres travelled. This is called working out 'private use' and 'business use'.

You then multiply your total operating costs by the percentage of private use.

A reduction in the taxable value of the benefit requires a reasonable estimate of the number of business kilometres travelled in the car – it is not enough to solely rely on a log book if the log book is not kept for a full year. A reasonable estimate must take all relevant matters into account, including log book records (in a log book year), odometer records, other records and any variation in the pattern of use of the car.

You can only factor business use into this calculation when you have kept the right records. If you have not kept the right records, you cannot count your business use and it is treated as nil business use.

See also:

Chapter 4 – Fringe benefits tax record keeping.

What counts as private use and business use?

All kilometres travelled by the car during the time you or the provider own it or lease it will be either private use or business use. There are special rules that put some kilometres into a certain category:

private kilometres are put into the private use category only where they result in the provision of a car benefit
private kilometres that do not result in the provision of a car benefit (for example, where they are exempt) are put into the business use category, and
business kilometres are those kilometres left over, once you have put all of the relevant kilometres into the private use category.

High integrity electronic devices, such as a built-in global positioning system (GPS), can be used to determine the kilometres travelled and whether that travel is business or private use of the car.

See also:

Private use discussed in section 7.4.

Example 29 – business use and private use

Lia is provided with a car by her employer. Lia uses the car for the entire FBT year and travels 19,000 km in the year per odometer records. Lia and her employer have kept all of the required logbooks and other relevant records. According to her log book, Lia has used the car in the following way:

5,000 km have been travelled between work sites to attend meetings (business use)
12,000 km have been travelled between Lia's home and work (private use)
1,000 km have been travelled on weekends, to run shopping errands, visiting friends, and taking the kids to their football matches (private use), and
1,000 km have been travelled to and between vineyards that Lia runs as a side business to her employment, and travelling in the course of visiting local shops and eateries in an attempt to secure retail opportunities for her wine (business use).

Based on the records Lia has maintained, the car has been used to travel 6,000 km for business journeys. Lia's business use of the car is calculated as:

6,000 ÷ 19,000 = 31.58%.

Therefore, Lia's private use is 68.42%.

Example 30 – calculating business use when there are journeys that result in minor benefits

Rose is provided with Car A by her employer. The car provided to Rose is part of a broader pool of cars that are held by the employer for the full year. Both log book and odometer records are maintained for all of the cars held.

Car A is regularly used during the year by Rose (and other employees) for both work related and for private purposes.

The log book records show that during the year Rose used this car to undertake a short private journey. This use of the car was a car benefit under section 7 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). It was determined at the end of the year that this car benefit satisfied the requirements of section 58P of the FBTAA and was an exempt benefit.

The employer elects and uses the operating cost method in section 10 of the FBTAA to calculate the aggregate of the taxable value of car fringe benefits in relation to the car.

When calculating the aggregate of the taxable values of car fringe benefits under subsection 10(2) of the FBTAA, the 'business use percentage' applicable to the car needs to be determined.

Where a journey is concluded to be a minor benefit that is an exempt benefit, it meets the definition of a 'business journey' as it is not private use that results in the provision of a fringe benefit, but rather it is private use that results in the provision of an exempt benefit. The employer should therefore record any journeys that are determined to be minor benefits that are exempt benefits, as business journeys.

The inclusion of a minor benefit that is an exempt benefit as a 'business journey' and therefore as 'business kilometres' will result in an increase in the ratio of number of business kilometres to total kilometres which will increase the 'business use percentage'.

The end result of the inclusion of the number of kilometres travelled on the short private journey by Rose (which was a minor benefit that is an exempt benefit) will be a reduction in the aggregate taxable value of the car fringe benefits as determined under subsection 10(2) of the FBTAA.

7.9.3 STEP 4: reduce the amount by the recipient's payment (employee's contribution)

Reduce your amount of (operating costs × personal use percentage) by any 'recipient's payment'. This is an amount that the employee has paid you for the use of the car or has paid for the operating costs.

See section 7.8.4 for how to work out the recipient's payment.

Example 31 – calculating the taxable value using the operating cost method

A car purchased by an employer in January 2020 is used privately by an employee throughout the FBT year 1 April 2020 to 31 March 2021. The employer and employee have kept the right records and determined that the business use percentage is 75%.

Table 14: Calculating the taxable value using the operating cost method
Step 1.1	Total repair, maintenance, service, fuel, insurance and registration costs (including GST, as appropriate) for FBT year: $3,000 fuel $1,500 repair and maintenance $1,000 service $2,000 insurance and registration costs Step 1.1 amount = $7,500
Step 1.2	The car was not leased. Step 1.2 is not relevant.
Step 1.3	Calculate the depreciation costs. The depreciated value at 1 April 2020 is $40,000, so that depreciation at 25% to 31 March 2021 would be $10,000 (that is, 25% × $40,000). Step 1.3 amount = $7,500 + $10,000 = $17,500
Step 1.4	Add to the Step 1.3 amount, deemed interest. The statutory interest rate is 5.20%, so that the interest component to 31 March 2021 would be $2,080 (that is, 5.20% × $40,000). Step 1.4 amount = $17,500 + $2,080 = $19,580 (total operating costs)
Step 2	Identify the business use and private use percentages of the car during the year. The percentage of private use is 25% (difference between 100% and percentage of business use).
Step 3	Multiply the operating costs by the percentage of private use Step 3 amount = $19,580 × 25% = $4,895
Step 4	Reduce the amount by the recipient's payment (employee's contribution). The employee spent $2,000 on fuel and has provided the required declaration to the employer. Step 4 amount = $4, 895 - $2,000 = $2,895 (taxable value)

The taxable value of the car fringe benefit using the statutory formula method is $2,895.

7.9.4 Replacement cars

If you replace a car during the year, you may treat the replacement car as though it were the replaced car for the purposes of complying with the requirements of the operating cost method.

If you maintained log books and odometer records during the year, or in a previous year, you may transfer that percentage to the replacement car (if it remains appropriate) when estimating a business percentage for the replaced car.

The transfer of a business percentage in this way is conditional on you recording the make, model and registration number of both cars and the date on which the replacement was made. These entries must be made before the due date for lodging your annual FBT return or, if you do not have to lodge a return, by 21 May. Odometer records you keep for the cars during the replacement year must show details of the odometer readings of both the replaced car and the replacement car on the replacement date.

7.9.5 Log book year

A year is a log book year if one of the following applies:

none of the previous 4 years was a log book year of tax for that car
you elect to treat the year as a log book year (for example, to increase the nominated percentage of business travel), or
by written notice we require you to treat the year as a log book year.

The applicable log book period must be specified in the log book records for the period, at or as soon as possible after, the end of the period. Where the log book is kept for a 12-week period that extends beyond the current FBT year into the following FBT year, this following year is the log book year.

7.9.6 Electronic log book devices

There are now many readily available, low cost electronic log book devices available to track and record travel in a vehicle as well as storing the data and generating reports.

Electronic log book devices can be used to record journeys and generate reports that will be treated as log books when they meet the following minimum requirements:

The device is equipped with technology, such as a GPS, or capacity to connect to the car's own on-board computer and odometer and such technology enables the system to accurately track and record distance travelled by the car. The opening odometer reading of the car can be programmed into the system and the GPS then continuously tracks the location and distance of journeys undertaken in the car.
Sufficient detail is recorded and logged that records the date and time of the journey, the distance travelled and whether the journey is private or business. An entry stating 'business' or 'miscellaneous business' will not be enough – your entry should sufficiently describe the purpose of the journey so that it can be classified as a business journey.
The report can be generated weekly and in English. The report should be subject to checks by the driver or the employer, or both. Ideally, this should happen on the day of the travel, but regular weekly intervals would also be acceptable.

See also:

Section 4.2 of Fringe benefits tax record keeping.

7.9.7 Business use percentage calculation for employers with a fleet of 20 or more cars

We understand that it can be difficult to work out the business use percentage applicable to each car you provide if you have a large fleet. To provide you with some certainty, we have developed a simplified approach for calculating car fringe benefits if you have a fleet of 20 or more 'tool of trade' cars.

See also:

Practical Compliance Guidelines PCG 2016/10 Fleet Cars: simplified approach for calculating car fringe benefits.

7.9.8 Using the operating cost method if you have not maintained a log book

You can use the operating cost method of valuing all of the car fringe benefits for a particular car, under subsection 10(2) of the FBTAA, where a log book has not been maintained. However, you will not be able to reduce the operating cost of the car for any business journeys that are made.

If you elect to use the operating cost method and this results in a higher taxable value than under the statutory formula method, the election will be deemed not to have been made. As such, the taxable value would then be calculated under the statutory formula method.

7.9.9 Novated leases

Novated lease arrangements involve the novation (or transfer) by an employee to you of some of the obligations under a motor vehicle lease. Cars provided for the private use of an employee under a novated lease are subject to the same car fringe benefit valuation rules as other cars you lease.

There are many different types of novated lease arrangements, and you need to understand your rights and obligations under the arrangement, as this may affect how you calculate the taxable value of any car fringe benefits you provide.

For example:

Under a hire-purchase lease, you are regarded as the owner of the car from the moment you enter into the arrangement. The cost price of the car is the leased car value of the car when the car was first taken on hire. As you are taken to hold the car as an owner, you include deemed depreciation and deemed interest in the taxable value of the car fringe benefit if using the operating cost method.
In a novated lease, if you are regarded as the lessee, and you use the operating cost method, you include lease repayments in determining the taxable value of the car fringe benefit, however you do not include deemed depreciation or deemed interest.
Where an employee transfers a novated lease to you as a new employer and the old employer was not an associate of yours, the base value of the car for the purposes of the statutory formula method is the market value at the time of transfer.

Where multiple consecutive short-term novated leases are entered into, the minimum residual value is calculated based on the total period that the car has been leased for, rather than the term of each consecutive short-term lease arrangement.

See also:

Taxation Ruling TR 1999/15 Income tax and fringe benefits tax: taxation consequences of certain motor vehicle lease novation arrangements
Taxation Ruling IT 2509 Income tax: income tax and fringe benefits tax consequences of an employee leasing a car to an employer which is subsequently provided back to the employee
Taxation Determination TD 93/142 Income tax: in calculating the residual value of a leased item, may a lower residual value than those outlined in IT 28 be adopted in light of the more generous depreciation rates?

7.9.10 Transfer of lease to new employer

Upon a terminating event, such as the payment of the last lease payment under the novated lease or termination of employment, a further novation may occur. Under the further novation, your rights and obligations are novated to the employee. The employee becomes the lessee and can take this lease to another employer.

Where an employee transfers a novated lease to a new employer who is not an associate of yours, the base value of the car is the market value at the time of transfer.

7.9.11 FBT consequences of acquiring the car at the end of a lease

If the employee acquires the car at the end of a bona fide lease for its residual value, this will be an arm's length transaction on which you would not be subject to FBT.

This is because the residual value and notional value would be the same, so the benefit provided to the employee will have a nil taxable value.

We will generally accept the agreement as a bona fide lease if:

all dealings between the lessor, employer and employee are at arm's length and on commercial terms. An arm's length dealing is where each party acts independently and without influence or control over the other. It is dependent on the nature of your relationship and the quality of the bargaining between you
terms are not based on the reduced (net) cost of the car (that is, the cost to the employer or lessor after any trade-in credit or employee cash contribution)
the residual value of the car is
- based on a reasonable valuation of estimated market value at the end of the lease
- not based on reduced (net) cost
- not less than the minimum residual values set out in ATO Interpretative Decision ATO ID 2002/1004 Income Tax: car lease residual values
there is no agreement the employee, their associate, nominee, or agent will
- purchase the car after the end of the lease term
- be allowed to keep using the car after the lease termination, or
an option for the employee, their associate, nominee or agent to purchase the car is by request and agreement between the lessor and purchaser as to the purchase price.

However, if the agreement is not covered by a bona fide lease, a fringe benefit would usually arise.

See also:

Car leasing fringe benefits
Taxation Determination TD 95/63 Fringe benefits tax: where a car is acquired at the end of a lease, is the acquisition at the residual value an 'arm's length transaction' for the purposes of section 43 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Latest update

September 2022

Section	Changes and updates
All	Rewritten to provide a step-by-step guide to identifying and calculating the taxable value of car fringe benefits.

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 8 - Loan and debt waiver fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

8.1 What is a debt waiver fringe benefit?

A debt waiver fringe benefit arises where you (the employer) waive the obligation of an employee to pay or repay an amount owed to you. Such debts are normally waived for reasons related to the employment relationship.

In circumstances where you (the employer) write-off a genuine bad debt (that is, a debt that cannot be recovered because, for example, the employee has no assets) and the write-off is made for reasons unrelated to the employment relationship, a debt waiver fringe benefit does not arise.

Factors which indicate that an employer has written off a genuine bad debt for reasons unrelated to the employment relationship include:

the employer is able to demonstrate all reasonable efforts were made to recover the debt
the write-off was in accordance with company policy in relation to debts owed by non-employees.

In circumstances where the settlement of a debt owed by an employee to an employer is negotiated and results in the repayment of an amount that is less than the total debt outstanding, consideration should be given to whether a debt waiver fringe benefit has been provided. If it can be established that the reasons for releasing part of the debt are entirely unrelated to the employment relationship, a debt waiver fringe benefit will not arise.

8.2 Taxable value of debt waiver fringe benefits

The taxable value of a debt waiver fringe benefit is the amount of the debt that is released. For example, if you release an employee from an obligation to repay a loan of $1,000, the taxable value of the debt waiver fringe benefit is $1,000. Where the amount you waive includes an amount of principal and accrued interest (for example, $1,000 principal and $100 interest), the taxable value of the debt waiver fringe benefit is the total amount waived – that is, $1,100 in this example.

GST does not affect the taxable value of debt waiver fringe benefits, so these benefits are always grossed up at the type 2 rate. For more on GST and FBT, refer to Chapter 1.

8.3 What is a loan fringe benefit?

The use of the term 'loan' is quite broad. For example, if an employee owes you a debt but you don't enforce payment at the time the debt becomes due, the unpaid amount is treated as a loan to the employee. Such a loan commences immediately after the due date, at the rate of interest (if any) that accrues on the unpaid amount. If you later decide to recover the debt, a loan benefit continues to arise provided the employee is still obliged to repay the outstanding amount.

Where you make a loan to an employee under terms that allow for interest payments to be made less frequently than every six months, you are treated at the end of each six months as having separately loaned, at a nil rate of interest, any unpaid amount of interest. The period of the deemed loan is from the end of the six months until the interest is paid or becomes payable.

Where you release an employee from the obligation to repay the loan, a debt waiver fringe benefit arises (refer to section 8.1).

8.4 Statutory interest rate

The statutory interest rate is set by reference to the standard variable rate for owner-occupied housing loans of the major banks that the Reserve Bank of Australia published most recently before the beginning of the FBT year. This statutory rate is the basis for calculating fringe benefit values for all types of loans you provide, whether interest-free or at low interest. The statutory interest rate may differ for housing loans made to employees before 3 April 1986, or for loans bearing a fixed interest rate taken out before 1 July 1986.

The statutory interest rate for the following year is announced in a taxation determination, usually published in April. Following is a list of statutory interest rates from 1 April 1986 onwards.

Period during which loan was made

Date on which period commenced	Interest rate (per annum)
1 April 1986	14.75%
1 April 1987	14.75%
1 April 1988	12.75%
1 April 1989	14.25%
1 April 1990	14.90%
1 April 1991	13.50%
1 April 1992	9.25%
1 April 1993	7.25%
1 April 1994	8.75%
1 April 1995	10.50%
1 April 1996	10.50%
1 April 1997	7.55%
1 April 1998	6.70%
1 April 1999	6.50%
1 April 2000	7.30%
1 April 2001	7.55%
1 April 2002	6.05%
1 April 2003	6.55%
1 April 2004	7.05%
1 April 2005	7.05%
1 April 2006	7.30%
1 April 2007	8.05%
1 April 2008	9.00%
1 April 2009	5.85%
1 April 2010	6.65%
1 April 2011	7.80%
1 April 2012	7.40%
1 April 2013	6.45%
1 April 2014	5.95%
1 April 2015	5.65%
1 April 2016	5.65%
1 April 2017	5.25%
1 April 2018	5.20%
1 April 2019	5.37%

See also:

Fringe benefits tax – rates and thresholds

8.5 Taxable value of loan fringe benefits

The taxable value of a loan fringe benefit is the difference between:

the interest that would have accrued during the FBT year if the statutory interest rate had applied to the outstanding daily balance of the loan, and
any interest that actually accrued.

GST does not affect the taxable value of loan fringe benefits, so these benefits are always grossed up at the type 2 rate. For more on GST and FBT, refer to Chapter 1.

Example

On 1 April 2016, an employee was given a $50,000 loan at an annual interest rate of 5% (payable six-monthly). No repayments of principal were required during the next 12 months. The statutory interest rate is 5.65%.

The notional interest on such a loan would be $2,825 ($50,000 × 5.65%).

The actual interest for the 2016-17 FBT year would be $2,500 ($50,000 × 5%). The difference of $325 ($2,825 - $2,500) would be the taxable value of the loan fringe benefit.

8.6 Fixed interest loans made before 1 July 1986

For this purpose, a fixed interest loan is one where the rate of interest can't be varied and that rate is specified in a document that existed at the time the loan was made.

Where a fixed interest loan was made before 1 July 1986, the statutory interest rate is the lesser of:

the statutory interest rate that applies generally for the FBT year in which the value of the benefit is being determined, or
the statutory interest rate that applied when the loan was taken out.

8.7 Housing loans made before 3 April 1986

The statutory interest rate for housing loans made before 3 April 1986 (other than fixed interest loans) is the lesser of:

the statutory interest rate that applies generally for the FBT year in which the value of the benefit is being determined, or
13.5%.

So the maximum statutory interest rate for such loans is 13.5%.

8.8 Reduction in taxable value where interest would have been deductible to employee

The taxable value of a loan fringe benefit may be reduced in accordance with the 'otherwise deductible' rule, but only if the recipient of the benefit is the employee (that is, a loan provided to an associate is not eligible for this reduction). Broadly, this means that the taxable value may be reduced to the extent to which interest payable on the loan is, or would be, allowable as an income tax deduction to the employee. For example, if an employee were to use a loan from you wholly to purchase interest-bearing investments, any interest payable on the loan would be wholly deductible for income tax purposes. So under the otherwise deductible rule, the taxable value of this loan fringe benefit would be nil, regardless of whether you charged a low, or even a nil, rate of interest on the loan.

Special rules apply where the interest that would have been deductible to the employee is incurred in relation to a car (refer to section 8.10).

Applying the otherwise deductible rule produces different results depending on whether any interest charged was intended to be for any private element of the loan fringe benefit. This is because the employee is entitled to an income tax deduction for interest charged on the portion of the loan used to derive their assessable income, but not for interest charged on the portion of the loan used for private or domestic purposes.

Therefore, where the otherwise deductible rule applies, the taxable value of a loan fringe benefit is:

the interest that would have accrued during the FBT year if the statutory interest rate had applied to the outstanding daily balance of the loan

any interest that actually accrued

the otherwise deductible amount

You can calculate the taxable value of a loan fringe benefit where the otherwise deductible rule applies using the following steps:

Step	Action
1	Calculate the taxable value of the loan fringe benefit ignoring the otherwise deductible rule.
2	Ignore any interest you charged on the loan and calculate the taxable value of the loan fringe benefit as if the loan was interest-free.
3	Now suppose that the employee had paid interest equal to the amount of the taxable value as calculated in Step 2. How much of this hypothetical interest payment would have been income tax deductible to the employee?
4	Now look at the real loan situation. If the employee is being charged interest on the loan, how much of this interest is allowable as an income tax deduction to the employee?
5	Subtract the actual deductible amount (Step 4) from the hypothetical deductible amount (Step 3). The result is the amount you can deduct from the taxable value of the fringe benefit.
6	The taxable value is your result from Step 1 minus your result from Step 5.

Example – rate set without regard to employee's use of loan

On 1 April 2016, an employee is given a loan of $50,000 at 4% for the whole of the FBT year. No repayments of principal are required in that year. The 4% rate is set without regard to how the employee intends to use the loan. The employee applies 60% of the loan to interest-bearing investments and spends the remaining 40% on home improvements.

The statutory interest rate is 5.65%.

The taxable value is calculated as follows:

Step	Action	Result
1	Calculate the taxable value of the loan fringe benefit without the otherwise deductible rule. That is: (Amount of loan × statutory interest rate) – (Amount of loan × actual interest rate charged)	($50,000 × 5.65%) – ($50,000 × 4%) = $825
2	Ignore any interest charged on the loan and calculate the taxable value of the loan benefit as if the loan was interest-free.	$50,000 × 5.65% = $2,825
3	Now suppose that the employee had paid interest equal to the amount of the taxable value calculated in Step 2. How much of this hypothetical interest payment would have been income tax deductible to the employee?	$2,825 × 60% = $1,695
4	Now look at the real loan situation. If the employee is being charged interest on the loan, how much of this interest is allowable as an income tax deduction to the employee?	$2,000 × 60% = $1,200
5	Subtract the actual deductible amount (Step 4) from the hypothetical deductible amount (Step 3). The result is the amount by which the taxable value of the fringe benefit may be reduced.	$1,695 - $1,200 = $495
6	The taxable value is the result from Step 1 minus the result from Step 5.	$825 - $495 = $330

Example – rate set with regard to employee's use of loan

On 1 April 2016, an employee is given a loan of $50,000 at 4% for the whole of the FBT year. No repayments of principal are required in that year. The employee intends to use 50% of the loan for interest-bearing investments and spend the remaining 50% on home improvements.

The statutory interest rate was 5.65%.

The 4% interest rate is set by the employer after considering how the employee intends to use the loan (that is, the employer knows that under the otherwise deductible rule there will be no FBT liability for that part of the loan used to produce income. Therefore, the employer charges interest at a rate sufficient to avoid incurring FBT on that part of the loan used for private or domestic purposes).

By the time the employee actually obtains the loan funds, the interest-bearing investments have increased in price and eventually cost 60% of the funds, so only 40% of the funds are spent on home improvements.

The taxable value is calculated as follows:

Step	Action	Result
1	Calculate the taxable value of the loan fringe benefit without the otherwise deductible rule. That is: (Amount of loan × statutory interest rate – (Amount of loan × actual interest rate charged)	($50,000 × 5.65%) – ($50,000 × 4%) $2,825 - $2,000 = $825
2	Ignore any interest charged on the loan and calculate the taxable value of the loan benefit as if the loan was interest-free.	$50,000 × 5.65% = $2,825
3	Now suppose that the employee had paid interest equal to the amount of the taxable value calculated in Step 2. How much of this hypothetical interest payment would have been income tax deductible to the employee?	$2,825 × 60% business use = $1,695
4	Now look at the real loan situation. If the employee is being charged interest on the loan, how much of this interest is allowable as an income tax deduction to the employee? If the employer had not made allowance for the intended use of the loan, they would have charged interest at the statutory rate of 5.65%. However, because the employer reduced the interest rate to take into account the intended business use and the effect of the otherwise deductible rule, the employee's income tax deduction is limited to: the amount that would have been allowed as a deduction to the employee if no allowance had been made for the income-producing purpose for which some of the loan funds were to be used, reduced by the amount of the allowance that was made.	$50,000 × 5.65% interest rate × 60% business use. The employee would have been entitled to a deduction of: $2,825 interest × 60% business use = $1,695 = ($50,000 × 5.65% × 60%) – ($50,000 × 5.65% × 50%) = $282.50
5	Subtract the actual deductible amount (Step 4) from the hypothetical deductible amount (Step 3). The result is the amount by which the taxable value of the fringe benefit may be reduced.	$1,695 - $282.50 = $1,412.50
6	The taxable value is the result from Step 1 minus the result from Step 5.	$825 - $1,412.50 = 0

Note that there can be no negative figures.

8.8A Special rules under the law for otherwise deductible rule and jointly provided loan fringe benefits

As described in section 8.8, the 'otherwise deductible' rule only applies if the recipient of a benefit is the employee. The FBT law also contains a design feature so that loan fringe benefits provided jointly to an employee and an associate are deemed to be provided solely to the employee. In cases where the otherwise deductible rules also apply, the law provides a special rule so that the otherwise deductible rule only applies to the employee's share of any deductible amount, and specifically excludes the associate's share of any deductible amount.

The otherwise deductible amount is calculated as:

taxable value × employee's percentage of interest

Where
the employee's percentage of interest is the employee's (not the associate's) interest in the asset
which is purchased with all or part of the loan
is applied or used for the purpose of producing assessable income of the employee.

Example

An employer provides an employee and her husband with a $100,000 low interest loan which they use to purchase shares. The loan fringe benefit has a taxable value of $10,000. The employee and her husband use the loan to purchase $100,000 worth of shares which they will hold jointly with a 50% interest each. The employee and her husband each include 50% of the dividends from the shares as assessable income in their tax returns.

The otherwise deductible rule applies, but the taxable value can only be reduced by the employee's share in the income-producing asset – that is, $10,000 × 50% = $5,000.

8.9 Substantiation requirements

Where you use the otherwise deductible rule, you must have an employee declaration to substantiate the extent to which the interest would have been 'otherwise deductible' to the employee. You must obtain the declaration from the employee before lodging the relevant FBT return or, if you don't have to lodge a return, by 21 May. Where the documentation is a declaration by the employee, it must be in a form approved by the Commissioner.

There is no need to obtain a declaration where the loan:

is used solely to enable the employee to acquire shares in your company and the shares are owned by the employee throughout the period of the year when the loan is outstanding
consists of you providing credit for a sale to the employee of goods or services used exclusively in the employee's employment – for example, where you sell protective clothing to an employee on interest-free credit terms.

See also:

About declarations for a copy of the Loan fringe benefit declaration

8.10 Reduction in taxable value where interest that would have been deductible to the employee is incurred in relation to a car

Where a loan fringe benefit is provided in relation to a car owned or leased by the employee, there are special rules for determining how much, if any, of your expenditure would have been 'otherwise deductible' to the employee.

These special rules are actually two different methods of calculating the amount of interest that hypothetically would have been income tax deductible to the employee (that is, Step 3 in the six-step procedure explained in section 8.8). The differences arise from the extent to which the car is used for business or employment-related purposes, and/or the type of evidence available to substantiate that use.

From 1 April 2016 only the first method – logbook record and the third method – no logbook and no kilometres requirements method are available. The logbook record method is substantiated by means of logbook records and/or odometer records. The no logbook and no kilometres method is substantiated by an employee declaration only. For full details and the appropriate declaration, refer to Chapter 21.

The employee declaration shown in section 8.9 is not suitable to be used for a loan related to a car.

8.11 Other reductions in taxable value

You calculate the taxable value of a loan fringe benefit in accordance with the valuation rules explained in sections 8.3 to 8.7. Where the otherwise deductible rule applies, you then reduce the taxable value as explained in section 8.8.

If the fringe benefit is of a type that attracts the remote area housing assistance concession, you may reduce the taxable value further – as explained in section 19.2.

8.12 Exempt loans

A loan benefit may be exempt from FBT in any of the following circumstances.

If, as an employer, you are engaged in the business of lending money and the interest rate on a loan to an employee is fixed at a rate at least equal to the interest on a comparable loan made to a member of the public in the ordinary course of business at about the time the loan was made to the employee.
If you are engaged in a business of lending money and, for each FBT year over which the loan extends, the rate of interest is variable but never less than the arm's length rate, you charge on loans made at about the time the loan was made to the employee.
You advance money to an employee solely to meet expenses to be incurred within six months of the advance being made. The expense must be incurred in carrying out duties of employment with you, the employer who made the advance. It must be accounted for by the employee and any excess advance refunded or otherwise offset.
An advance, repayable within 12 months, is made to an employee solely to pay a security deposit on accommodation – for example, a rental bond or service connection deposit. The accommodation must give rise to an exempt benefit, as explained in section 20.4, or must be temporary accommodation eligible for a reduced taxable value in accordance with the relocation concessions (refer to section 19.4).

See also:

Miscellaneous Taxation Ruling MT 2019 Fringe benefits tax: shareholder employees of family private companies and directors of corporate trustees
Taxation Determination TD 95/18 Fringe benefits tax: can the making of a loan to an employee be an exempt benefit under subsections 17(1) or 17(2) of the Fringe Benefits Tax Assessment Act 1986 where the employee receives a reduced interest rate not available to members of the public?
Taxation Determination TD 95/17 Fringe benefits tax: is the taxable value of a loan fringe benefit calculated only for those periods in the year of tax during which the interest rate on the loan was below the statutory interest rate?
Taxation Determination TD 93/90 Income tax: does the 'otherwise deductible rule' apply to reduce the taxable value of fringe benefits provided to associates of employees?

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 9 - Expense payment fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

9.1 What is an expense payment fringe benefit?

An expense payment fringe benefit may arise in either of two ways:

you (the employer) reimburse an employee for expenses they incur
you pay a third party in satisfaction of expenses incurred by an employee.

In either case, the expenses may be business expenses or private expenses, or a combination of the two.

It is important to note that the rules in this Chapter apply to expenses incurred by an employee that are reimbursed or paid by you, the employer. They don't apply to goods or services you purchase directly and provide to the employee. Nor do they apply to goods or services purchased using your credit card. Goods or services acquired in these ways are subject to valuation under the property or residual benefit rules discussed in Chapter 17 and Chapter 18.

Generally, where expenditure has been incurred by an employee as an agent for the employer, and the employer subsequently reimburses the employee or pays a third party directly, an expense payment benefit arises, not a property or residual benefit.

9.2 Taxable value

The taxable value of an expense payment fringe benefit is the amount you reimburse or pay. However, you use concessional valuation rules to calculate the taxable value of in-house expense payment fringe benefits.

In an attempt to keep explanations as simple as possible, we sometimes refer to 'the reimbursement' rather than 'the reimbursement or payment'.

9.3 In-house expense payment fringe benefits

An in-house expense payment fringe benefit arises where the expenditure you reimburse or pay for was incurred by the employee (or family member) in purchasing goods or services that you (or an associate) sell to customers or clients in the ordinary course of your business. There are two types of in-house expense payment fringe benefits:

an in-house property expense payment fringe benefit
an in-house residual expense payment fringe benefit.

Example

An employer, who is a manufacturer, markets her products through independent retailers.

The employees of that employer purchase those products from the retailers at full retail price, but subsequently receive a reimbursement from the employer for part of the purchase price.

The reimbursement is an in-house expense payment fringe benefit.

Taxable value of an in-house property expense payment fringe benefit

The taxable value of an in-house property expense payment fringe benefit is equal to the amount that would be the taxable value under the in-house rules explained in Chapter 17 if the sale of the goods to the employee (or associate) by the vendor had constituted an in-house property fringe benefit. For this purpose, the employee contribution would be the amount of expenditure incurred by the employee (or associate), reduced by the amount you reimburse or pay them.

As explained in Chapter 17, there have been changes to the valuation of in-house property benefits provided from 22 October 2012 under a salary packaging arrangement.

Taxable value of an in-house residual expense payment fringe benefit

The taxable value of an in-house residual expense payment fringe benefit is equal to the amount that would be the taxable value under the in-house rules explained in Chapter 18 if the service or privilege had constituted an in-house residual fringe benefit. For this purpose, the employee contribution would be the amount of expenditure incurred by the employee (or associate), reduced by the amount you reimburse or pay them.

As explained in Chapter 18, there have been changes to the valuation of in-house residual benefits provided from 22 October 2012 under a salary packaging arrangement.

Example

An employer manufactures petroleum products for sale to the public through independent retail outlets.

An employee purchases petroleum from one of the retailers at the ordinary retail price of $1,000. The employer reimburses the employee $250 of that expense.

The retailer had purchase the petroleum from the employer for $800.

The taxable value of this in-house property expense payment fringe benefit is:

$800 – ($1,000 - $250) = $50

The effect is that, irrespective of whether a staff discount is provided directly as a property or residual fringe benefit or indirectly as an expense payment fringe benefit, the taxable value is the same.

9.4 Reduction in taxable value where expenditure would have been deductible to the employee

The taxable value of an expense payment fringe benefit may be reduced in accordance with the otherwise deductible rule, but only if the recipient of the benefit is the employee. Broadly, this means that the taxable value may be reduced by the amount the employee would have been entitled to claim as an income tax deduction if you had not reimbursed them.

For example, if an employee incurred an expense solely in performing employment-related duties, the expenditure would be wholly deductible for income tax purposes. Under the otherwise deductible rule, if you reimbursed the employee for all or part of this expense, the taxable value of the expense payment fringe benefit would be nil.

The otherwise deductible rule does not apply to deductions for the decline in value of depreciating assets, except when the cost is less than $301 or you are eligible for and choose to use the simplified depreciation rules.

See also:

Simpler depreciation for small business

Special rules operate where the expenditure that would have been deductible to the employee is incurred in relation to a car (refer to section 9.6).

Applying the otherwise deductible rule produces different results, depending on whether the reimbursement you made was intended to be for the business element of the expense payment fringe benefit. This is because the employee is entitled to an income tax deduction for that portion of the expenditure incurred to derive their assessable income, but not for that portion of the expenditure incurred for private or domestic purposes.

You can apply the otherwise deductible rule using the following steps:

Step	Action
1	Write down the amount of the employee's gross expenditure – that is, the amount spent before any reimbursement from you.
2	Now suppose that the employee had not been reimbursed for any of the expenditure in Step 1. In this hypothetical situation, how much of this expenditure would have been income tax deductible to the employee?
3	Now look at the actual fringe benefit situation. How much of the employee's expenditure are they entitled to claim as an income tax deduction- There are two possibilities: If you reimbursed all or part of the business component of the employee's expenditure, their income tax deduction is calculated as follows the amount of the employee's expenditure is multiplied by the business percentage. This result is then reduced by the amount of the reimbursement. The resulting amount is their income tax deduction. Alternatively, if the amount you reimbursed was not calculated by reference to the business component of the expenditure, their income tax deduction is calculated as follows the amount of the employee's expenditure is reduced by the amount of the reimbursement. This result is then multiplied by the business percentage. The resulting amount is their income tax deduction.
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The resulting figure is the amount by which the taxable value of the fringe benefit may be reduced.

Therefore, where the otherwise deductible rule applies, the taxable value of an expense payment fringe benefit is:

the amount of your reimbursement or payment, reduced by
the amount obtained at Step 4 of the otherwise deductible rule.

Example

An employee incurred expenditure of $500, 80% of which was employment-related (and income tax deductible) and 20% private.

The employer reimbursed the employee for $250, without regard to whether the employee's expenditure was for business or private purposes.

The taxable value of the expense payment fringe benefit (without the otherwise deductible rule) is $250.

Apply the otherwise deductible rule as follows:

Step	Action	Result
1	Write down the amount of the employee's gross expenditure – that is, the amount spent before any reimbursement from you.	$500
2	Now suppose that the employee had not been reimbursed for any of the expenditure in Step 1. In this hypothetical situation, how much of this expenditure would have been income tax deductible to the employee?	$500 × 80% = $400
3	Now look at the actual fringe benefit situation. How much of the employee's expenditure are they entitled to claim as an income tax deduction? The amount of the employee's expenditure is reduced by the amount of the reimbursement. This result is then multiplied by the business percentage. The resulting amount is their income tax deduction.	($500 - $250) × 80% = $200
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The resulting figure is the amount by which the taxable value of the fringe benefit may be reduced.	$400 - $200 = $200
5	Finally, the taxable value of $250 may be reduced by $200.	$250 - $200 = $50

Example

An employee incurred expenditure of $500, 80% of which was employment-related (and income tax deductible) and 20% private.

The employer reimbursed the employee for $350, after considering the extent to which the employee's expenditure was employment-related and income tax deductible. (That is, the employer knew that under the otherwise deductible rule there would be no FBT liability for that part of the fringe benefit used to produce income, so they avoided reimbursing the private or domestic part of the employee's expenditure).

The taxable value of the expense payment fringe benefit (without the otherwise deductible rule) is $350.

Apply the otherwise deductible rule as follows:

Step	Action	Result
1	Write down the amount of the employee's gross expenditure – that is, the amount spent before any reimbursement from you.	$500
2	Now suppose that the employee had not been reimbursed for any of the expenditure in Step 1. In this hypothetical situation, how much of this expenditure would have been income tax deductible to the employee?	$500 × 80%= $400
3	Now look at the actual fringe benefit situation. How much of the employee's expenditure are they entitled to claim as an income tax deduction? The amount of the employee's expenditure is multiplied by the business percentage. This result is then reduced by the amount of the reimbursement. The resulting amount is their income tax deduction.	($500 × 80%) - $350 = $50
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The resulting figure is the amount by which the taxable value of the fringe benefit may be reduced.	$400 - $50 = $350
5	Finally, the taxable value of $350 may be reduced by $350.	$350 - $350 = 0

9.4A The 'otherwise deductible' rule and jointly provided expense payment fringe benefits

As described in section 9.4, the 'otherwise deductible' rule only applies if the recipient of a benefit is the employee. The FBT law also contains a design feature so that expense payment fringe benefits provided jointly to an employee and an associate are deemed to be provided solely to the employee. In cases where the otherwise deductible rule also applies, it will only apply to the employee's share of any deductible amount and specifically excludes the associate's share of any deductible amount.

The otherwise deductible amount is calculated as:

taxable value × employee's percentage of interest

Where the employee's percentage of interest is the employee's (not the associate's) interest in the asset

which relates to the expense payment fringe benefit
is applied or used for the purpose of producing assessable income of the employee.

Example

An employee and his wife jointly own a rental property, each with a 50% interest. The rental income from the property is $20,000 and the associated deductible expenses are $10,000. The property is available for rent during all of the FBT year.

The employer reimburses the employee and his wife for the rental expenses ($10,000) on the 31 March 2016. There are no employee contributions made by the employee. The otherwise deductible rule applies and that taxable value can be reduced to nil (that is, by both the employee's and their spouse's interest in the deductible rental expenses).

The otherwise deductible rule applies, but the taxable value can only be reduced by the employee's share of the deductible rental expenses – that is, $10,000 × 50% = $5,000.

9.5 Substantiation requirements

Where you use the otherwise deductible rule, you must have certain documentation to substantiate the extent to which the expense payment would have been 'otherwise deductible' to the employee. You must obtain the documentation from the employee before lodging the relevant FBT return or, if you don't have to lodge a return, by 21 May. Where the documentation is a declaration by the employee, it must be in a form approved by the Commissioner.

Travel diary

A 'travel diary' is a diary or similar document that must be obtained from the employee where either:

the employee's expense is incurred for travel within Australia for more than five consecutive nights and the travel is not exclusively for performing employment-related duties (the fact that the business travel requires the employee to stay away over a weekend will not, in itself, mean the trip is not undertaken exclusively in the course of their employment)
the employee's expense is incurred for travel outside Australia for more than five consecutive nights.

In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.

Example – travel more than five consecutive nights

A travel diary shows the nature of each work or business activity, where and when it took place, the duration of the activity and the date the entry was made.

If the provision of the expense payment or residual benefit is covered by an annual 'no private use declaration' (refer to section 20.3), the requirement to obtain a travel diary will be waived. That is, if the expense payment benefit is subject to a consistently enforced prohibition on private use and which would result in a taxable value of nil, you will then be able to make an annual no private use declaration.

Such a declaration would state that the benefits were provided only for employment related purposes and that there was no private portion.

Employee declaration

You must obtain an employee declaration except where:

the employee's expense (other than an expense incurred in respect of a car they own or lease) is incurred exclusively in the course of performing employment-related duties (for example, protective clothing or tools of trade)
there is a requirement to keep a travel diary
the requirement to keep a travel diary is waived because the employee is a member of an international aircrew
the provision of the fringe benefit is covered by a recurring fringe benefit declaration.

See also:

About declarations – to get an Expense payment benefit declaration

An employee's declaration must specify the percentage of those expenses incurred in earning the employee's assessable income. The percentage may be based on a reasonable estimate made by the employee. The employee is required to keep records in accordance with the income tax guidelines to support the percentage used in the declaration.

The guidelines in Law Administration Practice Statement PS LA 2001/6 Verification approaches for home office running expenses and electronic device expenses can be followed by an employee in respect of home office and electronic device expenses.

If a declaration contains an estimate that appears excessive to the employer, having regard to the nature of the employee's duties, the employer should seek an explanation from the employee. You and your employee may be liable to a penalty if the declaration or the percentage used to reduce your taxable value does not reflect actual usage associated with earning assessable income.

See also:

Law Administration Practice Statement PS LA 2001/6 Verification approaches for home office running expenses and electronic device expenses

Recurring fringe benefit declaration

The requirement to obtain an employee declaration is waived if the provision of the fringe benefit is covered by a recurring fringe benefit declaration.

A fringe benefit is covered by a recurring fringe benefit declaration if:

it is provided no later than five years after the day the declaration was made
the deductible proportion of the benefit is not significantly less than the deductible proportion of the benefit for which the declaration was first provided (a difference of more than 10 percentage points is regarded as being significant)
it is 'identical' to the fringe benefit for which the declaration was first made.

Benefits are to be treated as being identical if they are the same in all respects except for any differences that:

are minimal or insignificant
relate to the value of the benefits, or
relate to the deductible proportion of the benefits.

A recurring fringe benefit declaration is automatically revoked by a later declaration made for an identical benefit. This means that the earlier declaration applies to the first benefit and to any identical benefits provided before the later declaration was made. The later declaration applies to the benefit for which it was provided and to any identical benefits provided subsequently.

See also:

About declarations – to get a recurring expense payment fringe benefit declaration

Example – recurring fringe benefit declaration

An employer regularly reimburses an employee for the cost of home telephone expenses. This is an expense payment fringe benefit. The employee gives the employer a recurring fringe benefit declaration which specifies that the deductible proportion of the expenses is 80%. The declaration will cover all further reimbursements in relation to telephone costs over the next five years if the employment-related use of the telephone is not less than 70%. If the employment-related use of the telephone drops to less than 70%, another declaration is required.

9.6 Reduction in taxable value where an expense that would have been deductible to the employee is incurred in relation to a car

Where an expense payment fringe benefit is provided in relation to a car owned or leased by the employee, there are special rules for determining how much, if any, of your expenditure would have been otherwise deductible to the employee.

These special rules are actually two different methods of calculating the amount of the expense that hypothetically would have been income tax deductible to the employee (that is Step 2 in the four-step procedure explained in section 9.4). The differences arise from the extent to which the car is used for business or employment-related purposes, and/or the type of evidence available to substantiate that use.

From 1 April 2016 only the first method – logbook record and the third method – no logbook and no kilometres method are available. The logbook record method is substantiated by means of logbook records and/or odometer records. The no logbook and no kilometres method is only substantiated by the use of employee declarations. For full details about applying the otherwise deductible rule and the employee's car declaration, refer to Chapter 21.

The employee declaration referred to in section 9.5 is not suitable for an expense incurred in relation to a car.

9.7 Other reductions in taxable value

You calculate the taxable value of an expense payment fringe benefit in accordance with the valuation rules explained in sections 9.2 and 9.3. Where the otherwise deductible rule applies, you then reduce the taxable value as explained in section 9.4.

If the fringe benefit is of a type that attracts any of the concessions listed below, you may reduce the taxable value further. In some instances, special conditions must be satisfied before the concession applies – for example, keeping certain records.

The following is a list of reductions that may apply to expense payment fringe benefits:

in-house fringe benefits – tax-free threshold
remote area residential fuel
remote area housing assistance
remote area holiday transport
remote area home ownership schemes
overseas employment holiday transport
relocation transport – where transport is by employee's car
relocation – temporary accommodation and meals
employment interviews and selection tests – where transport is by employee's car
occupational health and migrant language training – where transport is by employee's car
living away from home – food provided
entertainment expense payments
overseas employees – education of children.

See also:

Chapter 19 – Reductions in fringe benefit taxable value

9.8 Exempt expense payment benefits

The following is a list of exemptions that may apply to expense payment fringe benefits:

no private use declaration
living-away-from-home accommodation
car expenses – expense payments
employment interviews and selection tests – transport
relocation – removal and storage of household effects
relocation – engagement of a relocation consultant
relocation – sale or acquisition of dwelling
relocation – connection or reconnection of certain utilities
living-away from home – leasing of household goods
relocation – transport
motor vehicle parking
newspapers and periodicals
compensable work-related trauma (including workers' compensation insurance cover)
travel in a foreign country to obtain medical treatment
travel for compassionate reasons
occupational health and migrant language training
emergency assistance
minor benefits
long service awards
safety awards
Australian Traineeship System
provision of certain work-related items
membership fees and subscriptions
travel by way of a motor vehicle (other than a limousine) involving the transport of passengers for a fare (including ride-sourcing vehicles)
provision of certain non-entertainment meals.

See also:

Chapter 20 – Exempt benefits

9.9 Common expenses reimbursed or paid for by employers

The following are some of the most common expenses reimbursed or paid for by employers and how they are treated for FBT purposes.

Car expenses

The payment or reimbursement of employee car expenses, such as registration, is an expense payment fringe benefit.

The taxable value is the amount you reimburse or pay, reduced by the otherwise deductible rule (refer to section 9.4). There are special rules determining the otherwise deductible amount for car expense payment benefits (refer to Chapter 21).

Car expenses – reimbursed cents per kilometre

Reimbursement of car expenses on a rate per kilometre basis is not a fringe benefit, except in relation to remote area holiday transport (refer to section 19.2) and overseas employment holiday transport (refer to section 19.3). This is the exception to the general rule that reimbursement for expenses incurred by an employee gives rise to an expense payment fringe benefit.

The employee will need to show this reimbursement as income in their tax return. They can claim a deduction for any work-related car expenses and the Individual tax return instructions has more information on this.

Car parking expense payment benefits

Car parking fringe benefits arise when you provide car parking facilities for an employee and certain other conditions are met (refer to section 16.1).

By contrast, a car parking expense payment benefit may arise if an employee incurs expenditure on car parking, and:

you subsequently reimburse the employee or you pay for the car parking expenses on behalf of the employee
the car is parked at or near the employee's primary place of employment for more than four hours between 7.00am and 7.00pm on the day the expenses are incurred, and the car is used by the employee to travel between home and work on that day.

In the case of car parking expense payment benefit, the proximity to a commercial parking station and the daily fee charged by it are not relevant.

Exempt employers

The following employers who are otherwise liable to pay FBT are exempt from car parking expense payment benefits:

a scientific institution (other than an institution run for the purposes of profit or gain to its shareholders or members)
a religious institution
a charitable institution
a public educational institution
a government body, but only in relation to an employee who is employed exclusively in, or in connection with, a public educational institution.

Health insurance premiums

The reimbursement or payment of employee health insurance premiums is an expense payment fringe benefit.

The taxable value is the amount you pay.

Home/desktop computer

This is an expense payment fringe benefit and the taxable value is the amount you reimburse or pay.

Even if the computer is used for work, the taxable value can't be reduced under the otherwise deductible rule. This is because the computer is depreciated, not claimed as a one-off deduction in the year it was purchased, unless you are eligible for the simplified depreciation rules for small businesses.

See also:

Simplified depreciation – rules and calculations

Home mortgage

The taxable value of this benefit is the total amount you reimburse or pay.

Payments you make to an employee's mortgage account are an expense payment fringe benefit. However, payments made into an employee's home mortgage offset facility are not an expense payment fringe benefit, but rather a payment of salary and wages.

Home telephone and internet

The reimbursement or payment of employee home telephone and internet costs is an expense payment fringe benefit. To work out the taxable value, you need to know the business use of the telephone and internet and apply the otherwise deductible rule.

The use of the otherwise deductible rule must be supported by certain records (refer to section 9.5). Different substantiation requirements apply to claims up to $50 per FBT year, and those that exceed $50.

Reimbursement of home telephone and internet costs up to $50 for an employee for an FBT year: you can reduce the taxable value under the otherwise deductible rule by up to $50 with limited documentation retained by the employee. In practical terms, you should be able to explain the nexus between the employment and the expenses incurred by the employee. You are still required to obtain a declaration from the employee in these circumstances (refer to section 9.5).
Reimbursement of home telephone and internet costs greater than $50 for an employee for an FBT year: you and the employee are required to obtain and keep records of the actual expenses incurred and reduce the taxable value only by the amount supported by the documentation which reflects actual use. The declaration alone is not a sufficient record in these circumstances.

See also:

Phone, data and internet expenses

Laptop computer

This is an exempt benefit, if the expense payments in the FBT year are in relation to the employee's purchase of the one laptop computer.

The other types of exempt benefit that can arise from providing a laptop are as follows.

Where you own the computer and give it to the employee to keep, this is a property benefit. This exemption is limited to one computer per employee per year.
Where the computer belongs to you and the employee will have to return it, this is a residual benefit.

There are certain conditions that must be met for the exemption to apply (refer to section 20.8)

Mobile phone

If the mobile phone is primarily for use in the employee's employment, the benefit is an exempt benefit (refer to section 20.8).

Personal credit card payments

This is an expense payment fringe benefit.

The taxable value is the amount you reimburse. This will be regardless of the items of expenditure incurred under the credit card agreement – that is, purchases of goods, services or cash advances. If the goods or services bought by the employee are work related, the taxable value can be reduced by the otherwise deductible rule (refer to section 9.4).

Home rental expenses

Unless the home is in a remote area, this is an expense payment fringe benefit. The taxable value of this benefit is the total amount you reimburse or pay.

If you incur the rental expenses and the premises are the employee's usual place of residence, the benefit is a housing fringe benefit (refer to Chapter 10).

If you incur the rental expenses and the premises are not the employee's usual place of residence, the benefit is a residual fringe benefit (refer to Chapter 18).

If you incur the rental expenses for an employee who is required to live away from their usual place of residence, the benefit is an exempt benefit (refer to section 20.4).

Self-education expenses

This is an expense payment fringe benefit.

The taxable value is the amount you pay. If the self-education expenses are work related, the taxable value can be reduced by the otherwise deductible rule (refer to section 9.4). The use of the otherwise deductible rule must be supported by certain records (refer to section 9.5).

Unlike when claiming an income tax deduction, for FBT you don't have to reduce self-education expenses by $250 when working out the otherwise deductible amount. Note: In the 2021-22 Federal Budget that was handed down on 11 May 2021, it was announced that the Government will allow an income tax deduction of the first $250 of a prescribed course of education expense (which is currently not deductible) from the first income year after the date of Royal Assent of the enabling legislation.

Higher Education Loan Program (HELP) charges are not otherwise deductible for the employee, and the full value is subject to FBT if paid by you. All HELP debt repayments and HECS-HELP student contributions in the form of upfront payments for Commonwealth supported higher education are not otherwise deductible for the employee. This means that the full value is subject to FBT if paid by you.

Taxi travel (including ride-sourcing)

Any benefit arising from taxi travel by an employee is an exempt benefit if the travel is a single trip beginning or ending at the employee's place of work.

Any benefit arising from taxi travel by an employee is also an exempt benefit if both of the following apply:

the travel is a result of sickness of, or injury to, the employee, and
the whole or a part of the journey is directly between any of the following:
- the employee's place of work
- the employee's place of residence
- any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.

From 1 April 2019, the taxi travel exemption was extended to include travel by way of a motor vehicle (other than a limousine) involving the transport of passengers for a fare. That is, the exemption can apply to travel in a ride-sourcing vehicle, or other vehicles for hire that do not have a taxi licence, where the above requirements are met.

For prior FBT years, the exemption was limited to travel in a vehicle licensed by the relevant State or Territory to operate as a taxi. It did not extend to ride-sourcing services provided in vehicles that were not licensed to operate as a taxi.

Other non-work-related travel by an employee in a motor vehicle involving the transport of passengers for a fare generally gives rise to an expense payment fringe benefit. The taxable value is the amount you pay or reimburse.

See also:

Education and study – Specific self-education expenses
Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement
Taxation Ruling TR 98/9 Income tax: deductibility of self-education expenses
Taxation Determination TD 93/90 Income tax: does the 'otherwise deductible rule' apply to reduce the taxable value of fringe benefits provided to associates of employees?
Taxation Determination TD 93/96 Fringe benefits tax: does an employer have a liability under the Fringe Benefits Tax Assessment Act 1986 in relation to the payment of costs for a home telephone of an employee?
Law Administration Practice Statement PS LA 2001/6 Verification approaches for home office running expenses and electronic device expenses

Latest update

May 2021

Section	Changes and updates
9.8	Updated the 'Taxi travel' exemption to reflect a law change which extended this exemption
9.9	Updated the 'Self-education expenses' section to note the Federal Budget measure to allow income tax deductions for the first $250 of a prescribed course of education expense. Updated the 'Taxi travel' section to reflect a law change which extended this exemption.

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 10 - Housing fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

10.1 What is a housing fringe benefit?

A housing fringe benefit arises where an employee is provided with the right to use a unit of accommodation and the lease or licence which grants that right exists at a time when that unit of accommodation is the usual place of residence of the employee.

A unit of accommodation includes:

a house, flat or home unit
accommodation in a house, flat or home unit
accommodation in a hotel, motel, guesthouse, bunkhouse or other living quarters
a caravan or mobile home
accommodation in a ship or other floating structure.

The employee does not have to have exclusive use of the unit of accommodation – the use of shared accommodation as a usual place of residence is a housing fringe benefit.

If the unit of accommodation is not the employee's usual place of residence, the right to use the unit is not a housing fringe benefit. However, it may give rise to a residual fringe benefit (refer to Chapter 18).

10.2 Basis of valuation rules

The taxable value of a housing fringe benefit is measured by reference to the market value of the right to occupy the unit of accommodation reduced by any 'recipients rent' which in effect are rental payments.

Market value

Certain factors are disregarded in determining the market value of the right to occupy a unit of accommodation, namely:

any rights of the occupant to have expenses associated with the occupancy (for example, electricity or gas) paid for by you (the employer) or someone else (where the right of occupancy carries with it the provision of gas or electricity without charge to the employee, the market rental value of the housing benefit would need to reflect that condition)
any onerous conditions of the occupancy relating to the occupant's employment (for example, being on call for duty).

This means, in effect, that the right to occupy the unit of accommodation is valued according to what it would command for rent in an open market situation, without taking into account any special employment conditions or associated expenses of the occupant that might be paid by another person. The object is to ascertain the market rental value by reference to the occupied property, and to disregard any matters particular to the person or people who occupy it.

In normal valuation practice, the market rental is what a willing but not anxious person would be prepared to pay the owner to occupy the particular property in its existing condition if it were placed on the open market for rent. Ordinarily, market rental is ascertained by comparing it with similar properties, on the basis that the best evidence of the market rental value of a property is found by examining rents obtained for comparable properties in the locality.

Rental payment

A rental payment is the amount of rent or other consideration paid to the provider of the housing benefit in respect of the housing right. It is not restricted to rental money, but it must be something which is capable of being formally recognised within the lease or licence for the housing right. That is, it must be something for which a cash value can be determined. For example, a lease could specify that an employee will pay the costs of general maintenance of the property, and this would be considered a rental payment.

10.3 Types of housing fringe benefits

For the purposes of calculating the taxable value, there are two categories of housing fringe benefit, namely – benefits provided:

outside Australia
in Australia.

10.4 Taxable value of a housing fringe benefit provided outside Australia

The taxable value is the market rental value of the right to use the accommodation, reduced by any rental payments made by the employee. The market rental value must be calculated by reference to the period during the FBT year when the employee had the right to use the accommodation.

Accommodation provided in an external Australian Territory (other than Christmas Island and the Cocos (Keeling) Islands) is a housing benefit provided outside Australia.

10.5 Taxable value of a housing fringe benefit provided in Australia

This category of benefit does not include accommodation provided in a remote area of Australia. Remote area housing benefits are exempt from FBT (refer to section 10.8).

There are two sub-categories of these benefits for valuation purposes, namely:

where the person providing the accommodation is carrying on a business of providing the same accommodation to the public and the unit of accommodation is a caravan or mobile home, or is in a hotel, motel, hostel or guesthouse
any other accommodation.

Accommodation in a caravan, mobile home, hotel, motel, hostel or guesthouse where the person providing the benefit is carrying on a business of providing such accommodation to the public

The taxable value of the right to use a unit of accommodation – that is a caravan or mobile home, or is in a hotel, motel, hostel or guesthouse – is the market rental value of the accommodation, reduced by any rental payments made by the employee. The market rental value must be calculated by reference to the period during the FBT year when the employee had the right to use the accommodation.

If the accommodation is provided to an employee of the hotel, caravan park, etc, and is identical or similar to that provided to paying guests, the taxable value is 75% of the market rental value, less the amount of any rental payments.

For example, consider an employee who manages a caravan park. If the employee lives rent-free in a house in the caravan park, the taxable value is the market rental value of that house. However, if the employee's accommodation is in a mobile home and the caravan park has other similar mobile homes that are let to customers, the taxable value is 75% of the market rental value of the mobile home.

In determining the market rental value in these cases, it is not appropriate to use the daily rate charged to casual guests. Rather, you need to establish an appropriate long-stay occupancy rate. One acceptable measure is to determine the market rental value by reference to rentals charged for equivalent accommodation in the nearest residential quarter (for example, the rent charged for a similar apartment). As an alternative, you could adopt an amount equal to 15% of the daily rate charged to casual guests.

Other accommodation

The taxable value of accommodation other than that described above is the market rental value of the accommodation, reduced by any rental payments made by the employee. You must calculate the market rental value by reference to the period during the FBT year when the employee had the right to use the accommodation.

As an alternative to establishing the market rental value every year, you may base the taxable value for the second and subsequent years on the first year's market rental value. This requires calculating an annual rental value for the first year and thereafter applying an inflation factor. The inflation factor can be obtained from the rent sub-group of the national consumer price index, and is published each year by the ATO. You can use this alternative method for a maximum of nine consecutive years.

If an employee occupies the accommodation for only part of a year, you have to 'annualise' the market rental value before applying the inflation factor. Where the year is a leap year, 366 days are used instead of 365.

Example – single employee occupying house

An employee occupies a house for 121 days of the year.

If the market rental value for that period is $5,200, the annualised market rental value is:

$5,200 ÷ 121 × 365 = $15,687.70

Example – several employees occupying house

An employee occupied a house owned by the employer from 1 July 2014 to 31 March 2015 (that is, 274 days). The market rental value of the house for that period was $11,820. The house is located in New South Wales.

Another employee occupied the house from 1 January 2016 to 31 March 2016 (that is, 91 days). The indexation factor for the state of New South Wales for the year ended 31 March 2016 was 1.032.

A third employee occupies the house from 1 August 2016 to 31 March 2017 (that is, 243 days). The indexation factor for New South Wales for the year ended 31 March 2017 is 1.025.

The house was left vacant except for the periods described above.

No rental payment was made by any of the employees.

The taxable value of the benefit provided to the first employee (in the 2015 FBT year) was $11,820.

The taxable value of the benefit provided to the second employee (in the 2016 FBT year) was $4,040.17. This was determined using the following steps:

Step	Action	Result
1	Obtain the annual rental value equivalent of the accommodation provided in the first year.	$15,745.62 (that is, $11,820 ÷ 274 × 365)
2	Determine the indexed rental value for the 2016 year.	$15,745.62 × 1.032 = $16,249.48
3	Determine the taxable value of the accommodation provided to the employee according to the period of occupancy.	91 ÷ 366 × $16,249.48 = $4,040.17

The taxable value of the benefit provided to the third employee (in the 2017 FBT year) was $11,088.60. This was determined using the following steps:

Step	Action	Result
1	Index the previous year's (that is, 2016) annual rental value by the published indexation factor.	$16,249.48 × 1.025 = $16,655.72
2	Determine the taxable value of the accommodation provided to the employee according to the period of occupancy.	243 ÷ 365 × $16,655.72 = $11,088.60

Where substantial improvements to the particular unit of accommodation could be expected to have increased the market rental value by at least 10%, you must determine the value of the housing benefit by reference to the 'new' market rental value. You also have to find a 'new' market rental value if alterations reduce the market rental value by at least 10%.

If the accommodation was occupied at different times during the first year by different employees, and the market rental values differed, the annual rental value for indexation purposes is the weighted average of the annual equivalent of the market rental value of each employee's period of occupancy.

10.6 Accommodation that is not the usual place of residence

The housing fringe benefit rules apply only to accommodation that is the employee's usual place of residence. The rules do not apply where the employee is:

living away from their usual place of residence in order to carry out employment-related duties, or
travelling in the course of performing employment-related duties.

In the former case, the benefit may be an exempt benefit. In the latter case, the 'otherwise deductible' rule may apply to the taxable value of the expense payment fringe benefit or residual fringe benefit.

10.7 Reductions in taxable value

There are a number of circumstances where you may reduce the taxable value of a housing fringe benefit. These are outlined below.

Relocation – temporary accommodation

This concession reduces the taxable value of fringe benefits arising from providing temporary accommodation (including household goods) to an employee who changes their usual place of residence during employment, or to start employment.

Temporary accommodation at former location

The concession applies to temporary accommodation at the employee's former location only if the temporary accommodation is necessary because the former home is unavailable or unsuitable for occupancy because of the relocation (for example, furniture removal). In that case, the concession applies to the temporary accommodation for a maximum 21-day period ending on the day the employee starts work at the new location.

Temporary accommodation at new location

Where the temporary accommodation is at the new location, the employee must start to make sustained and reasonable efforts to buy or lease suitable long-term accommodation as soon as reasonably practicable after starting work at the new location.

The concession is limited to an occupancy period that begins seven days before the day the employee starts work at the new location and ends when the employee could reasonably be expected to occupy the home after it has been purchased or leased.

The concession is ordinarily limited to a maximum occupancy period of four months. However, it may apply for a maximum of 12 months, as follows.

Where the employee gives you a declaration outlining their efforts to find suitable long-term accommodation, the concession may apply for a maximum of six months.
Where the employee:
- owned a home at the former location but sold it within six months of starting work at the new location and, during that period, attempted to buy a home at the new location, and
- gives you a declaration (see below) outlining their efforts to find suitable long-term accommodation.

In either case, the concession will end before the four months, six months or 12 months elapse if the employee stops making reasonable and sustained efforts to buy or lease suitable long-term accommodation.

The Temporary accommodation relating to relocation declaration must be in a form approved by the Commissioner (refer to About declarations).

10.8 Exempt housing benefits

Remote area housing benefits

A housing benefit qualifies as a remote area housing benefit where:

a	For the whole of the tenancy period, the unit of accommodation is in a remote area (that is, it is not located in or adjacent to an eligible urban area).
b	For the whole of the tenancy period, the accommodation is occupied by a person who is your current employee, and the usual place of employment of the employee is in the remote area.
c	It would be concluded that it must be necessary for you to provide accommodation for employees or to arrange to provide such accommodation because: the nature of your business is such that employees are liable to move frequently from one residential location to another there is insufficient suitable residential accommodation otherwise available at or near the place or places where the employees are employed, or it is customary for employers in that industry to provide free or subsidised accommodation for employees.
d	The benefit was not provided to the employee under either: a non-arm's length arrangement, or an arrangement that was entered into by any of the parties for the purpose, or partial purpose, to obtain the concession.

For most employers, accommodation is in a remote area if it is not in or near an urban centre. Accommodation is classified as being near or adjacent to an eligible urban area and therefore not remote where it is situated is either:

less than 40 km from an eligible urban area with a census population of 14,000 to less than 130,000
less than 100 km from an eligible urban area with a census population of 130,000 or more.

If the accommodation is in zone A or B (for income tax purposes), to be remote it must be located:

at least 40 km from an eligible urban area with a census population of 28,000 to less than 130,000, and
at least 100 km from an eligible urban area with a census population of 130,000 or more.

The population figures are based on the 1981 Census.

Where the shortest practical surface route includes water

When determining whether a location is remote and the shortest practical surface route includes a route by water, the distance between these locations is worked out using the following formula:

total kilometres of the surface route that are by water

total kilometres of the surface route that are by land

Example

Wong Island is 80 km, by the shortest practical surface route, from the centre point of an inland eligible urban area with a population of 140,000. The shortest practical surface route to the island involves 40 km of travel by road and 40 km of travel by sea.

Wong Island is also situated 45 km, by the shortest practical surface route, from the centre point of an eligible urban area with a population of 20,000.

Wong Island is 'remote' as it is 120 km – that is, (40 km by water × 2) + 40 km by land – from an eligible urban area by the shortest practical surface route.

Where the circumstances warrant it, the Commissioner has a discretion to treat a person who resides or works in an area adjacent to an eligible urban area as residing or working outside that area if people who live or work near that person are outside the area.

Where free water is provided to an employee in accordance with a residential tenancy agreement between you and the employee, the water will form part of the housing benefit on which the remote area housing fringe benefit is based. Therefore, the provision of water in this instance is also exempt from FBT.

Extension of the remote area housing exemption for some regional employers

An extended exemption applies to housing benefits provided for employees of:

a public hospital
a government body where the duties of the employee are exclusively performed in, or in connection with, a public hospital or a not-for-profit hospital
a hospital carried on by a not-for-profit society or a not-for-profit association
a charitable institution
an employer who provides a public ambulance services or services that support those services where the employee is predominantly involved in connection with the provision of those services
a government body where the employee's duties are performed in a police service.

For these employers an employee's housing will be treated as being in a remote area, where it is at least 100 km via the shortest practical surface route from the centre point of an eligible urban area of with a 1981 census population of more than 130,000.

The same extended exemption applies to determining if the usual place of employment for these employees is in a remote area for the purposes of the remote area housing exemption.

The extended exemption for some regional employers only applies to remote area housing exempt benefits and the remote area residential fuel reduction (if the employer also provides a remote area housing benefit). It does not apply to other remote area reductions explained in section 19.2.

See also:

Fringe benefits tax – rates and thresholds
Fringe benefits tax – remote areas
Miscellaneous Taxation Ruling MT 2025 Fringe benefits tax: guidelines for valuation of housing fringe benefits
Practical Compliance Guideline PCG 2016/14 Discount to the valuation of housing fringe benefits provided by retirement village operators

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 11 - Living-away-from-home allowance fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

Unlike most other types of fringe benefits, a living-away-from-home allowance fringe benefit can only be provided by the employer to the employee.

The information provided relates to the application of the FBT law to living-away-from-home allowance (LAFHA) fringe benefits as at 1 October 2012. For information about the application of the FBT law to such fringe benefits provided because the employee was living away from home (LAFH) before 1 October 2012, see Living-away-from-home-allowances – before 1 October 2012.

11.1 Overview

For FBT purposes, LAFHA is an allowance you (the employer) pay to your employee to compensate for additional expenses incurred and any disadvantages suffered because the employee's duties of employment require them to live away from their normal residence.

Instead of paying a cash LAFHA to an employee, you could provide other fringe benefits, either by:

reimbursing the employee's actual food costs and/or accommodation expenses incurred at the new location, or
providing the food or accommodation yourself.

11.2 What is a living-away-from-home allowance fringe benefit?

The payment of a LAFHA is a fringe benefit.

For FBT purposes, a LAFHA is an allowance you (the employer) pay to an employee to compensate for additional expenses incurred and any disadvantages suffered because the employee's duties of employment require them to live away from their normal residence.

The term 'additional expenses' does not include expenses the employee would be entitled to claim as an income tax deduction.

For a payment to an employee to be considered a LAFHA, there are three conditions that must be met:

It is an allowance you pay your employee in respect of the employment of that employee.
The duties of their employment require them to live away from their normal residence.
The whole or part of the allowance is in the nature of compensation for:
- non-deductible additional expenses your employee might be expected to incur, or
- non-deductible additional expenses your employee might be expected to incur and other disadvantages suffered, because the duties of your employee's job require them to live away from their normal residence.

Duties of employment require your employee to live away from their normal residence

A LAFHA exists where some or all of the allowance is compensation to the employee for accommodation and additional living expenses that the employee might be expected to incur because the duties of the employee's employment require them to live away from their normal residence.

Whether an employee's job requires them to live away from their normal residence, and where the employee's normal residence is located, is a question of fact and will depend on each employee's circumstances.

Normal residence

'Normal residence' is a broad term that means a LAFHA fringe benefit can arise regardless of the location of an employee's usual place of residence.

While an employee's usual place of residence may be in Australia or outside Australia, it is their normal residence that will be relevant for determining whether there is a LAFHA fringe benefit.

Place of residence scenarios

If an employee's usual place of residence is	Then their normal residence is
in Australia	that usual place of residence
not in Australia and they have a place in Australia where they usually reside while living in Australia	that place in Australia they usually reside while living in Australia
not in Australia and they do not have a place in Australia where they usually reside while living in Australia	their usual place of residence overseas.

Example – employee's usual place of residence is outside Australia and normal residence is Australian residence

Fiona, a British citizen, comes to Australia to work for three years. She intends to return to the United Kingdom at the end of the period. Her usual place of residence is in the United Kingdom.

Fiona takes out a lease and rents a home in Sydney for the duration of her employment in Australia.

After Fiona has been in Australia for six months, her employer asks her to work in the Melbourne office for six months. During the six-month period in which she will be working in the Melbourne office, Fiona is paid an allowance to cover her Melbourne food, drink and accommodation expenses.

For the purposes of determining whether the allowance is a LAFHA fringe benefit, the home in Sydney is considered to be her normal residence because it is the place in Australia where Fiona usually resides when in Australia.

Example – employee's normal residence is usual place of residence and is outside Australia

Harry, a British citizen, comes to Australia to work for three years. He intends to return to the United Kingdom at the end of the period. His usual place of residence is in the United Kingdom.

Harry takes out a lease and rents a home in Sydney for the duration of his employment in Australia.

After Harry has been in Australia for a few weeks, his employer asks him to work in the Melbourne office for the remainder of his time in Australia. During the period in which he will be working in the Melbourne office, Harry is paid an allowance to cover his Melbourne food, drink and accommodation expenses.

Even though Harry has taken out a lease of the Sydney home for three years, Sydney would not be considered to be his normal residence in Australia because he had lived there only briefly – that is, Sydney could not be considered the place in Australia where Harry usually resides while in Australia. His normal residence in this case would be his usual place of residence in the United Kingdom.

Usual place of residence

An employee's place of residence is the place at which they reside or have some form of sleeping accommodation, regardless of whether on a permanent or temporary basis, or on a shared basis. However, the question of whether an employee is living away from their usual place of residence involves a consideration of two places of residence – the place where the employee is living at the time, and some other place.

An employee is regarded as living away from their usual place of residence if they would have continued to live at the former place had the duties of their employment not required them to work temporarily in the new locality.

Example – former home continues to be usual place of residence

An employee is transferred by his employer from Sydney to Newcastle to help install a new item of plant. For the duration of this appointment, the employee's immediate family continues to live at his former address, where he returns every weekend.

Example – former home has ceased to be usual place of residence

An employee is transferred by his employer from Sydney to Newcastle. Just before the transfer, the employee separated from his wife, who continues to reside at the former address with the employee's children. Apart from irregular visits to see the children, the employee will not be returning to his former residence.

Practical guidelines for determining whether living away from home

The principles of determining whether an employee is living away from their usual place of residence have been established over the years by case law decisions. Whether or not an employee is living away from home will depend on the facts of each case. Similar principles can apply to determine if an employee is living away from their normal residence.

Factors such as the lifestyle of the employee and the type of profession and industry often need to be taken into consideration.

Other relevant factors may include whether personal details, such as the employee's driver's licence or electoral enrolment, have been changed; whether the former house was being looked after by relatives or friends for the time the employee was at the new locality; or whether the former residence was being rented out for the time they were at the new locality. These may also affect the calculation of the taxable value of any LAFHA fringe benefit.

Some employees do not have a fixed usual place of residence because of the transitory nature of their lifestyle, which means that their normal residence is wherever they happen to sleep at night. An example would be employees who follow a job from construction site to construction site and have no permanent place of residence – these employees will not generally be regarded as living away from home.

Examples of employees on appointments of finite duration who will generally be living away from their usual places of residence are foreign nationals employed in Australia (expatriate employees) and Australian residents stationed in foreign countries for a time – for example, export consultants, diplomats and immigration officials.

The same applies where an employee transfers to a new locality within Australia on an appointment of fixed duration, provided the permanent job location does not change. An example would be an arrangement where an employee transfers to a branch office of the employer in another state for a two-year or three-year term on the basis that they will return to the permanent position at the end of that time. The employee would be regarded as living away from their normal residence provided that they intend to return there at the end of the term of the transfer.

The general presumption is that a person's normal residence will be close to where they are permanently employed.

Generally, employees in the following kinds of situations would be regarded as living away from their normal residence:

construction workers living in camps, barracks or huts
oil industry employees living on offshore oil rigs
marine industry employees living on board vessels
trainee employees, such as trainee teachers, who are living away from home in order to undergo training courses of extended duration. Employees attending short-term staff training courses would generally be treated as travelling in the course of their employment.

Employees who work on an oil rig, or other petroleum or gas installation at sea, are generally provided with residential accommodation at or near the worksite. An allowance you pay in such circumstances to compensate employees for disadvantages suffered because their duties of employment require them to live away from their usual place of residence is a LAFHA for FBT purposes, provided the allowance is expressly stated to be a LAFHA. For these employees, they do not need to have a usual place of residence in Australia.

For further information about the difference between a travelling allowance and a LAFHA, see section 11.11.

11.3 Steps to take if you want to pay your employee a LAFHA

If you pay your employee a LAFHA, you need to do the following:

Step	Action	Section reference
1	Ensure that the amount paid to the employee is in fact a LAFHA by definition.	11.2, 11.12
2	Calculate the taxable value of the LAFHA fringe benefit. This can vary, depending on whether:
2a	The employee is a temporary or foreign resident and the transitional rules apply.	11.4, 11.5, 11.6, 11.7
2b	The employee is not a temporary or foreign resident and the transitional rules apply.	11.4, 11.5, 11.6
2c	The employee maintains a home in Australia at which they usually reside and the fringe benefit relates to the first 12-month period, and the transitional rules do not apply.	11.4, 11.5, 11.6, 11.7, 11.8
2d	The employee works on a fly-in fly-out or drive-in drive-out basis.	11.4, 11.5, 11.6, 11.7, 11.9
2e	Any other circumstance applies.	11.4
3	Keep the appropriate records and declarations.	11.10 and Chapter 4
4	If required, report an amount as a reportable fringe benefit on the employee's payment summary or income statement (not as a taxable allowance).	Chapter 5

If you are not paying a cash LAFHA to your employee, but rather are providing accommodation or food or drink, or reimbursing them for these expenses, see section 11.12.

11.4 Taxable value

The taxable value of the LAFHA fringe benefit depends on the circumstances of the employee. The calculation of the taxable value falls into three circumstances:

the employee maintains a home in Australia at which they usually reside, and the fringe benefit relates to the first 12-month period
the employee is working on a fly-in fly-out or drive-in drive-out basis
all other cases.

Taxable value of the LAFHA fringe benefit

If your employee	Then the taxable value is
maintains a home in Australia at which they usually reside and it is available for their use at all times receives a LAFHA fringe benefit which relates to the first 12-month period at a particular work location, and gives you the appropriate declaration about living away from home	the amount of the LAFHA paid, minus: any exempt accommodation component, and any exempt food component.
works on a fly-in fly-out or drive-in drive-out basis has residential accommodation at or near their usual place of employment, and gives you the appropriate declaration about living away from home	the amount of the LAFHA paid, minus: any exempt accommodation component, and any exempt food component.
does not fall into either of the above situations	the amount of the fringe benefit.

The taxable value is not reduced by any exempt food component to the extent the fringe benefit relates to a period during which the employee resumes living at his or her normal residence. This means that if you pay an allowance for food or drink during any days that the employee returns home, the allowance that relates to those days is fully taxable for FBT purposes.

11.5 Exempt accommodation component

The accommodation component is the amount of the LAFHA fringe benefit that it is reasonable to conclude is compensation for expenses to be incurred by the employee for accommodation while the employee is living away from home. The accommodation expenses are for both the employee and any eligible family members, such as the employee's spouse and children.

The exempt accommodation component is so much of the accommodation component that equals the accommodation expenses actually incurred by the employee. Where a family member incurs these expenses on behalf of the employee, that family member is considered to be acting as an agent of the employee and, therefore, the employee is still the person incurring those expenses. The employee must substantiate all accommodation expenses.

If an employee does not spend all of the LAFHA provided in respect of the accommodation component, the excess is not an exempt accommodation component and is taxable.

Example

Steve receives a LAFHA from his employer which includes an accommodation component of $450 while he is seconded to Perth for 12 months. His normal residence is in Melbourne, and his Melbourne home continues to be available for his immediate use during his secondment. Steve resides with his wife, Helen, who rents a house in Perth for 12 months at a cost of $450 per week. The exempt accommodation component in this case is $450, provided the substantiation requirements are met.

Example

Steve and his wife Helen both work for the same employer and receive a LAFHA. Each LAFHA includes an accommodation component of $450 while they are seconded to Perth for 12 months. Steve and Helen's normal residence is in Melbourne, and their Melbourne home continues to be available for their immediate use during their secondment. Steve and Helen rent a house together in Perth at a cost of $450 per week.

Steve and Helen's separate exempt accommodation components in this case are $225 each per week, provided the substantiation requirements are met.

As Steve and Helen are each receiving an accommodation component of $450 per week, but are only spending $225 each per week, the excess of $225 each per week ($450 - $225) is not an exempt accommodation component. This excess of $225 each per week will form part of the taxable value of their respective LAFHA fringe benefits.

11.6 Exempt food component

The steps for calculating the exempt food component are outlined below:

Step	Action
1	Establish the food component
2	Subtract the applicable statutory food total from the food component. That is: Food component – applicable statutory food total.
3	From the amount calculated at Step 2, determine how much of that amount was incurred by the employee on food and drink.
4	The exempt food component is so much of the result of Step 3 that can be substantiated if required.

Where a family member incurs these expenses on behalf of the employee, that family member is considered to be acting as an agent of the employee and, therefore, the employee is still the person incurring those expenses.

The exempt food component does not include food expenses relating to any days during which the employee resumes living at his or her normal residence – this means that if you pay an allowance for food or drink for any days that the employee returns home, that part of the allowance for those days is fully taxable.

Food component

The food component in relation to a LAFHA fringe benefit is so much that might reasonably be concluded is compensation for expenses to be incurred by the employee for food or drink while the employee is living away from home. The expenses are for food or drink for both the employee and any eligible family members.

Applicable statutory food total

The applicable statutory food total is:

the sum (total) of the statutory food amounts of the employee and any eligible family members

less (minus)

any amount that might reasonably be expected to be the total normal food or drink expenses for eligible family members had they remained living in their normal residence during the period, and was taken into account by the employer in working out the food component.

The applicable statutory food total cannot be below zero.

The statutory food amount is $42 a week for each adult, and $21 a week for each child. (For this purpose, an adult is a person who had attained the age of 12 years before the beginning of the FBT year.)

The applicable statutory food total calculation reflects two alternative practices:

one where you may provide an allowance that is net of the statutory food amount to compensate employees only for additional food or drink expenses.
the other being where you provide an allowance that includes the statutory food amount to compensate employees for total food or drink expenses.

Example – allowance includes compensation for additional food costs

An employee living away from their normal residence is paid a LAFHA of $933 per week. Of that allowance:

$700 is compensation for the cost of accommodation, which is fully spent by the employee on accommodation and is substantiated by the employee.
$233 represents compensation for the additional food costs only while living away from home. The employee declares that they have spent no more than the Commissioner's reasonable food amount and, therefore, is not required to substantiate their expenditure.

In this example, the allowance includes compensation for additional food costs. The employer calculated the $233 food component by deducting $42 (estimated normal home food consumption costs) from the estimated food costs of $275.

The taxable value is calculated as follows, because the substantiation requirements are met:

Total allowance less (minus):		$933
Exempt accommodation component	$700
Exempt food component*	$233	$933
Taxable value		$0
* In this case, the exempt food component is $233 – ($42 - $42).

Because the food allowance is only for additional food costs, the exempt food component is $233. This amount is not required to be substantiated because it does not exceed the Commissioner's reasonable amount for food and drink expenditure.

Example – allowance includes compensation for total food costs

An employee living away from their normal residence is paid a LAFHA of $900. Of that allowance:

$500 is compensation for the cost of accommodation, which is fully spent by the employee on accommodation. The employee substantiates their accommodation expenditure.
$320 represents compensation for the total food costs while living away from home. This amount is more than the Commissioner's reasonable food amount and the employee actually spends $260 on food. The employee substantiates their total food expenditure.
the remaining $80 is compensation for disadvantages associated with having to live apart from family and in a town without facilities that would normally be enjoyed at home.

The taxable value is calculated as follows, because the substantiation requirements are met:

Total allowance less (minus):		$900
Exempt accommodation component	$500
Exempt food component*	$260	$760
Taxable value		*$140*
* In this case, the exempt food component is $320 – ($42 - $0) = $278. However, because the employee only spent $260 (and this can be substantiated) this becomes the exempt food component.

The taxable value is $80 paid for disadvantages suffered for living away from home plus $60 food component that was not spent equals $140.

The $60 consists of the $42 statutory food amount plus the remaining $18 difference between the $278 - $260.

Commissioner's reasonable food amount

The Commissioner will issue an annual taxation determination specifying the reasonable amount for food and drink expenses for future years. The Commissioner determines a reasonable amount for food and drink expenses incurred by the employee for which substantiation is not required.

An employee is required to substantiate all the expenses incurred on food and drink if the total of those expenses incurred exceeds the amount the Commissioner considers reasonable.

However, while the Commissioner will determine the amounts that are considered reasonable for the purposes of alleviating the requirement for an employee to substantiate expenses incurred on food and drink, the Commissioner does not determine if a LAFHA paid to an employee is reasonable or not.

The amount paid as a LAFHA is a matter to be determined between you and your employee, having regard to appropriate matters, such as any industrial laws or requirements.

Expenditure equal to or less than the Commissioner's reasonable food amount

Where the employee incurs expenditure on food or drink that is equal to or less than the Commissioner's reasonable food amount, no substantiation of the food or drink expenditure is required. Before paying a LAFHA which consists of a food component, you must be able to conclude that an employee will incur expenditure on food or drink. As a result, it is reasonable for you to be satisfied that there has been expenditure on food or drink up to the Commissioner's reasonable amount.

This means that the Commissioner accepts that the employee has spent an amount equal to the lesser of either:

the food component (if it is less than the Commissioner's reasonable food amount), or
the Commissioner's reasonable food amount on food or drink for the purposes of this calculation where no substantiation is required.

The effect of paying an allowance where the employee's expenditure is equal to or less than the Commissioner's reasonable food amount is outlined in the table below.

If you pay an allowance that is	And the expenditure incurred by the employee is equal to or less than the Commissioner's reasonable food amount then
for additional food costs, and is less than or equal to the Commissioner's reasonable food amount	No substantiation is required. The taxable value of the food component is nil.
for additional food costs and is more than the Commissioner's reasonable food amount	No substantiation is required. The taxable value is the difference between the allowance paid and the Commissioner's reasonable food amount.
for total food costs equal to the total of the Commissioner's reasonable food amount, plus an amount up to the statutory food total	No substantiation is required. The taxable value of the allowance is the statutory food total.
for total food costs equal to the total of the Commissioner's reasonable food amount, plus an amount greater than the statutory food total	No substantiation is required. The taxable value of the allowance will be at least the amount of the statutory food total.

See also:

section 11.10 of this Guide for more information on the record-keeping requirements
Taxation Determination TD 2019/7 Fringe benefits tax: reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 for food and drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit, for the fringe benefits tax year commencing on 1 April 2019

Example – allowance includes compensation for additional food costs and expenditure is less than Commissioner's reasonable food amount

An employee living away from their normal residence is paid a LAFHA of $630 per week. Of that allowance:

$350 is compensation for the cost of accommodation. This amount is fully spent by the employee on their accommodation and is substantiated by the employee.
$200 is compensation for the additional cost of food while away from home. The normal food costs of the employee were taken into account by the employer. This is less than the Commissioner's reasonable food amount.
the remaining $80 is compensation for disadvantages associated with having to live apart from family and in a town without facilities that would normally be enjoyed at home.

The taxable value is calculated as follows, assuming the substantiation requirements for the accommodation component is met:

Total allowance less (minus):		$630
Exempt accommodation component	$350
Exempt food component*	$200	$550
Taxable value		*$80*
* Amount taken to be spent on food less (minus) statutory food amount – that is, $200 – ($42 - $42) = $200.

Because the food component paid is $200, which is less than the Commissioner's reasonable food amount, the full amount of the food component is accepted as having been spent.

The taxable value is $80 paid for disadvantages suffered for living away from home.

Example – allowance includes compensation for total food costs and expenditure is less than Commissioner's reasonable food amount

An employee living away from their normal residence is paid a LAFHA of $730 per week. Of that allowance:

$350 is compensation for the cost of accommodation. This amount is fully spent by the employee on their accommodation and is substantiated by the employee.
$300 is compensation for the total cost of food while away from home. The employee advises they have spent less than the Commissioner's reasonable food amount.
the remaining $80 is compensation for disadvantages associated with having to live apart from family and in a town without facilities that would normally be enjoyed at home.

The taxable value is calculated as follows, because the substantiation requirements for the accommodation component are met and where the Commissioner's reasonable food amount is $233:

Total allowance less (minus):		$730
Exempt accommodation component	$350
Exempt food component*	$233	$583
Taxable value		*$147*
* Food component – applicable statutory food total, that is $300 – ($42 - $0) = $258.

Because there is no substantiation required because the amount spent by the employee is less than the Commissioner's reasonable food amount, the exempt food component is accepted as being the Commissioner's reasonable food amount of $233.

The taxable value is:

$80 paid for disadvantages suffered for living away from home
$67 being the $42 statutory food total plus the $25 (that is, $258 - $233) that was not included in the exempt food component (as substantiation was not required because the employee spent less than the Commissioner's reasonable food amount on food and drink).

11.7 Employee maintains a home in Australia

An employee's home in Australia (the place in Australia where they usually reside) can be a unit of accommodation as defined in the FBT legislation. This definition is broad and includes a house, flat, home unit, caravan or accommodation in living quarters.

To maintain a home in Australia, all of the following must apply:

the employee or their spouse must have an ownership interest in a home
that home must be available for their immediate use and enjoyment at all times while they are living away from it, and
it is reasonable to expect that the employee will resume living at that home when they are no longer living away from home for the purposes of their employment.

Ownership interest

Ownership interest includes both a legal or equitable interest, and a licence or right to occupy a dwelling. An employee or their spouse can have an ownership interest in a home they own or rent.

An adult child living with their parents generally does not have an ownership interest in the home and, therefore, is not maintaining a home as required, because they are not usually responsible for the mortgage or rental payments. Any payment of board would not change this position because the payment of board is considered to be a domestic arrangement.

Immediate use and enjoyment

For the employee to maintain a home for their immediate use and enjoyment at all times, the entire home cannot be rented out or sublet while they are living away from it. The employee must incur the ongoing costs of maintaining the residence, such as mortgage or rental payments and rates. The employee must be able to return to the home at any time and take up immediate occupancy.

Boarders, tenants or house-sitters

If an employee has a boarder or tenant staying with them in their normal residence, the employee can still be considered to be maintaining the home for their own use and enjoyment. However, the boarder's or tenant's stay must not impinge on the availability of the residence for the individual's immediate use and enjoyment.

Likewise, if an employee has a house-sitter in their home while they are living away from it, they will be maintaining the home when the house-sitter is either:

required to vacate the residence, or
their stay does not impinge on the employee's use and enjoyment of it whenever the employee returns home – for example, during temporary visits.

Similarly, if an employee decides to rent or sublet a part of their home while they are living away from it, such as a bedroom or granny flat, they will be maintaining a home for their own use and enjoyment if the employee continues to have occupancy rights and the rental or sublet does not restrict the employee's use and enjoyment of the property when the employee returns home.

11.8 First 12 months employee is required to live away from home

The fringe benefit has to relate to all or part of the first 12 months that an employee is living away from home in Australia for the purposes of their employment. The 12 months do not have to be consecutive.

You can choose to pause the 12-month period – for example, you may choose to pause the period because the employee is taking leave, such as annual leave, long service leave or sick leave. This gives you the flexibility to pause the period when circumstances arise in which it is appropriate and beneficial to do so.

The table below outlines how the 12-month period is affected by various employment situations.

If	Then
you pause the 12-month period for the employee and continue to pay them a LAFHA	the taxable value of the fringe benefit is not reduced by any exempt accommodation or exempt food component during the paused period. The full amount of the fringe benefit is taxable during the paused period.
both of the following apply the employee moves to another location to perform the duties of employment (the employee's work location changes), and it is unreasonable to expect the employee to commute to the new location from the earlier location for which a LAFHA was provided	a new 12-month period starts at the new employment location. The balance of the 12-month period is available if the employee returns to the previous employment location.
an employee takes up employment with an associate of their employer, and works in the same employment location	the 12-month period is not affected – that is, it is accumulated under both employers; there is not a new 12 months under the associated employer.
any other changes in the nature of the employee's employment are made within the same work location, such as changes to the conditions of employment (a promotion of the employee to a management position, or a change in the employee's job title)	the 12-month period is not affected.
the employee takes up employment with a different employer, who is not an associate of their previous employer	a new 12-month period starts when the employee changes employers.

Example

Jess receives a LAFHA from her employer while she is seconded to Brisbane for 12 months. Her normal place of residence is in Canberra. She is living in a serviced apartment in Brisbane.

Part of the way through the secondment, Jess takes a month's leave. Her employer wants her to complete a full 12-month secondment in Brisbane and pauses the 12-month period while she is on leave.

During the paused period, Jess does not lease the serviced apartment in Brisbane and her employer does not pay her a LAFHA.

When Jess resumes her secondment in Brisbane, the employer again pays her a LAFHA and the 12-month period recommences.

Had Jess continued to lease the serviced apartment during the pause in the 12-month period, and Jess's employer continued to pay her a LAFHA during this time, Jess's employer would not have been able to reduce the taxable value of the LAFHA by the amount of the allowance paid for the period of leave.

Example

Frank lives and works in Canberra. His employer asks him to work in Sydney for a period of nine months, for which a LAFHA will be paid. After that period of employment in Sydney, Frank returns to Canberra. The LAFHA fringe benefit provided to Frank for the nine months relates to part of the first 12 months that Frank is living away from his Australian home.

At a later time, Frank's employer asks him to work in Melbourne for a number of months. Because this is a new work location, a new 12-month period starts for any LAFHA paid to Frank during his time working in Melbourne.

Example

James is living away from home and is paid a LAFHA by his employer. James's employer undergoes a corporate restructure. James is transferred to a separate entity, which is not an associate of the employer, and works in the same work location. A new 12-month period commences for the new employer in James's case.

Example

Stephen is paid a LAFHA by his employer, a state government department, for living away from home. His employer transfers him to work, in the same location, for a state-owned corporation that is an associate of the department. The 12-month period continues and a new 12-month period does not commence in this case.

Example

Ruth lives and works in Brisbane. For three months of the year, her job requires her to live away from her normal residence and work in Canberra. She returns to her normal residence in Brisbane for the remainder of the year.

This arrangement continues for five years, during which time there is no change to Ruth's employer, work location and duties.

In this case, the LAFHA paid by Ruth's employer is taxed concessionally in each of the first four years. In each of those years, only three months of the first 12 months are used.

In the last year, the value of the fringe benefit is not reduced by any exempt accommodation or exempt food component because the benefit does not relate to all or part of the first 12 months that Ruth is living away from home while working at that same location.

11.9 Fly-in fly-out and drive-in drive-out employees

The employee is considered to be working on a fly-in fly-out or drive-in drive-out (or equivalent) basis when all of the following apply:

on a regular and rotational basis, the employee works for a number of days and has a number of days off which are not the same days in consecutive weeks (that is, following one week after another without interruption), such as a standard five-day working week and weekend
the employee returns to the employee's normal residence during the days off
it is customary in the industry in which the employee works for employees performing similar duties to work on a rotational basis and return home during days off – for example, miners – and the work duties continue to be undertaken by other employees on a rotational basis while any particular employee is on their days off
it is unreasonable to expect the employee to travel to and from work and the normal residence on a daily basis, given the locations of the employment and their home, and
it is reasonable to expect that the employee will resume living at the normal residence when the employment duties no longer require them to live away from home.

Example

An employee works in the mining industry on a 7-day on, 7-day off roster. The employee works Sunday through to Saturday, and has the following Sunday through to Saturday off.

In this case, the employee is not working the same days in consecutive weeks because the employee is working every day in one week, then not working in the next, and is doing this on a rotational basis.

This is contrasted with an employee who works Monday through to Friday and has Saturday and Sunday off, and does the same in the next week. An employee in this instance is working the same days in each week – they are working on a consecutive basis, week after week.

11.10 Record-keeping requirements

Employee declarations

To access the concessional treatment for LAFHAs and benefits, your employee will need to give you a declaration about living away from home. The declaration must be in the approved form and will vary depending on your employee's situation.

Your employee may also give you a declaration to substantiate their exempt accommodation and exempt food expenditure.

Situation	Declaration
Employee received a LAFHA or benefit from 1 October 2012 and works on a fly-in fly-out or drive-in drive-out basis	Living-away-from-home declaration – employees who fly-in fly-out or drive-in drive-out Employees should not use this declaration if they received the benefit of both the use of accommodation and transport to and from their usual place of residence.
Employee received a LAFHA or benefit from 1 October 2012 and they are required to maintain a home in Australia at which they usually reside and the fringe benefit relates to the first 12-month period	Living-away-from-home declaration – employees who maintain an Australian home Employees should not use this declaration if they are either: a fly-in fly-out or drive-in drive-out employee, or are not a temporary or foreign resident but they qualify for the transitional rules.
Employee received a LAFHA from 1 October 2012 and chooses to provide their employer with a declaration about their accommodation and food or drink expenses	Living-away-from-home declaration – employee related expenses Employees should not use this declaration if they have provided you with documentary evidence of their accommodation and food or drink expenses. The food or drink section does not need to be completed if the food or drink expenses incurred do not exceed the amount the Commissioner considers reasonable. Note: Employees will also need to give you a declaration about living away from home.

You must obtain all employee declarations no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return, by 21 May.

See also:

Living-away-from-home declaration

Exempt accommodation and exempt food components

To reduce the taxable value of a LAFHA by any exempt accommodation component and any exempt food component, you must obtain from your employee documentation substantiating the expense, as explained below.

Exempt accommodation component

Exempt food component

The expense must be substantiated in full.
The employee must give you, by the declaration date for the FBT year, either:
- documentary evidence of the payment of the expense ( credit card statements, bank statements, receipts) or a copy of these documents, or
- a declaration about the expense in the approved form.

Where the food or drink expenses incurred are more than the Commissioner's reasonable amount, then all of the food or drink expenses must be substantiated (not just the amount in excess of the Commissioner's reasonable amount).
The employee must give you, by the declaration date for the FBT year, either:
- documentary evidence of the expense (receipts, tax invoices, credit card statements, bank statements) or a copy of these documents, or
- a declaration about the expense in the approved form.
Where the food or drink expenses incurred are less than the Commissioner's reasonable amount, the employee does not have to substantiate the expense as above.

The Commissioner issues an annual Taxation Determination specifying the reasonable food or drink amount.

It is the amount of food or drink expenditure incurred by the employee that is relevant for the substantiation requirements, not the amount of the allowance paid.

See also:

Living-away-from-home declaration

Example

Fred's employer pays him more than the Commissioner's reasonable amount for food or drink expenses as part of his LAFHA. Fred incurs food or drink expenses to the full extent of the allowance provided. He must substantiate all his food or drink expenses incurred, not just the amount in excess of the Commissioner's reasonable amount.

If Fred incurred food or drink expenditure that was less than or equal to the Commissioner's reasonable amount, he would not be required to substantiate his food or drink expenditure – the Commissioner's reasonable amount is taken to be his food or drink expenditure.

Timeframes for keeping and receiving records

If	Then
your employee gives you a declaration about living away from home	you must keep the declaration for five years from the date they must give you the declaration.
your employee gives you a declaration about their accommodation, food or drink (or a combination of these)	you must keep the declaration for five years from the date they must give you the declaration. Your employee must keep the relevant documentary evidence of their expenses for five years from the date they must give you the declaration.
your employee gives you documentary evidence of their expenses (such as receipts, a copy of credit card statements or bank statements), instead of a declaration about these expenses	you must keep the documents for five years from the date they would otherwise be required to give you the declaration.

11.11 Difference between a living-away-from-home allowance and a travelling allowance

It is important to determine whether an allowance paid by you to your employee is a LAFHA or a travelling allowance, because they have different tax treatments. LAFHAs are a fringe benefit, whereas travelling allowances are part of the employee's assessable income and are not fringe benefits.

The following table sets out some of the indicators of whether the allowance is a LAFHA or travelling allowance:

Living-away-from-home allowances	Travelling allowances
This is paid where an employee has taken up temporary residence away from their usual place of residence in order to carry out duties at a new, but temporary, workplace.	This is paid because an employee is travelling in the course of performing their job.
There is a change of job location in relation to paying the allowance.	There is no change of job location in relation to paying the allowance.
Where an employee is living away from home, it is more common for that employee to be accompanied by their spouse and family.	Where an employee is travelling, they are generally not accompanied by their spouse and family.
They are paid for longer periods.	They are paid for short periods.

The indicators above are guidelines only and no single indicator determines the nature of the allowance received – for example, a travelling allowance might be paid to a commercial traveller, or travelling entertainer almost continuously, whereas another employee may receive a LAFHA for only a month or so.

There may be circumstances when an employee is away from their home base for a brief period in which it may be difficult to determine whether the employee is living away from home or travelling. As a practical general rule, where the period away does not exceed 21 days, the allowance will be treated as a travelling allowance rather than a LAFHA.

11.12 Other living-away-from-home fringe benefits

Rather than paying a cash LAFHA while an employee is required to live away from their usual home, you may provide accommodation and/or food for the employee. Alternatively, you may reimburse the employee for these expenses. In these instances, although the benefits must be valued by reference to the valuation rule for the particular type of benefit, the tax liability is essentially the same. The following reduction and exemption may apply in these circumstances:

living-away-from-home – food provided (refer to section 19.4)
living-away-from-home – accommodation (refer to section 20.4).

See also:

Taxation Ruling TR 92/15 Income tax and fringe benefits tax: the difference between an allowance and a reimbursement.
Taxation Determination TD 2012/5 Fringe benefits tax: for the purposes of Division 7 of Part III of the Fringe Benefits Tax Assessment Act 1986, what amount represents a reasonable food component of a living-away-from-home allowance for expatriate employees for the fringe benefits tax year commencing on 1 April 2012?
Taxation Determination TD 2019/7 Fringe benefits tax: reasonable amounts under section 31G of the Fringe Benefits Tax Assessment Act 1986 for food or drink expenses incurred by employees receiving a living-away-from-home allowance fringe benefit, for the fringe benefits tax year commencing on 1 April 2019.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 12 - Airline transport fringe benefit

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

12.1 Overview

Airline transport fringe benefits were a separate category of fringe benefit, however they are now taxed under the in-house property or in-house residual fringe benefit provisions.

12.2 What is an airline transport fringe benefit?

An airline transport fringe benefit is an in-house property fringe benefit or an in-house residual fringe benefit to the extent the:

benefit provided is an in-house property or in-house residual fringe benefit
benefit is the provision of transport in a passenger aircraft operated by a carrier (including any incidental services on board the aircraft)
transport is subject to the stand-by restrictions that customarily apply in the airline industry to airline transport employees, for example, free or discounted air travel, and
benefit is provided by an airline or travel agent to their employees (or associates) for travel in the aircraft.

An airline transport fringe benefit is only provided when an employee or their associate commences the relevant travel (and not when it is booked). This means that an employee may book the travel in one year, but the fringe benefit liability does not arise until the following year when the employee commences the travel.

See also:

12.3 Taxable value

The taxable value of an airline transport fringe benefit is aligned with the in-house benefit valuation methods.

Not under a salary packaging arrangement

The taxable value of an airline transport fringe benefit not provided under a salary packaging arrangement is calculated as 75% of the stand-by airline travel value of the benefit, less any employee contribution. The stand-by value is determined at the comparison time for in-house residual fringe benefits or at the provision time for in-house property fringe benefits.

Under a salary packaging arrangement

If the airline transport fringe benefit is provided under a salary packaging arrangement, the taxable value is equal to the notional value of the benefit less any employee contribution. The notional value is determined at the comparison time for in-house residual fringe benefits or at the provision time for in-house property fringe benefits.

Comparison time or provision time

An airline transport fringe benefit is only provided when an employee or their associate commences the relevant travel (and not when it is booked). That is, the comparison time or provision time means when the employee or their associate commences the relevant travel. For example, an employee may book the travel in one year, but the taxable value for the fringe benefit is determined the following year when the employee commences the travel.

See also:

section 17.3 – Taxable value – in-house property fringe benefits
section 18.4 – In-house residual fringe benefits

12.4 Stand-by airline travel value

The stand-by airline travel value of the benefit differs, depending on whether the transport is over a domestic route or over an international route.

Domestic or international travel scenario

If the travel is on	Then the stand-by travel value is
a domestic route	50% of *the* carrier's lowest standard single economy airfare for that route as publicly advertised during the year of tax. This means the provider must use the lowest standard single economy airfare of the carrier that provided the transport.
an international route	50% of *any* carrier's standard single economy airfare for that route as publicly advertised during the year of tax. This means the provider can use the lowest standard economy airfare of any carrier that provides commercial airfares over the relevant route.

Domestic and international route

Generally, a domestic route refers to a route in which the flight's departure and arrival are both within Australia. An international route is considered to be a route in which the flight's departure or arrival (or both) are outside of Australia.

Standard single economy airfare

The standard single economy airfare is the economy airfare that an ordinary customer would be expected to pay in order to travel the same route in that year of tax.

It does not include the use of any of the following for determining the stand-by airline travel value:

group booking fares
one-off fares
heavily discounted fares as part of a marketing campaign.

Example – standard single economy airfare over an international route

An employer that is an airline provider gives one of its employees a free return flight overseas, subject to stand-by restrictions. Included in the flight are a checked luggage allowance, meals and in-flight entertainment.

Another airline provides flights over the same route. Their advertised fare is lower but does not include checked luggage, meals or in-flight entertainment.

In determining the taxable value of the overseas flight provided to its employee, the employer can use the lower fare advertised by the other airline.

Example – group booking fares

An airline provider offers discounted fares where a group booking is made of more than 10 people. Because this discounted fare is not a single economy airfare it cannot be used as a comparable airfare in determining the stand-by airline travel value.

Example – marketing campaign

GoCheap (an airline) is attempting to increase its market share and decides to set up a three month marketing campaign and as part of that, put out a select number of fares per flight over a couple of major routes during the off-peak season that are only $1.

The discounted fares are far below the cost price of the service and do not reflect the standard single economy airfare for that particular route and therefore cannot be used as a comparable airfare in determining the stand-by airline travel value.

Publicly advertised during the year of tax

In determining the stand-by airline travel value, you need to determine the relevant airfare that is publicly advertised during the relevant year of tax that the benefit was provided (that is, when the transport began).

The term 'publicly advertised' includes the internet, newspapers, television and radio, as well as any other medium in which a member of the public would be able to reasonably determine the cost of the fare.

Example – 2017-18 is the year of tax

Axel, an employee of an Australian airline, is travelling on an international carrier that is in an interline arrangement with his employer.

Having waited for a few days to get onto a flight to travel home to Australia as part of the stand-by restrictions, Axel is finally able to get on a flight on 31 March 2018.

Even though the flight lands in Australia on 1 April 2018 local time, the relevant year of tax in determining the stand-by travel value is the 2017-18 FBT year.

Example – 2018-19 is the year of tax

Following on from the example above, assume Axel is unable get onto the 31 March 2018 flight and instead boards on 1 April 2018. In that case, the relevant year of tax is the 2018-19 FBT year.

12.5 Reduction in taxable value where expenditure would have been deductible to the employee

The taxable value of an airline transport fringe benefit may be reduced in accordance with the 'otherwise deductible' rule, but only if the recipient of the benefit is the employee. Broadly, this means that the taxable value may be reduced by the amount the employee would have been entitled to claim as an income tax deduction if both of the following conditions are satisfied:

the provision of transport in the aircraft is not provided as a fringe benefit
the employee acts as a consumer or member of the public in purchasing the ticket.

For an explanation of how the otherwise deductible rule is applied for property fringe benefits, refer to section 17.5.

For an explanation of how the otherwise deductible rule is applied for residual fringe benefits, refer to section 18.7.

12.6 Substantiation requirements

If you use the otherwise deductible rule, you must have documentation to substantiate the extent to which the purchase price of the benefit would have been 'otherwise deductible' to the employee. This means you must obtain from the employee the relevant Property benefit declaration or Residual benefit declaration and the employee may also need to keep a travel diary. You must obtain the documentation from the employee before lodging the relevant FBT return.

See also:

section 17.6
section 18.8 – Substantiation requirements
About declarations

12.7 Concessions and exemptions

The taxable value of an airline transport fringe benefit (whether it is an in-house property or residual fringe benefit) may be reduced by up to $1,000, if the benefit is not accessed under a salary packaging arrangement.

There are also a number of exemptions which may apply to airline transport benefits that are either property or residual fringe benefits.

See also:

for information in relation to the concession and exemptions for property fringe benefits, sections 17.8 and 17.9
for information in relation to the concession and exemptions for residual fringe benefits, sections 18.10 and 18.11
section 19.5 – Other reductions
Chapter 20 – Exempt benefits

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 13 - Board fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

13.1 What is a board fringe benefit

Providing a meal to an employee is a board fringe benefit if the employee is entitled to have accommodation provided and all of the following conditions are satisfied:

there is an entitlement under an industrial award to be provided with at least two meals a day, or under an employment arrangement at least two meals a day are ordinarily provided
the meal is supplied by you (the employer) – if you are a company, the meal may be supplied by a related company in a wholly-owned group
the meal is cooked or prepared on your (or a related company's) premises or on a worksite or place adjacent to a worksite
the meal is supplied on your premises (or the worksite) or on the premises of a related company.

Some common examples of meals that may be board fringe benefits are:

meals provided in a dining facility located on a remote construction site, oil rig or ship
meals provided to a live-in housekeeper or to a resident teacher in a boarding school.

Meals supplied to family members living with an employee who is entitled to meals under the employment agreement or award are also treated as board meals and are valued under these rules.

13.2 Taxable value

The taxable value of a board fringe benefit is $2 per meal per person ($1 per person if under the age of 12). You reduce this by any amount the employee pays for the meal. Incidental refreshments such as morning and afternoon teas supplied as part of board are exempt from FBT.

Where you have an agreement in place with your employee, which requires them to make a contribution towards their board meals and their accommodation, you may apportion that contribution on any reasonable basis.

Example

An employee is provided with accommodation and meals at their place of work. The employee contributes $182 a week ($26 a day) towards their accommodation and meals as per their remuneration agreement. The employer apportions the contribution as follows: $6 per day as a contribution towards the three meals provided each day. In effect this will reduce the taxable value of each board fringe benefit to nil. $20 a day will be the employee's contribution towards their accommodation.

GST does not affect the taxable value of board fringe benefits so these benefits are always 'grossed up' at the type 2 rate. For more on GST and FBT, refer to Chapter 1.

Grossing up means increasing the taxable value of benefits you provide to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax.

13.3 Meals provided by others

Where you contract an employee's services to another person who provides the employee with board meals on their premises, the meals are board fringe benefits and you still have the FBT liability.

13.4 Meals that are not board fringe benefits

The following meals are not board fringe benefits:

meals provided at a party, reception or other social function
meals provided in a dining facility open to the public, except for board meals provided to employees of a restaurant, motel, hotel and so on
meals provided in a facility principally used by a particular employee.

Such meals may be property fringe benefits or, if provided by a tax-exempt body, tax-exempt body entertainment fringe benefits.

13.5 Reduction in taxable value where expenditure would have been deductible to the employee

The taxable value of the board fringe benefit is reduced to nil if both of the following apply:

you provide a board fringe benefit to an employee
they would have been entitled to an income tax deduction if they had paid for the meal.

13.6 Exempt board benefits

Board meals provided to an employee who is employed in a primary production business located in a remote area are exempt benefits (refer to section 20.7).

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 14 - Entertainment and fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee (for example, a relative).

14.1 What is the provision of entertainment?

The provision of entertainment means the provision of:

entertainment by way of food, drink or recreation
accommodation or travel in connection with, or to facilitate the provision of, such entertainment.

Recreation includes amusement, sport and similar leisure-time pursuits and includes recreation and amusement in vehicles, vessels or aircraft (for example, joy flights, sightseeing tours, harbour cruises).

Some examples of the provision of entertainment are:

business lunches and drinks, cocktail parties and staff social functions
providing entertainment to employees and clients by providing access to sporting or theatrical events, sightseeing tours, holidays and so on
accommodation and travel when it is provided in connection with, or to facilitate, activities such as entertaining clients and employees over a weekend at a tourist resort, or providing them with a holiday.

See also:

Chapter 15 – Tax-exempt body entertainment fringe benefits

14.2 Does the provision of entertainment give rise to an entertainment fringe benefit?

There is no category of 'entertainment fringe benefit' as such.

The provision of entertainment may give rise to a number of different types of fringe benefit, depending on the circumstances under which you provide the entertainment. The different types of fringe benefit that may arise are:

a meal entertainment fringe benefit (section 14.7) – where fringe benefits are provided by way of, or in connection with, food or drink
an expense payment fringe benefit – for example, the cost of theatre tickets purchased by an employee that you reimburse (see Chapter 9 of this Guide)
a property fringe benefit – for example, providing food and drink (see Chapter 17 of this Guide)
a residual fringe benefit – for example, providing accommodation or transport (see Chapter 18 of this Guide)
a tax-exempt body entertainment fringe benefit – this category of fringe benefit involves only those employers who are exempt from income tax (see Chapter 15 of this Guide).

14.3 How to identify whether the provision of food or drink is entertainment

In order to determine when food or drink provided to a person results in entertainment, you need to examine the circumstances surrounding that provision of the food or drink. You need to look at the following factors.

(a) Why is the food or drink being provided?

This is a purpose test. For example, food or drink provided for the purposes of refreshment does not generally have the character of entertainment, whereas food or drink provided in a social situation where the purpose of the function is for employees to enjoy themselves has the character of entertainment.

(b) What food or drink is being provided?

Morning and afternoon teas and light meals are generally not considered to be entertainment. However, as light meals become more elaborate, they take on more of the characteristics of entertainment. The reason for this is that the more elaborate a meal, the more likely it is that entertainment arises from consuming the meal.

(c) When is the food or drink being provided?

Food or drink provided during work time, during overtime or while an employee is travelling is less likely to be entertainment. This is because, in the majority of these cases, food provided is for a work-related purpose rather than an entertainment purpose. This, however, depends on whether the entertainment of the person is the expected outcome of the food or drink. For example, a staff social function held during work time still has the character of entertainment.

(d) Where is the food or drink being provided?

Food or drink provided on the employer's business premises or at the usual place of work of the employee is less likely to have the character of entertainment. However, food or drink provided in a function room, hotel, restaurant, cafe, coffee shop or consumed with other forms of entertainment is more likely to have the character of entertainment. This is because the provision of food or drink is less likely to have a work-related purpose.

None of these factors on their own will determine if the food or drink provided is meal entertainment. However, (a) and (b) are considered the more important factors.

What to do next:

If the benefit is	Then refer to
entertainment by way of food or drink	section 14.4
recreational entertainment	section 14.10
not entertainment	section 14.17

14.4 Do you provide food or drink that is entertainment?

If you provide entertainment by way of food or drink you must:

Step	Action	Section reference
1	Consider whether an exemption applies	14.5
2	If no exemption applies, the entertainment may be a property, expense payment or residual fringe benefit	14.6
3	Decide whether the benefit will be valued under the meal entertainment fringe benefit rules	14.7
4	Keep the appropriate records	14.13
5	If required, report an amount on the employee's payment summary or income statement	14.14

For examples of how the valuation rules apply see section 14.9.

14.5 Does an exemption apply?

An exemption applies to the provision of food or drink in the following circumstances.

Food and drink consumed on business premises (property exemption)

Food and/or drink provided to, and consumed by, current employees on your business premises on a working day are exempt property benefits (refer to section 20.6). The exemption from FBT applies regardless of whether:

the food and drink is prepared on your premises (a corporate box is not part of your business premises)
entertainment arises from the provision of food and/or drink.

Food and/or drink provided on your business premises to associates of employees (for example, spouses) is not exempt from FBT. Where you provide food and/or drink on the same occasion to both employees and their associates, you may have to apportion the expenditure on a per head basis.

Example – provision of meal entertainment employees and associates

An employer provided drinks and a buffet meal for 10 employees and their spouses on business premises. The cost was $500. The cost of the entertainment provided to employees was $250; this is exempt from FBT. The cost related to entertainment of the associates ($250) is not exempt from FBT.

In this example, the provision of the food and drink is the provision of meal entertainment. If the employer elects to use one of the meal entertainment fringe benefit valuation rules, they must include all of the $500 expenditure when calculating their total meal entertainment expenditure for the FBT year.

When this exemption does not apply

This exemption does not apply to:

employers who are exempt from income tax when entertainment arises from the provision of food and/or drink
income tax-paying bodies who elect to value the entertainment as meal entertainment
meals provided under a salary sacrifice arrangement after 7.30pm AEST on 13 May 2008.

Minor benefits exemption

Depending on the entertainment provided, the benefit may qualify for the minor benefits exemption (refer to section 20.8).

14.6 Taxable value of food or drink that is entertainment

Generally, when you provide entertainment to both employees and non-employees (for example, clients), only the part of the entertainment that relates to employees and their associates is subject to FBT.

The taxable value of the food or drink, and the associated accommodation or travel, is calculated using the respective valuation rule according to whether the benefit is an expense payment, property, residual or tax-exempt body entertainment fringe benefit.

If you can't easily determine the actual expenditure, you can use a 'per head' basis of apportionment.

You may elect to value the food, drink and associated accommodation or travel as 'meal entertainment'. If you make this election, you can't use the per head basis of apportionment and the taxable value is calculated under the meal entertainment valuation rules, explained below.

Example – property fringe benefit

An employee entertained two of her employer's clients by taking them to lunch at a restaurant. The meal cost $150. The employee paid for the meal by charging it to her employer's credit card account (that is, the meal was paid for by the employer). The meal provided to the employee is a property fringe benefit. Using a per head apportionment, the taxable value of the fringe benefit is one-third of the total cost of the meal (that is, $50).

Example – residual fringe benefit

An employee takes several of his employer's clients on a sightseeing tour of local attractions. The employer pays the total cost of the trip directly to the tour agent. Providing the trip to the employee is a residual fringe benefit, the taxable value of the fringe benefit is the cost of one ticket for the trip.

Example – expense payment fringe benefit

An employee entertained two of his employer's clients by taking them to lunch. The meals cost $50 each. The employee paid a total of $150 for the meals out of his own pocket. His employer later reimbursed him for the cost of the meals. This reimbursement gives rise to an expense payment fringe benefit. Special legislative provisions (refer to section 19.5) ensure that FBT is paid only on the portion of the reimbursement relating to the entertainment of the employee (and associates). In this case, the taxable value of the expense payment fringe benefit is $50.

14.7 Meal entertainment fringe benefits

Where expense payment fringe benefits, property fringe benefits, residual fringe benefits or tax-exempt body entertainment fringe benefits arise from the provision of meal entertainment, you may be eligible to elect to classify these fringe benefits as meal entertainment fringe benefits. You are not eligible to make an election if benefits are provided under salary packaging arrangements on or after 1 April 2016.

An election cannot include meal entertainment provided by someone other than you (that is, someone who is not the employer). If a fringe benefit arises from meal entertainment provided by someone other than you, you must value the fringe benefit according to the rules for that type of fringe benefit. It could, for example, be an expense payment fringe benefit, a property fringe benefit, a residual fringe benefit or a tax-exempt body entertainment fringe benefit.

If you choose to classify a fringe benefit as a meal entertainment fringe benefit, you have to classify all fringe benefits arising from the provision of meal entertainment during the FBT year as meal entertainment fringe benefits.

Specifically, the provision of meal entertainment means:

providing entertainment by way of food or drink
providing accommodation or travel in connection with, or to facilitate the provision of, such entertainment
paying or reimbursing expenses incurred by the employee for the above.

Example – reimbursement of car parking fees

An employer makes a meal entertainment election for the current FBT year. During that year, an employee is provided with meal entertainment at a restaurant. The employee drove their car from home to the restaurant, parked next door and paid for parking. The employee was reimbursed by their employer for the car parking fees.

In this case, the car parking fees reimbursed by the employer are expenses incurred in providing the employee with travel in connection with, or to facilitate the provision of the meal entertainment.

The provision of meal entertainment does not include the provision of entertainment by way of recreation.

If you elect to classify the provision of meal entertainment as a meal entertainment fringe benefit, the meal entertainment provided does not give rise to an expense payment fringe benefit, property fringe benefit, residual fringe benefit or tax-exempt body entertainment fringe benefit.

14.8 How to calculate the taxable value of a meal entertainment fringe benefit

There are two methods you can use to calculate the taxable value of meal entertainment fringe benefits:

50:50 split method
12-week register method.

These options are also available to income tax-exempt employers. Remember, you cannot elect to classify the provision of meal entertainment as meal entertainment fringe benefits if they are provided under a salary packaging arrangement on or after 1 April 2016. You must therefore use the respective valuation rule to calculate the taxable value according to the type of benefit provided. Both the 50:50 split and 12-week register methods are based on your total meal entertainment expenditure. This includes expenditure that might otherwise be exempt from FBT or not normally subject to FBT.

Under the 50:50 split method, the taxable value is 50% of your total meal entertainment expenditure.

The 12-week register method is based on the total meal entertainment expenditure and an appropriate percentage, as evident from the 12-week register.

Where you are reimbursed by a third party for the cost of meal entertainment you provide to an employee, the value of the benefit received by the employee is not reduced. The arrangement between the employer and the third party is unrelated to the benefit provided to the employee.

If you choose to classify a fringe benefit as a meal entertainment fringe benefit, you have to classify all fringe benefits arising from the provision of meal entertainment as such. You may elect to classify benefits as meal entertainment regardless of whether or not you did so in a previous year.

You must decide to classify fringe benefits as meal entertainment no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return, by 21 May.

You need to carefully consider the implications of both the 50-50 split method and the 12-week register method of calculating the taxable value of meal entertainment fringe benefits. It may be that a better option for you is to determine the taxable value based on actual expenditure.

When determining which meal entertainment valuation method is the best for you, factors you may consider include:

who do you provide entertainment to (employees, associates or clients)
how often do you provide entertainment
which method results in the lowest FBT liability
the administration costs of each method for your organisation.

There is no need to notify us of the method you choose as your business records are sufficient evidence of this.

If you don't elect to use one of these methods, you must use the respective valuation rule to calculate the taxable value according to whether the benefit is an expense payment fringe benefit, a property fringe benefit, a residual fringe benefit or a tax-exempt body entertainment fringe benefit.

Using the 50:50 split method

The total taxable value of meal entertainment fringe benefits is 50% of the expenses you incur in providing meal entertainment to all people (whether employees, clients or otherwise) during the FBT year. Your total meal entertainment expenditure includes expenditure that might otherwise be exempt from FBT or not normally subject to FBT.

The reference to expenses you incur in providing meal entertainment excludes any contribution by an employee or associate.

The property benefits exemption described in sections 14.5 and 20.6, and the minor benefits exemption described in section 20.8 don't apply to meal entertainment fringe benefits if you use the 50:50 split method.

Using the 12-week register method

The total taxable value of meal entertainment fringe benefits is the total expenses you incur in providing meal entertainment to all people (whether employees, clients or otherwise) during the FBT year, multiplied by the 'register percentage'. Your total meal entertainment expenditure includes expenditure that might otherwise be exempt from FBT or not normally subject to FBT.

The reference to expenses you incur in providing meal entertainment excludes any contribution by an employee or associate.

Register percentage

You use the following formula to calculate the register percentage:

A	×	100
B

Where:
A is the total value of meal entertainment fringe benefits you provide to employees and their associates during the 12-week register period.
B is the total value of meal entertainment you provide to all people (whether employees, clients or otherwise) during the 12-week register period.

Valid register

You must keep the register for a continuous period of 12 weeks. The provision of meal entertainment during this period must be representative of the meal entertainment you provide during the first FBT year for which the register is valid.

Generally, a register is valid for the year in which you keep it and the four following years. However, if the period during which you keep the register begins in one FBT year and ends in the following FBT year, the register is not valid for the first year.

If the total expenses you incur in providing meal entertainment increase by more than 20% in a year, the register is not valid for any of the years following the year in which the increase occurred.

A register that is otherwise valid for an FBT year ceases to be valid if there is a later valid register for that FBT year.

A register containing an entry that is false or misleading in a material particular is not a valid register.

The person making the entries in the register must do so as soon as practicable after the details are known.

Details to be included in register

You record the following details in the register:

the date you provided meal entertainment
for each recipient of meal entertainment, whether they are one of your employees or an associate of an employee
the cost of the meal entertainment
the kind of meal entertainment provided
where the meal entertainment was provided
if the meal entertainment was provided on your premises, whether it was provided in an in-house dining facility.

The property benefits exemption described in sections 14.5 and 20.6, does not apply to meal entertainment fringe benefits when you use the 12-week register method. However, the minor benefits exemption described in section 20.8 can apply.

14.9 Common circumstances in which food or drink is provided

The following are some common circumstances in which food or drink is provided by a taxable entity. The FBT consequences of providing food or drink in these circumstances are explained.

The provision of alcohol generally means that entertainment has been provided. However, there is a narrow category of situations where alcohol is provided to an employee while they are on business travel overnight or where the provision of alcohol is reasonably incidental to an employee's attendance at certain business seminars.

Morning and afternoon teas and light meals

Providing morning or afternoon tea or light meals to your employees on your premises is not entertainment (and, therefore, is not meal entertainment), where you are providing refreshments to enable the employee to complete the working day in comfort. The provision of food or drink in these circumstances is exempt from FBT under the property exemption if the food or drink is provided on your premises and the food or drink is not provided under a salary packaging arrangement. If the food or drink is provided off your premises, you will need to consider the circumstances surrounding the provision of the food or drink.

Providing morning or afternoon tea or light meals to associates of your employees on your premises is not entertainment. However, the provision of food or drink in this circumstance is a property fringe benefit. You will need to look at the rules for valuing property fringe benefits in order to determine the taxable value. The property exemption does not apply where the benefit is provided to an associate.

Morning and afternoon tea includes light refreshments such as tea, coffee, fruit drinks, cakes and biscuits, but does not include alcohol.

Light meals include sandwiches and other hand food, salads and orange juice that are intended to be, and can be, consumed on your premises or worksite. As light meals become more elaborate, they take on more of the characteristics of entertainment. Normal business practice determines when light meals become entertainment.

If alcohol is provided at the morning or afternoon tea or light lunch, you are providing entertainment to your employees and their associates.

Example – afternoon tea without alcohol

A taxable entity undertakes a research project. When the project is completed, a presentation by the participants in the project is provided to senior management. All staff involved in the research project attend the presentation. The presentation is undertaken on the business premises. An afternoon tea break is included in the presentation and afternoon tea consisting of tea, coffee, cakes and biscuits are provided. The afternoon tea provided to the employees is exempt from FBT.

Example – afternoon tea with alcohol

Assume the same facts as above apply, however alcohol is provided. As alcohol has been provided, the afternoon tea provided to employees in this situation is considered to have a social context. The afternoon tea is entertainment. This will be a property fringe benefit and the property exemption will apply, unless the employer elects to value the entertainment as meal entertainment.

Christmas parties

There is no separate FBT category for Christmas parties and you may encounter many different circumstances when providing these events to your staff. Fringe benefits provided by you, an associate or under an arrangement with a third party to any current employees, past and future employees and their associates (spouses and children), may attract FBT.

Implications for a taxpaying body

If you are not a tax-exempt organisation (refer to Chapter 15), the following explanations may help you determine whether there are FBT implications arising from a Christmas party.

Exempt property benefits

If you don't use either the 50:50 split method or the 12-week register method for meal entertainment (refer to section 14.8), the costs (such as food and drink) associated with Christmas parties are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees (refer to section 20.6).

A taxable fringe benefit will arise in respect of an associate of an employee who attends the party if not otherwise exempt under the minor benefits exemption (refer to section 20.8).

Exempt benefits – minor benefits

The minor benefits rules that apply to Christmas parties are no different from those that apply to any other benefits. Where you provide a Christmas party for your employees and their partners you don't add the costs together, but instead look at the cost of the benefit provided to each person. Each benefit that is less than $300 may be a minor benefit and exempt if certain conditions are met (refer to section 20.8).

The minor benefits exemption can apply if you use the 12-week register method for valuing meal entertainment benefits.

Gifts provided to employees at a Christmas party

All benefits associated with the Christmas function should be considered separately to the Christmas party when considering the minor benefits exemption. For example, the cost of gifts such as bottles of wine and hampers given at the function should be looked at separately to determine if the minor benefits exemption applies to these benefits.

Tax deductibility of a Christmas party

The cost of providing a Christmas party is income tax deductible only to the extent that it is subject to FBT. Therefore, any costs that are exempt from FBT (that is, exempt minor benefits and exempt property benefits) can't be claimed as an income tax deduction.

The costs of entertaining clients are not subject to FBT and are not income tax deductible.

Christmas party held on the business premises

A Christmas party provided to current employees on your business premises or worksite on a working day may be an exempt benefit. The cost of associates attending the Christmas party is not exempt.

Christmas party held off the business premises

The costs associated with Christmas parties held off your business premises (for example, a restaurant) will give rise to a taxable fringe benefit for employees and their associates unless the benefits are exempt minor benefits (refer to section 20.8).

Food or drink provided to employees while on business travel overnight

If you provide food or drink, including some alcohol, to your employee while they are on business travel overnight, this is generally not the provision of entertainment. Food or drink provided in these circumstances is, therefore, not meal entertainment, but will be an expense payment or a property fringe benefit. The 'otherwise deductible' rule applies to reduce the taxable value of the expense payment or property fringe benefit to nil.

If excessive alcohol is provided to employees while they are on business travel overnight, the provision of the food or drink is considered entertainment. The provision of a meal to employees while they are on business travel overnight is also entertainment if they receive entertainment in conjunction with their meal, such as attending a floor show.

Example – meals provided to employees while on business travel overnight not entertainment

Two employees of an employer dine together while travelling on business overnight and are subsequently reimbursed by their employer.

The reimbursement of the meal expenses does not amount to entertainment and would be income tax deductible to the employer. Therefore, the reimbursement of the meals is not meal entertainment, but is an expense payment fringe benefit. The taxable value of the meals is reduced to nil because the meals would have been 'otherwise deductible' to the employees.

Food or drink provided to employees at work functions

Where your employees are required to attend work functions as part of their employment duties, you will need to examine the circumstances of the situation and what duties are being performed by your employee in order to determine if entertainment has been provided. The fact that an employee is required to attend a function does not by itself mean that entertainment has not been provided.

Food or drink provided to employees at continuing professional development seminars

Your expenditure on food or drink that is reasonably incidental to your employees' attendance at a continuing professional development (CPD) seminar that goes for at least four hours, is deductible and is not entertainment. The benefit is either an expense payment or property fringe benefit. Where the food or drink is provided on your premises, it is normally a property benefit and the property exemption may apply.

If the food or drink is not provided on your premises, it is either an expense payment or property fringe benefit. However, the 'otherwise deductible' rule may apply to reduce the value of the fringe benefit.

How does the 'otherwise deductible' rule apply?

If your employee would have been able to claim an income tax deduction for the cost of attending the seminar had it been incurred by the employee (and not reimbursed by you), the otherwise deductible rule applies as follows.

If the food or drink:

does not amount to entertainment, the registration fee would have been deductible in full and FBT does not apply
does amount to entertainment
- the registration fee would have been deductible in full provided the food or drink is reasonably incidental to the employee attending certain business seminars that go for at least four hours, and FBT does not apply
- if the food or drink is not reasonably incidental to the employee attending certain business seminars that go for at least four hours, only that proportion of the registration fee which does not relate to the food or drink would have been deductible, and FBT will apply
- if the food or drink is reasonably incidental to the employee attending a work-related CPD seminar that is not at least four hours in duration, only that proportion of the registration fee which does not relate to the food or drink would have been deductible and FBT will apply.

Does the type of seminar make a difference?

A seminar is any training session, including a conference, convention, lecture, meeting, speech, question and answer session or educational course.

A business meeting, where the main purpose of the meeting is to give or receive information, or discuss matters relating to the business, is not treated the same way as those described as 'certain business seminars'. Neither, for example, is a seminar, where the main purpose is to promote or advertise a business (or prospective business) or its goods or services. However, a planning day (where employees discuss general policy issues relevant to the internal management of your business) conducted on property that is occupied by a person (other than the employer) whose business includes organising seminars or making property available for conducting seminars, is treated the same way as those described as 'certain business seminars'.

What does reasonably incidental mean?

Food or drink is reasonably incidental to a seminar if it:

is provided for sustenance because of the duration, time of day or location of the seminar
is provided immediately before, during or immediately following working sessions of the seminar
is available to all seminar participants.

Which part of the seminar can be included in the four hours?

The four hours does not include any part of the seminar that occurs during a meal or any breaks during the seminar for meals, rest or recreation.

What if the seminar goes for less than four hours?

Where a work-related CPD seminar goes for less than four hours, the costs of attending that seminar would be deductible to an employee if incurred by the employee. Food or drink which is included as part of that cost would be deductible provided that the food or drink does not amount to entertainment. For this purpose, light refreshments (which can include some alcohol) provided immediately prior to or following the seminar does not constitute entertainment.

Food or drink provided in these circumstances does not amount to entertainment and is not meal entertainment. It will be a property or expense payment fringe benefit. The full cost of attending the seminar would have been income tax deductible if incurred by the employee. The taxable value of the property or expense payment fringe benefit can be reduced to nil under the 'otherwise deductible' rule.

Example – food and drink provided at seminar is not entertainment

An employer pays for an employee to attend a seminar that is held from 7.00am to 9.00am and is part of a CPD program. The employer pays the organisation presenting the seminar directly. The seminar is held in a hotel and a light breakfast is provided.

The food or drink provided in these circumstances does not amount to entertainment and is, therefore, not meal entertainment. It is a property fringe benefit. The full cost of attending the CPD session would have been income tax deductible to the employee had the employee incurred it. The taxable value of the property fringe benefit can be reduced to nil under the 'otherwise deductible' rule.

14.10 Recreational entertainment

Recreational entertainment includes amusement, sport and similar leisure time pursuits – for example, a game of golf, theatre or movie tickets, a joy flight or a harbour cruise.

If you provide recreational entertainment to your employees, you need to:

Step	Action	Section reference
1	Consider whether an exemption applies.	14.11
2	If no exemption applies, decide how you're going to value the entertainment.	14.12
3	Keep the appropriate records.	14.13
4	If required, report an amount on the employee's payment summary or income statement.	14.14

14.11 If the benefit provided is recreational entertainment, does an exemption apply?

Depending on the standard of entertainment provided, the minor benefits exemption may apply (refer to section 20.8).

14.12 Taxable value of recreational entertainment

The taxable value of recreational entertainment is calculated using the respective valuation rule according to whether the benefit is an expense payment (refer to Chapter 9), property (refer to Chapter 17) or residual fringe benefit (refer to Chapter 18).

Where you provide recreational entertainment by hiring or leasing entertainment facilities, you may elect to use the 50-50 split method. However, you cannot elect to use the 50-50 split method where you provide benefits attributable to entertainment facility leasing expenses under a salary packaging arrangement on or after 1 April 2016.

Hiring or leasing entertainment facilities

Entertainment facility leasing expenses are the expenses you incur in hiring or leasing:

a corporate box
boats or planes for providing entertainment
other premises or facilities for providing entertainment.

Expenses, or parts of expenses, that are attributable to the following are not entertainment facility leasing expenses for these purposes:

providing food or beverages
advertising that would be an allowable income tax deduction.

Generally, the transport to and from an entertainment facility will be a separate benefit that will not be part of the entertainment facility leasing expense.

However, the transport may be part of the entertainment facility leasing expense where the transport is provided as part of an all-inclusive package.

Boats or planes for providing entertainment

Expenses incurred in hiring or leasing a boat or plane in their entirety for the purposes of providing entertainment will be 'entertainment facility leasing expenses'.

For example, the hiring or leasing of a houseboat or a charter flight where the whole plane is hired for entertainment purposes would meet the definition of entertainment facility leasing expenses.

When you give an employee a plane ticket for travel to a holiday destination, while this will be entertainment it is not an entertainment facility leasing expense. The purchase of an air fare is not the hiring or leasing of a plane.

However, if the plane ticket is part of an all-inclusive package that includes holiday accommodation, the taxable value of the benefit may be partly attributable to an entertainment facility leasing expense being the cost of hiring the holiday accommodation.

For example, providing an all-inclusive holiday package to an employee organised through a travel agent that includes both flights and the hire or lease of holiday accommodation will be a single benefit whose taxable value is partly attributable to entertainment facility leasing expenses. As the benefit is partly attributable to entertainment facility leasing expenses, the whole of the package will be treated as an entertainment facility leasing expense.

Other premises or facilities for providing entertainment

The phrase 'other premises or facilities' has a wide meaning. In the same way that a corporate box is a part of larger premises or a facility (being the sporting stadium), items that satisfy this category of entertainment facility leasing expense must be either:

an entire premises or facility
a distinct area or separate room of larger premises or a facility.

The following are examples of 'other premises or facilities' for providing entertainment:

a function room in a club or hotel that has been hired to the exclusion of others
a hotel/motel room
a room in a bed or breakfast facility
a cabin on a cruise ship
a cabin or on-site van at a caravan park
the hire of a marquee
where you hire or lease a golf course for a set time or full day to the exclusion of others for example, a corporate golf day
where you hire one or more tennis courts to the exclusion of others for example, a corporate tennis day.

The following would not be 'other premises or facilities' for providing entertainment:

a seat on a plane
a seat at a sporting event
table in the dining room of a club or hotel
golf green fees or memberships
caravan site fees.

50:50 split method

You may elect the total taxable value of fringe benefits arising from the use of entertainment facilities you hire or lease is 50% of all entertainment facility leasing expenses.

The 50:50 split method for entertainment facility leasing expenses only applies to expenses you incur. It does not include, for example, those expenses incurred by an employee that you reimburse.

You must decide to use the 50:50 split method for entertainment facility leasing expenses no later than the day on which your FBT return is due to be lodged with us or, if you don't have to lodge a return by 21 May.

There is no need to notify us of the method chosen as your business records are sufficient evidence of this.

The minor benefits exemption described in section 20.8 does not apply if you elect to use the 50:50 split method for valuing entertainment facility leasing expenses.

14.13 Record-keeping requirements

You should record information relating to entertainment so that the taxable value of the fringe benefit can be calculated. You should record:

the date you provided the entertainment
who is the recipient of the entertainment (are they an employee, associate of the employee or another person)
the cost of the entertainment
the kind of entertainment provided
where the entertainment is provided.

See also:

Chapter 4 – Fringe benefits tax record keeping

14.14 Reporting requirements

Generally, entertainment provided by way of food or drink, and benefits associated with that entertainment, such as travel and accommodation (regardless of which category is used to value the benefit) are excluded benefits for reporting purposes and so they are not included in your employees' reportable fringe benefits amount on their payment summary or income statement.

Expenses associated with hiring or leasing entertainment facilities are excluded fringe benefits for reporting purposes and are, therefore, not reportable. Other types of recreational entertainment, such as tickets to musicals, are subject to the reporting requirements.

Entertainment benefits that are provided under a salary packaging arrangement on or after 1 April 2016 are not excluded benefits for reporting purposes and must be included in the employee's reportable fringe benefits amount on their payment summary or income statement.

See also:

Chapter 5 – Reportable fringe benefits

14.15 Income tax deductibility

As a general rule, you are not allowed an income tax deduction for expenses incurred in providing entertainment. This is the case even if the entertainment is provided specifically for business reasons, such as business lunches and entertaining clients, or in connection with the performance of employment-related duties.

There are a number of exceptions to the general non-deductibility rule. Briefly, they include the following:

the cost of providing entertainment in the ordinary course of business where your business is providing entertainment to paying clients or customers – for example, restaurants, theatres or amusement parks.
certain advertising or promotional expenses relating to your business, including the cost of
- supplying entertainment to a person as part of a contract for supplying goods or services – for example, offering a free holiday as an incentive to customers to purchase goods
- promoting your goods or services by providing free or discounted entertainment – for example, wine tasting at a winery
- exhibiting goods for public promotion – for example, a fashion parade.
an entertainment allowance provided to employees where the allowance is included in their assessable income.
the cost of food and drink you provide to employees in an 'in-house dining facility'. (This does not include food or drink you provide to employees at a party or similar function.) An in-house dining facility is
- a canteen, dining room or similar facility located on your premises
- wholly or principally operated to provide food and drink to employees on working days, and
- not open to the public at any time (a boardroom or meeting room with kitchen facilities is not an in-house dining facility).
the cost of meals you provide to employees on working days in an 'eligible dining facility' – for example, restaurant, cafe or hotel dining room. The employees must be employees who work in, or in connection with, the eligible dining facility. Again, this does not include meals you provide at a party or similar social function.
the cost of food and drink that is reasonably incidental to a person's attendance at an 'eligible seminar'. This is a conference, convention, lecture and so on of at least four hours duration that is not held
- to conduct normal business discussions in relation to the particular business
- for the purpose of advertising the goods or services of a particular business
- for the dominant purpose of providing entertainment.
the cost of food and drink that is reasonably incidental to a person's attendance at an 'exempt training seminar' of at least four hours duration, organised by, or on behalf of, you solely for training employees. The session must be conducted in conference facilities operated by a business unrelated to you.
the cost of operating a recreation facility that is situated on your premises, and is mainly for use by employees on working days – for example, gym, pool or games room.
the cost of providing an overtime meal to an employee under an industrial award or agreement, or an overtime meal allowance paid to an employee under an industrial instrument.
expenditure on entertainment, that does not involve entertaining another person, that would otherwise be deductible to the person benefiting from it – for example, the cost of a person's meals while travelling in the course of employment.
the cost of gratuitous entertainment provided to members of the public who are sick, disabled, poor or otherwise disadvantaged – for example, a company sponsors a Christmas party in a children's hospital.
expenditure incurred in providing certain specified fringe benefits and exempt benefits. The more common of these are board meals and living-away-from-home food benefits.
expenditure on entertainment that is incurred in providing fringe benefits. Note that exempt benefits are not fringe benefits.
if you elect to classify certain fringe benefits as meal entertainment fringe benefits, a restriction on deductibility is imposed for all expenditure incurred in the provision of meal entertainment, regardless of who the recipient is and whether the expenditure would ordinarily be deductible. The right to a deduction is limited to that portion of the expenditure taxed as meal entertainment fringe benefits.

The cost of entertaining clients and suppliers (that is, not employees or associates of employees) remains non-deductible except for the limited range of circumstances described above where the income tax law may allow a deduction.

14.16 Entertainment table

The following table gives a simplified summary of the FBT and income tax results that generally arise from providing entertainment to employees and others. The table is not intended for use by income tax-exempt employers.

Situation	Income tax	FBT
Employee takes two clients to lunch at a restaurant – cost $150	Employee's portion $50 tax deductible Client's portion $100 non-deductible	Employee's portion $50 fringe benefit Client's portion No FBT
Employee has meal in restaurant while travelling on business trip	Tax deductible	No FBT ('otherwise deductible' rule)
Employee has meal in an 'in-house canteen'	Tax deductible	Exempt from FBT
Employer provides sandwiches and juice for working lunch in office (not entertainment)	Tax deductible	Exempt from FBT
Employer provides substantial lunch with wine for employees in office but not in 'canteen'	Non-deductible	Exempt from FBT
Employer provides social function for employees in office	Non-deductible	Exempt from FBT
Employer provides social function for employees and associates in office	Cost per employee Non-deductible Cost per associate Tax deductible	Cost per employee Exempt benefit Cost per associate Taxable fringe benefit
Employer reimburses employee for cost of private party	Amount reimbursed is tax deductible	Taxable fringe benefit
Employer provides employee and associates with theatre tickets	Tax deductible	Taxable fringe benefit

14.17 Do you provide a benefit which is not entertainment?

If you provide food, drink, recreation or associated accommodation or travel which is not entertainment, the benefit may be an expense payment, property or residual fringe benefit.

See also:

More information

Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits
Taxation Ruling TR 97/17 Income tax and fringe benefits tax: entertainment by way of food and drink
Taxation Ruling IT 2675 Income tax and fringe benefits tax: entertainment – morning and afternoon teas; light meals; and in-house dining facilities
Taxation Determination TD 94/25 Fringe benefits tax: where an employer provides entertainment to both employees and non-employees, what is an acceptable method of determining the portion applicable to the employees for the purposes of the Fringe Benefits Tax Assessment Act 1986?

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 15 - Tax-exempt body entertainment fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee (for example, a relative).

15.1 What is a tax-exempt body entertainment fringe benefit?

A tax-exempt body entertainment fringe benefit may arise from entertainment expenses incurred by an employer who either:

is wholly or partially exempt from income tax
does not derive assessable income from the activities to which the entertainment relates.

If your entity is a charity, you must be endorsed in order to be income tax exempt.

See also:

Chapter 6 – Not-for-profit organisations and fringe benefits tax

15.2 Are you a tax-exempt body?

Your organisation is a tax-exempt body if your organisation's income is either:

wholly exempt from income tax – for example, a club that earns income from members only
partially exempt from income tax – for example, a club that earns income from both members and non-members.

If your entity is a charity, you must be endorsed in order to be income tax exempt.

See also:

Chapter 6 – Not-for-profit organisations and fringe benefits tax

15.3 Is the benefit entertainment?

To work out whether the benefit provided is entertainment, you need to consider the circumstances in which the benefit was provided. Tax-exempt bodies need to look at the same factors as income tax paying bodies in order to decide if the benefit is entertainment. For information about working out whether a benefit is entertainment, refer to sections 14.1, 14.2 and 14.3.

What to do next

If the benefit is	Then refer to
entertainment by way of food or drink	section 15.4
recreational entertainment	section 15.12
not entertainment	section 15.17

15.4 Do you provide food or drink that is entertainment?

If you provide entertainment by way of food or drink, take the following steps and actions:

Step	Action	Section reference
1	Consider whether an exemption applies.	15.5
2	If no exemption applies, decide whether or not the entertainment is a tax-exempt body entertainment fringe benefit.	15.6
	If the benefit is not tax-exempt body entertainment, it may be a property, expense payment or residual fringe benefit.	15.17
3	If the benefit is a tax-exempt body entertainment fringe benefit, decide whether the benefit will be valued under the meal entertainment fringe benefit rules.	15.10
4	Keep the appropriate records.	15.15
5	If required, report an amount on the employee's payment summary or income statement.	15.16

See also:

section 15.7 for examples of how the valuation rules apply

15.5 Does an exemption apply?

There are only very limited circumstances under which an exemption will apply to entertainment provided by way of food or drink.

PBIs, HPCs, public hospitals, not-for-profit hospitals and public ambulance services

The provision of benefits that constitute the provision of meal entertainment may be exempt from FBT when provided by public benevolent institutions (PBIs), health promotion charities (HPCs), public hospitals, not-for-profit hospitals and public ambulance services.

From 1 April 2016, meal entertainment provided under a salary packaging arrangement by these employers is no longer an excluded fringe benefit and is subject to a separate capping threshold.

See also:

Chapter 6 – Not-for-profit organisations and fringe benefits tax

Providing meal entertainment means:

providing entertainment by way of food or drink
providing accommodation or travel connected with such entertainment
paying or reimbursing expenses incurred by an employee for the above.

Minor benefits exemption

Depending on the entertainment provided, the benefit may qualify for the minor benefits exemption. As well as the general criteria for deciding whether a minor benefit should be treated as an exempt benefit (refer to section 20.8), for tax-exempt bodies, the exemption is available only if either:

the entertainment provided is incidental to the entertainment provided to outsiders and does not consist of a meal other than light refreshments
a function is held on your business premises solely as a means of recognising the special achievements of your employee in a matter relating to the employment of your employee.

In these circumstances, only benefits provided to your employee and their associates are exempt from FBT.

This exemption does not apply to employers who elect to value the entertainment as meal entertainment using the 50:50 split method.

Example – light refreshment that is incidental to entertainment provided to outsiders

A tax-exempt body hosts a morning tea at a local cafe for its sponsors at which they provide finger food, tea, coffee and soft drinks. Some employees attend to thank the sponsors on behalf of the tax-exempt body for their assistance throughout a particularly difficult year. It is unusual for the tax-exempt body to host this type of function and the cost per head is $15.

Providing morning tea to employees in these circumstances would meet the requirements of the minor benefits exemption.

Example – function recognising special achievements of employee

A project manager, who is an employee of a tax-exempt body, is awarded 'Project Manager of the Year' by an external organisation. A dinner is held on the tax-exempt body's premises for the presentation of the award. The following people attend the dinner:

senior management of the tax-exempt body
the employee receiving the award and their family
representatives from the external organisation presenting the award.

In these circumstances, the minor benefits exemption applies to the employee receiving the award and their family.

15.6 Is the benefit a tax-exempt body entertainment fringe benefit?

A tax-exempt body entertainment fringe benefit is non-deductible entertainment provided to employees (and their associates) by a tax-exempt body. Only entertainment that is non-deductible for income tax purposes can give rise to this benefit. Where entertainment is deductible, it will not constitute a tax-exempt body entertainment fringe benefit.

For the purpose of identifying a tax-exempt body entertainment fringe benefit, and working out whether the expenditure is deductible for income tax purposes, you are treated as though you are a taxable entity. That is, you should ask yourself, 'If my organisation paid income tax, would the organisation be entitled to an income tax deduction for this expenditure?'

The benefit may arise from entertainment expenses incurred by an employer who is wholly or partially exempt from income tax or who does not derive assessable income from the activities to which entertainment relates.

In general, entertainment expenses are non-deductible for income tax purposes. However, some specific entertainment expenses are deductible – for example, the cost of meals provided to employees in a staff cafeteria, excluding:

benefits associated with a social function
the cost of meals at certain business seminars
meals on business travel overnight.

See also:

section 14.15 – Income tax deductibility

15.7 Common circumstances in which food or drink is provided

The following are some common circumstances in which food or drink is provided by a tax-exempt body to their employees. The way FBT applies to food or drink provided in these circumstances is explained.

Providing alcohol generally means entertainment has been provided. However, in a narrow category of situations, you can provide alcohol to an employee without providing entertainment. These situations include where some (but not excessive) alcohol is provided to an employee:

while they are on business travel overnight
where providing the alcohol is reasonably incidental to an employee's attendance at certain business seminars.

Morning and afternoon teas, and light meals

Providing morning or afternoon tea, or light meals to your employees on your premises is not entertainment (and is therefore not a tax-exempt body entertainment fringe benefit) if you are providing them to help your employees complete the working day in comfort. In this situation, the food and drink you provide is exempt from FBT under the property exemption if you provide it on your premises and the food or drink is not provided under a salary sacrifice arrangement. If you provide the food or drink off your premises, you will need to consider the circumstances under which you provide it.

Providing morning or afternoon tea, or light meals to associates of your employees on your premises, is not entertainment. However, providing food and drink in this circumstance is a property fringe benefit. You will need to look at the rules for valuing property fringe benefits in order to work out the taxable value. The property exemption does not apply where the benefit is provided to an associate.

Morning and afternoon tea includes light refreshments such as tea, coffee, fruit drinks, cakes and biscuits, but does not include alcohol.

Light meals include sandwiches and other finger food, salads and orange juice that are intended to be, and can be, consumed on your premises or worksite. As light meals become more elaborate, they take on more of the characteristics of entertainment. Consider normal business practices to help work out when light meals become entertainment.

Note that the property exemption does not apply to food or drink provided under a salary packaging arrangement.

Example – afternoon tea without alcohol

A tax-exempt body undertakes a research project. When the project is completed, the project participants provide a presentation to senior management. All staff involved in the research project attend the presentation. The presentation is undertaken on the business premises. An afternoon tea break is included in the presentation and afternoon tea consisting of tea, coffee, cakes and biscuits are provided.

The afternoon tea provided to the employees is exempt from FBT.

Example – afternoon tea with alcohol

If the afternoon tea described above also included alcohol, it would be considered to have a social context and will be tax-exempt body entertainment. If the employer elects, it could also be meal entertainment instead.

If you provide alcohol at a morning or afternoon tea, or light lunch, you are providing entertainment to your employees and their associates.

Meals provided to employees at in-house dining facilities

If you provide full hot meals to employees who are not on overnight business travel, you are providing entertainment. However, the expense you incur to provide full hot meals to employees at an in-house dining facility is an allowable income tax deduction to tax-paying bodies. This means it is not tax-exempt body entertainment.

Tax-paying bodies can only claim an income tax deduction if the food and drink is not provided at a party, reception or social function. If you provide full hot meals at an in-house dining facility (not at a party, reception or social function) this will be a property benefit and the property exemption will apply unless the meals are provided under a salary sacrifice arrangement.

What is an in-house dining facility?

A canteen, dining room or similar facility is an in-house dining facility if it meets all of the following requirements:

located on your premises or, if you are a company on premises of a company related to you
operated wholly or principally for providing food and drink on working days to your employees or, if you are a company to employees of a company related to you
not open to the public at any time.

When we say 'principally', we mean the facility is mainly operated for providing food or drink. Whether a facility is operated principally for providing food and drink on working days to employees will ordinarily be determined on a time basis. That is, operated for this purpose more than 50% of the time it is used. However, you will also need to consider the facts, degree or impression of how the facility is used.

Provided the facility meets these three criteria, there is no restriction on where the food and drink is consumed. The food or drink provided in these facilities does not have to be consumed at the facility.

Example – food and drink not consumed at the in-house dining facility

A tax-exempt body provides full hot meals to its employees in an in-house dining facility. Some employees consume the meals at their workstations and the meals are not provided under a salary sacrifice arrangement. Although providing the full hot meals to employees is entertainment, the property exemption will apply in these circumstances.

A canteen, dining room or similar facility can be an in-house dining facility even though it does not provide food and drink for all your employees. For example, a dining room for the sole use of your executive employees qualifies as an in-house dining facility.

What is not an in-house dining facility?

A boardroom or a meeting room with kitchen facilities is not an in-house dining facility because it is neither of the following:

a canteen, a dining room or a facility similar to a canteen or a dining room
operated wholly or principally for providing food and drink on working days to employees.

A boardroom or meeting room, whether or not it has associated kitchen facilities, is used or operates mainly as a venue for meetings or conferences. The costs of providing substantial meals in a boardroom or meeting room with associated kitchen facilities are not deductible, regardless of where the meals are consumed.

Example – meals provided in an in-house dining facility – property exemption applies

A tax-exempt body provides hot lunches to employees in an in-house dining facility. The lunch is not provided under a salary sacrifice arrangement and it does amount to meal entertainment. However, it is a property benefit and the property exemption will apply.

Example – meals provided in an in-house dining facility – property exemption does not apply

A tax-exempt body provides hot dinners to employees at its end-of-financial-year dinner. The dinner provided does amount to meal entertainment, but no income tax deduction would be available to tax-paying bodies. Meals provided in this instance are tax-exempt body entertainment fringe benefits and no exemptions apply.

Christmas parties

Christmas parties, whether held on a tax-exempt employer's premises or at another venue, are entertainment and tax-exempt body entertainment fringe benefits.

Example

A tax-exempt body hosts a Christmas party for its employees and their spouses on the employer's premises. This is tax-exempt body entertainment.

If clients attended, there would be no FBT on their portion, provided the tax-exempt body has not elected to use the meal entertainment valuation rules.

Gifts provided to employees at Christmas

Christmas gifts you provide to your employees at Christmas functions need to be considered separately when you work out whether the minor benefits exemption applies.

For example, hampers or presents you provide at a Christmas function are not considered to be entertainment. As these are not treated as tax-exempt body entertainment benefits, you can consider the minor benefits exemption. For example, if you give each of your employees a hamper at a particular Christmas function, each hamper is an exempt minor benefit if they cost less than $300 each and you meet the other conditions of the minor benefits exemption.

Food and drink provided to employees while on overnight business travel

If you provide food or drink, including some alcohol, to your employee while they are on overnight business travel, this is generally not the provision of entertainment. Food or drink provided in these circumstances is therefore not tax-exempt body entertainment, but will be an expense payment or a property fringe benefit. The 'otherwise deductible' rule applies to reduce the taxable value of the expense payment or property fringe benefit to nil.

If excessive alcohol is provided to employees while they are on overnight business travel, the food or drink you provide is considered entertainment. The provision of a meal to employees while they are on business travel overnight is also entertainment if they receive entertainment in conjunction with their meal, such as attending a floor show.

Example – meals provided to employees while on overnight business travel – not entertainment

Two employees of a tax-exempt body dine together while travelling on business overnight and are later reimbursed by their employer.

The reimbursement of the meal expenses does not amount to entertainment and would be income tax deductible to the employer. Therefore, the reimbursement of the meals is not tax-exempt body entertainment; rather, it is an expense payment fringe benefit. The taxable value of the meals is reduced to nil because the meals would have been 'otherwise deductible' to the employees.

Example – meals provided to employees while on overnight business travel – entertainment

Two employees of a tax-exempt body have dinner together while travelling on business overnight. They see a show at the casino in the city where they are staying and the fee to see the show includes dinner. Their employer reimburses them for the cost of the show entry, which includes meals.

This expenditure is entertainment and is tax-exempt body entertainment. The expense payment fringe benefit valuation rules could not apply in this circumstance as this is a tax-exempt body entertainment fringe benefit.

Food and drink provided to employees at work functions

Where your employees are required to attend work functions as part of their employment duties, you will need to consider the circumstances of the situation and what duties are being performed by your employee in order to work out if entertainment has been provided. The fact that an employee is required to attend a function does not, by itself, mean that entertainment has not been provided.

For example, depending on the standard of entertainment provided, the benefit may qualify for the minor benefits exemption. As well as the general criteria for deciding whether a minor benefit should be treated as an exempt benefit, for tax-exempt bodies, the exemption is available only where the provision of the entertainment is incidental to the provision of entertainment to outsiders and does not consist of a meal, other than light refreshments.

15.8 FBT implications of tax-exempt bodies providing food and drink

The following table summarises the FBT implications of tax-exempt bodies providing food and drink through a number of examples.

Circumstance in which food or drink provided	Meal entertainment?	Fringe benefits tax arises?
Circumstance in which food or drink provided	Meal entertainment?	For employees	For associates	For clients
At a social function – for example a staff Christmas party (either on or off business premises)	Yes	Yes	Yes	No
In an in-house dining facility – not at a social function	Yes/No*	No	Yes	No
In an in-house dining facility at a social function	Yes	Yes	Yes	No
Morning and afternoon teas, and light lunches (on business premises)	No	No	Yes	No
At a social function or business lunch (either on or off business premises)	Yes	Yes	Yes	No
Employee on business travel overnight and dining by themselves or with an employee, employee of an associate or client who is also on business travel overnight, regardless of who pays	No	No	Yes	No
Employee on overnight business travel dining with an employee not on overnight business travel – employer pays for all meals:
travelling employee's meal	No	No
non-travelling employee's meal	Yes	Yes
Employee on overnight business travel dining with a client who is not on overnight business travel
travelling employee's meal	No	No		No
client's meal	Yes

* Depending on what is provided, the food or drink may or may not amount to meal entertainment. However, if you provide full hot meals at an in-house dining facility (not at a social function), this will be a property benefit and the property exemption will apply (refer to section 15.7).

15.9 Taxable value of food and drink that is tax-exempt body entertainment

The taxable value of the food and drink, and the associated accommodation or travel is the amount of the actual expenditure you incur for the benefit of the employee. In calculating the taxable value of a tax-exempt body entertainment fringe benefit, there is no reduction for contributions that may be made by an employee.

If you cannot easily work out the actual expenditure, you can use a 'per head' basis of apportionment.

You may elect to value the food, drink and associated accommodation or travel as 'meal entertainment'. If you make this election, you cannot use the per head basis of apportionment.

Example – per head basis of apportionment

Mary entertains three of her employer's clients at a local restaurant. Her employer is a tax-exempt body who has not elected to treat entertainment as 'meal entertainment'. Mary pays, and is reimbursed, for the full cost of the meals. The benefit provided to Mary is a tax-exempt body entertainment fringe benefit. The taxable value of that benefit is 25% of the amount reimbursed to Mary.

15.10 Meal entertainment fringe benefits

Where tax-exempt body entertainment fringe benefits arise from the provision of meal entertainment, you can choose to classify these fringe benefits as meal entertainment fringe benefits. If you choose to classify a fringe benefit as a meal entertainment fringe benefit, you must classify all fringe benefits arising from the provision of meal entertainment during the FBT year as meal entertainment fringe benefits.

See also:

section 14.7 – Meal entertainment fringe benefits

15.11 How to calculate the taxable value of a meal entertainment fringe benefit

Tax-exempt bodies calculate the taxable value of a meal entertainment fringe benefit in the same way as income tax paying bodies.

See also:

section 14.8 – How to calculate the taxable value of a meal entertainment fringe benefit

15.12 Do you provide recreational entertainment?

Recreational entertainment includes amusement, sport and similar leisure time pursuits. Examples include a game of golf, theatre or movie tickets, a joy flight or a harbour cruise.

If you provide recreational entertainment to your employees, take the following steps and actions.

Step	Action	Section reference
1	Consider whether an exemption applies.	15.13
2	If no exemption applies, you need to decide how you're going to value the entertainment.	15.14
3	Keep the appropriate records.	15.15
4	If required, report an amount on the employee's payment summary or income statement.	15.16

15.13 If the benefit is recreational entertainment, does an exemption apply?

There are only limited circumstances in which an exemption applies to recreational entertainment you provide.

PBIs, HPCs, public hospitals, not-for-profit hospitals and public ambulance services

Where you provide benefits that are wholly or partly attributable to entertainment facility leasing expenses, they may be exempt from FBT when provided by PBIs, HPCs, public hospitals, not-for-profit hospitals and public ambulance services.

From 1 April 2016, a benefit that is wholly or partly attributable to entertainment facility leasing expenses provided under a salary packaging arrangement by these employers is no longer an excluded fringe benefit and is subject to a separate capping threshold.

See also:

Chapter 6 – Not-for-profit organisations and fringe benefits tax

Generally, the transport to and from an entertainment facility will be a separate benefit that will not be part of the entertainment facility leasing expense. The transport in these circumstances would not be a benefit that is partly or wholly attributable to entertainment facility leasing expenses.

However, for example, the reimbursement of the cost incurred by an employee in purchasing an all-inclusive package from a travel agent that includes both the travel and the hire or lease of holiday accommodation is a single tax-exempt body entertainment benefit. The benefit is one whose taxable value is partly attributable to entertainment facility leasing expenses being the lease or hire of the holiday accommodation. As the tax-exempt body entertainment benefit is partly attributable to entertainment facility leasing expenses, the whole of the tax-exempt body entertainment benefit will be exempt from FBT.

The entertainment facility leasing expenses that are exempt from FBT for these purposes can be incurred by you or your employee.

See also:

section 14.12 – Taxable value of recreational entertainment

Minor benefits exemption

Depending on the entertainment you provide, the benefit may qualify for the minor benefits exemption. As well as the general criteria for deciding whether a minor benefit should be treated as an exempt benefit (refer to section 20.8), for tax-exempt bodies, the exemption is available only where either of the following apply:

the entertainment you provide is incidental to entertainment you provide to outsiders and does not consist of a meal other than light refreshments
a function is held on your business premises solely as a means of recognising the special achievements of your employee in a matter relating to the employment of your employee.

In these circumstances, only benefits provided to your employee and their associates are exempt from FBT.

This exemption does not apply if you elect to value entertainment facility leasing expenses using the 50:50 split method.

Example – entertainment you provide that is incidental to entertainment you provide to outsiders

A tax-exempt body hosts a fundraising movie premiere. Staff of the tax-exempt body attend to meet and greet ticket holders, usher ticket holders to their seats and to serve light refreshments. This will be an exempt minor benefit as the provision of the recreational entertainment is incidental to the provision of entertainment to people outside of the tax-exempt body.

15.14 Taxable value of recreational entertainment

The taxable value of the recreation component of tax-exempt body entertainment is generally the same as the cost of the activity; for example, the entry fee for a golf day.

Where you provide tax-exempt body entertainment by hiring or leasing entertainment facilities, the taxable value is the cost of the activity, unless you elect to use the 50-50 split method.

You cannot elect to use the 50:50 split method if you provide the benefit under a salary packaging arrangement on or after 1 April 2016.

50:50 split method

You can elect that the total taxable value of tax-exempt body entertainment fringe benefits arising from the use of entertainment facilities you hire or lease is 50% of all entertainment facility leasing expenses.

You must decide to use the 50:50 split method for entertainment facility leasing expenses no later than the day on which you are due to lodge your FBT return with us or, if you do not have to lodge a return, by 21 May.

There is no need to notify us of the method you chose as your business records are sufficient evidence of this.

15.15 Keep appropriate records

You should record information relating to tax-exempt body entertainment so the taxable value of the fringe benefit can be calculated. You should record all of the following:

the date you provided the entertainment
details of the recipient of the entertainment – for example, whether they are an employee, associate of the employee or another person
the cost of the entertainment
the kind of entertainment provided
details of where the entertainment is provided.

See also:

Chapter 4 – Fringe benefits tax record keeping

15.16 Reporting requirements

Generally, entertainment you provide by way of food and drink, and benefits associated with that entertainment such as travel and accommodation (regardless of which category is used to value the benefit) are excluded benefits for reporting purposes and so they are not included in your employees' reportable fringe benefits amount on their payment summary or income statement.

Expenses associated with hiring or leasing entertainment facilities are excluded fringe benefits for reporting purposes and are therefore not reportable.

Other types of recreational entertainment are subject to the reporting requirements. Examples include tickets you provide to musicals and green fees for attendance at golf days.

However, entertainment benefits that are provided under a salary packaging arrangement on or after 1 April 2016 are not excluded benefits for reporting purposes and must be included in the employee's reportable fringe benefits amount on their payment summary or income statement.

See also:

Chapter 5 – Reportable fringe benefits

15.17 Do you provide a benefit that is neither entertainment nor tax-exempt body entertainment?

Where the benefit you provide is neither entertainment nor tax-exempt body entertainment, you must take the following steps and actions.

Step	Action	Section reference
1	Work out whether it is an expense payment, property or residual benefit.	15.18
2	Work out whether an exemption applies. If no exemption applies, it may be an expense payment, property or residual fringe benefit.	15.19
3	Keep the appropriate records.	Chapter 4
4	If required, report an amount on the employee's payment summary or income statement.	Chapter 5

15.18 Is the benefit an expense payment, property or residual benefit?

Where the benefit you provide is neither entertainment nor tax-exempt body entertainment, it may be an expense payment, property or residual fringe benefit.

Expense payment fringe benefits

You may provide expense payment fringe benefits if an employee incurs expenses and you either:

reimburse them for the expenses
pay a third party for the expenses.

Property fringe benefits

A property fringe benefit may arise when you provide an employee with property, either free or at a discount.

Residual fringe benefits

Any fringe benefit not subject to any of the other rules is a residual fringe benefit. These are the fringe benefits that are left over because they are not one of the more specific categories of fringe benefit.

A residual fringe benefit could include the use of property.

See also:

15.19 If the benefit is neither entertainment nor tax-exempt body entertainment, does an exemption apply?

An exemption may apply in the following circumstances.

Property benefit exemption

Where you provide food or drink that is not meal entertainment, this is a property benefit. Where the benefit is provided to, and consumed by, the employee on your business premises on a working day, it is exempt from FBT. Only the food and drink you provide to your employee is exempt in these circumstances. Food and drink you provide to an associate of your employee in these circumstances is still subject to FBT.

The property exemption does not apply to meals you provide under a salary sacrifice arrangement.

Minor benefits exemption

Depending on the standard of benefit you provide, the benefit may qualify for the minor benefits exemption.

See also:

section 20.8 – Other exemptions

More information

Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits
Taxation Ruling TR 97/17 Income tax and fringe benefits tax: entertainment by way of food or drink.
Taxation Ruling IT 2675 Income tax and fringe benefits tax: entertainment – morning and afternoon teas; light meals; and in-house dining facilities
Taxation Determination TD 94/25 Fringe benefits tax: where an employer provides entertainment to both employees and non-employees, what is an acceptable method of determining the portion applicable to the employees for the purposes of the Fringe Benefits TaxAssessment Act 1986
Taxation Determination TD 93/195 Income tax: to what extent is a registration fee for a Continuing Professional Development (CPD) seminar deductible if a part of the fee represents the cost of food and drink to be provided as part of the seminar

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

© AUSTRALIAN TAXATION OFFICE FOR THE COMMONWEALTH OF AUSTRALIA

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 16 - Car parking fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

16.1 What is a car parking benefit?

If you provide your employee or their associate with parking at a work car park, you may be providing them a car parking benefit. The parking can be on your business premises, or you may organise for your employee (or their associate) to park a car somewhere else. For example, you may have an agreement with the owner of a commercial parking station to provide parking at their parking station to your employees.

This Chapter provides you with more information and examples that relate to Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits. Terms in bold are defined or discussed in that Ruling.

As with any fringe benefit, as the employer, you are required to calculate and meet the FBT liability for any car parking benefits provided to your employees.

You provide a car parking benefit when all of the following apply:

Your employee or their associate parks a car in a car space at a work car park for a minimum parking period between 7:00 am and 7:00 pm.
The work car park is located at or in the vicinity of the employee's primary place of employment, on that day.
The car (including a van, utility, sports utility vehicle, all-wheel drive vehicles or similar vehicles designed to carry a load of less than 1 tonne and fewer than 9 passengers) must be
- owned by or leased to the employee or their associate (for example, their spouse)
- made available to the employee or their associate
- a pool car, or
- provided to the employee under a salary packaging arrangement.
The employee used the carinconnection with travel between their place of residence and their primary place of employment on the day the car is parked.
At least one commercial parking station is located within a one-kilometre radius of the work car park.
The lowest representative fee charged to members of the public for all-day parking by any such commercial parking station is above the car parking threshold.
The parking is not provided to an employee on a day where the employee is entitled to the use of a disabled persons' car parking space and displayed a valid disabled persons' car parking permit on the car.

If the benefit you provide is not a car parking benefit, you may still provide another benefit subject to FBT such as a car parking expense payment benefit (see section 9.9). If you provide a car space to an employee and it does not meet the conditions of a car parking benefit (and it is not a car parking expense payment benefit) you do not need to pay FBT on that benefit (see sections 9.8 and 18.11).

Some types of organisations, such as charities, government and educational or scientific institutions do not need to pay FBT on car spaces they provide (see section 16.3.2).

See also:

Taxation Ruling TR 2021/2 Fringe benefits tax: car parking benefits
section 39A of the FBTAA
section 12 of the Fringe Benefits Tax Assessment Regulations 2018

Working out if you provided a car parking benefit

The following table helps you determine if you provided a car parking benefit to your employee on a particular day.

Table 1: Working out if you provided a car parking benefit

Steps	Action	Detail	Decision
Step 1	Did you reimburse an employee for, or pay on their behalf, the employee's car parking expenses?	Section 9.9 discusses car parking expense payment benefits.	No: go to the next Step. Yes: go to Step 13.
Step 2	Did an employee (or their associate) park a car in a work car park anytime between 7:00 am and 7:00 pm?	Section 16.1.1 discusses work car park. Section 16.1.4 discusses the definition of a car.	No: go to Step 13. Yes: go to the next Step.
Step 3	Was the car parked because the employee was entitled to the use of a disabled persons' car parking space and displayed a valid disabled persons' car parking permit on the car?	Section 16.3.1 discusses this exclusion.	No: go to the next Step. Yes: go to Step 14.
Step 4	Are you an exempt employer?	Section 16.3.2 discusses the exemption that applies to certain employers.	No: go to the next Step. Yes: go to Step 14.
Step 5	Are you a small business employer or was your total income for the last income year less than $50 million and not a public company, subsidiary of a public company or a government body?	Section 16.3.3 discusses when this exemption may apply.	No: go to the next Step. Yes: was the car was parked at a commercial parking station? Yes: go to the next Step. No: go to Step 13.
Step 6	Is the parking provided on an ad hoc basis and has a value of less than $300?	Section 20.8 discusses the minor benefits exemption.	No: go to the next Step. Yes: go to Step 14.
Step 7	Was there a commercial parking station within a one-kilometre radius of the work car park?	Section 16.1.7 discusses the radius. Section 16.1.7.1 discusses commercial parking stations and section 16.1.8 discusses representative fees.	No: go to Step 13. Yes: go to the next Step.
Step 8	Did any of the commercial parking stations within a one-kilometre radius charge a lowest representative fee on the first business day of the FBT year above the car parking threshold?	For the current car parking threshold, refer to Fringe benefits tax – rates and thresholds. Section 16.1.8 discusses lowest representative fee.	No: go to Step 13. Yes: go to the next Step.
Step 9	Was the car parked for the minimum parking period?	Section 16.1.2 discusses the minimum parking period.	No: go to Step 13. Yes: go to the next Step.
Step 10	Was the work car park at or in the vicinity of the employee's primary place of employment?	Section 16.1.3 discusses the employee's primary place of employment on the day.	No: go to Step 13. Yes: go to the next Step.
Step 11	Did your employee use the car in connection with travel between their place of residence and their primary place of employment at least once on the day?	Section 16.1.5 discusses this condition.	No: go to Step 13. Yes: go to the next Step.
Step 12	You provided a car parking benefit.	Section 16.2 discusses how to work out the taxable value.	Work out the taxable value of the benefit you provide. Go to Table 2.
Step 13	You did not provide a car parking benefit.	Section 9.9 discusses when a car parking expense payment benefit arises.	Determine whether the parking you provide gives rise to an eligible car parking expense payment benefit. Go to Chapter 9.
Step 14	Even if you work out you provided a car parking benefit using this table, it is an exempt benefit.	Section 16.3.1 discusses this exclusion. Section 16.3.2 discusses the exemption that applies to certain employers.	You do not pay FBT on having provided parking to your employee.

16.1.1 Car parked in work car park anytime between 7:00 am and 7:00 pm

A work car park is any car space you provide (or you organise for someone else to provide) to your employees or their associates for them to park a car.

A car space is a space where a car can reasonably be parked. It does not need to be on bitumen or a paved surface and does not need to be marked as a parking bay.

A work car park can be located on your business premises or a premises that you use and control. For example, you might decide to lease an empty lot near your business to provide parking for your employees. However, a work car park cannot be at your employee's place of residence (for example, their driveway). If you provided more than one work car park for your employees to use, you must test whether each work car park separately meets all of the conditions in section 16.1.

A work car park:

can be in a commercial parking station (if you leased or made an agreement with the owner of the commercial parking station for your employees or their associates to park there) but it doesn't need to be a commercial parking station
can be the area where pool cars or fleet cars are parked
doesn't need to be operated with an intention to make a profit
is not a space set aside in a car yard for the display of cars by a car dealer where the car being parked is an item of trading stock.

Not every car space provided in a work car park is subject to FBT. See sections 16.1.2 to 16.1.7 for additional conditions.

16.1.2 Parking must be provided in respect of the employee's employment

A benefit must be provided in respect of the employment of an employee. Where an employee parks in a car space on identical terms to non-employees, it is unlikely the parking is provided in respect of the employment of the employee as there is no benefit provided to the employee because of their employment. Terms include access, length of stay and the fee paid for car parking.

Example 1a – car park not provided in respect of employment

A Leisure Centre has a car park. Employees of the Leisure Centre park their cars in the car park. Parking is on a first-in basis, and access to the car park by an employee is on identical terms to the public.

The Leisure Centre (Employer) has not provided an employee with parking in respect of the employee's employment. Its employees' car parking is explained by it having business premises which include a car park, not the employees' employment.

Example 1b – car park provided in respect of employment

The Leisure Centre marks 10 of the parking bays as Reserved – Staff Only. Parking in the reserved parking bays is on a first-in basis as there are 30 staff and only 10 parking bays.

Employees are provided with preferential access to car parking, as there are a limited number of parking bays that are only available to employees. Therefore, even though access to a car park is not guaranteed, their employment relationship explains why each employee has the opportunity to park in a reserved parking bay. Therefore, the parking is provided in respect of an employee's employment.

Example 2 – provider of the car space

Delilah Pty Ltd has an arrangement with Parky Ltd under which Delilah has exclusive occupancy rights to 4 car spaces under Parky Ltd's business premises. Parky is obliged to provide the spaces free of charge to Delilah's employees.

As Delilah Pty Ltd has made the arrangement with Parky Ltd, Delilah Pty Ltd provides a benefit to its employees.

See also:

subparagraph 39A(a)(i) of the FBTAA
definition of 'associated premises' and 'business premises' in subsection 136(1) of the FBTAA
Taxation Ruling TR 2000/4 Fringe benefits tax: meaning of 'business premises'

16.1.3 Minimum parking period

To get a benefit, the employee (or associate) must park a car on a work car park for the minimum parking period between 7:00 am and 7:00 pm on that day. The minimum parking period is more than 4 hours.

One work car park may give rise to more than one benefit, for example, where 2 employees each park their car for the minimum parking period in the same work car park on a given day.

The minimum parking period is a cumulative period, so the car may come and go during the day. Parking in different work car parks also counts toward the minimum parking period, as long as each work car park satisfies the conditions in sections 16.1.3, 16.1.6 and 16.1.7.

When counting the time parked, only consider the times between 7:00 am and 7:00 pm on that day. For example, if you provide parking for an employee working between 4:00 pm and 11:00 pm, this counts as 3 hours on the day (between 4:00 pm and 7:00 pm), so the minimum parking period condition is not satisfied.

Example 3 – minimum parking period requirement

Alan is employed by Bearly Ltd and generally performs his duties at Bearly Ltd's regional business premises (an office). Alan drives a pool car from home to work and parks it on a work car park at Bearly Ltd's regional office. After the car is parked, it is made available to other employees of Bearly Ltd. Various employees use the car on the day so that, in total, the car is not parked at the work car park for more than 4 hours.

A car parking benefit is not provided by Bearly Ltd to Alan because the car is not parked on the work car park for a total period of more than 4 hours on the day.

Example 4 – car pooling work car park

Car T is a pool car. George books Car T on Monday and removes it from the employer's car pool parking bay at 12:00 pm for a series of client visits. George travels from the various client premises to his home and garages the car at home on Monday night.

On Monday, George does not receive a car parking benefit for Car T in the car pool parking bay. This is because George did not use Car T to travel between home and his primary place of employment on Monday; instead, he travelled between a client's premises and his home.

On Tuesday, George drives Car T to work and returns it to the car pool parking bay by 9:00 am.

Car T is available for booking for the rest of Tuesday, and remains in the car pool parking bay between 9:00 am and 2:00 pm. Between 2:00 pm and 4:00 pm Car T is used by another employee for a short audit activity at a client's business premises. The employee returns the car to its bay at 4:00 pm, where it remains until the next day.

On Tuesday, George is provided with a car parking benefit (assuming the other conditions are satisfied) because George drove Car T from home to work on Tuesday and Car T was parked for a total period of more than 4 hours. A car fringe benefit is also provided in respect of Car T (see Chapter 7).

See also:

paragraph 39A(1)(b) of the FBTAA

16.1.4 Location of the work car park

The work car park must be located at or in the vicinity of (near) the employee's primary place of employment on the relevant day for a car parking benefit to arise.

Where the work car park is located at the primary place of employment, this condition is satisfied. Where the work car park is not at the primary place of employment but in the vicinity of, or near to the primary place of employment, it may be more difficult to determine whether the work car park satisfies this condition. Consider whether the work car park and the place of employment are near to each other. That is, in close spatial and geographical proximity to each other.

Example 5a – work car park not near place of employment

You provide a work car park to your employees which is 100 metres away from your office. While only 100 metres apart, the work car park and your office are separated by a railway line with the nearest pedestrian crossing one kilometre away from the work car park. Therefore, employees who park in the work car park must travel at least 2 kilometres by foot to get to their workplace. The work car park is not near to, or in the vicinity of your office as the work car park and your office (your employees' primary place of employment) are not in close spatial and geographical proximity to each other.

Example 5b – work car park not near primary place of employment

You operate a coffee shop at an airport. You have a work car park for your employees located away from the airport terminal but within the airport precinct. The shortest route from the work car park to the coffee shop in the terminal building is approximately 3 kilometres. Employees are required to take a shuttle bus to the work car park. The shuttle bus trip takes 15 to 20 minutes, excluding waiting time. The shuttle bus stop is located just outside the coffee shop which employees use to get to their cars.

The work car park is not considered near to, or in the vicinity of the coffee shop as the car park and the primary place of employment are not in close spatial and geographical proximity to each other.

See also:

paragraph 39A(1)(f) of the FBTAA

16.1.5 The definition of 'car'

Your employees must park a car in the work car park.

Cars include a passenger vehicle, a sports utility vehicle, a van or utility vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers.

The car may be:

the employee's own
provided to them under a salary packaging arrangement, or
made available to them as a pool or fleet vehicle, which is owned or held by you.

Pool or fleet cars

Pool or fleet cars are not permanently allocated to particular employees, and are predominantly provided for operational (that is, work) use. However, on occasion, an employee may use a pool or feet car to commute between their place of residence and their primary place of employment. When not in use, pool or fleet cars may be parked in a work car park.

FBT may, therefore, apply to parking for pool or fleet cars when the other conditions in section 16.1 are met.

For there to be a car parking benefit, the pool car or fleet car must also result in a car fringe benefit being provided on that day. So on a day when providing a pool or fleet car results in a car fringe benefit being provided to your employee, providing a parking space for that car may also be a car parking benefit. The requirements are the same as for an employee parking their own car. In addition, it doesn't matter if the employee returns the car to the pool during the parking period and it is no longer under their control (see Example 3) nor if the employee garages the pool car at their home overnight as they are on call. In these situations, FBT may apply to parking of the pool or fleet car.

See also:

section 7.1 What is a car fringe benefit?
definition of 'car' in subsection 995-1(1) of the Income Tax Assessment Act 1997
Explanatory Memorandum to the Taxation Laws Amendment (Car Parking) Bill 1992

Example 6 – pool cars

Geoff, an employee of Silverserve Pty Ltd undertakes a regional trip for his job. He takes a pool car on the trip. The pool car is normally parked in Silverserve's basement work car park.

On Monday, the car is parked in the basement for more than 4 hours, until Geoff takes it home on Monday evening. He drives it to the country the next day. On Tuesday evening, Geoff drives the car home before returning the car to the pool on his arrival at work on Wednesday morning. The car remains in the work car park for more than 4 hours on Wednesday.

A car benefit is provided to Geoff on Monday and Wednesday. In addition, Geoff received a car parking benefit on Monday and Wednesday, the days he used the car in connection with travel between his home and primary place of employment. It does not matter that the car was subject to the complete control of Silverserve Pty Ltd for most of Monday and Wednesday.

16.1.6 Commuting between the place of residence and the place of employment

For your employees to receive a car parking benefit on a day, they must travel between their place of residence and their primary place of employment – either before or after work. See Example 6 above.

The trip does not need to be a direct trip between their place of residence and place of employment to satisfy this condition. For example, an employee may use the car to travel between home and work, but may stop at shops on the way home or pick up a child from child care. In both instances, the car is still considered to be used 'in connection with' travel between their place of residence and primary place of employment.

In this case, place of residence has a wider meaning than the place where the employee resides (lives). It can include a place where the employee has sleeping accommodation, such as a hotel or serviced apartment. For example, your employee may ordinarily reside in Sydney, but use their car to travel to Canberra to work temporarily, and to drive between their hotel and your Canberra business premises while they are there. In this instance, the car is used in connection with travel between the place where they (temporarily) reside and their primary place of employment on the day.

See also:

paragraph 39A(1)(g) of the FBTAA

16.1.7 Was there a commercial parking station within a one-kilometre radius of the work car park?

Not every car park qualifies as a commercial parking station (see section 16.1.7.1). If there is no commercial parking station within the one-kilometre radius of the work car park, a car parking benefit does not arise.

Measure the one-kilometre radius from the closest car entrances to the work car park and the commercial parking station. Use the shortest practicable route from one car park entrance to the other. The travel may be by foot, car, train or boat; whichever produces the shortest route.Where the shortest route can be travelled on foot, public thoroughfares such as arcades through shopping centres should be utilised in determining the distance.

An illegal or impractical shortcut through private property is not considered a practicable route. A route that is not available for an extended period of time is not a practicable route. For example, if a river crossing existed and was measured as part of a practicable route, should that river crossing be destroyed via a natural disaster, the river crossing will no longer be considered to be part of that practicable route until it is restored.

The one-kilometre radius may be measured by using an odometer reading, information available online (such as images), by measurement on a scale map or any other method (such as an application or tracking on a mobile device).

A new commercial parking station may be established within a one-kilometre radius of your work car park when previously there were no commercial parking stations within that radius. In these circumstances, where the new commercial parking station is the only commercial parking station within a one-kilometre radius, you will not immediately be providing car parking benefits. The earliest you could provide a car parking benefit is the first business day of the next FBT year when you can compare the fees charged by this commercial parking station (and any others that may also have opened) against the FBT car parking threshold.

If on the first business day of the FBT year any new commercial parking stations within the one-kilometre radius charge an all-day parking fee above the car parking threshold, employers who provide car parking to their employees may start to provide car parking fringe benefits from that day.

16.1.7.1 When does a commercial parking station qualify?

A commercial parking station is a commercial car parking facility which meets all of the following requirements, on a particular day:

It is permanent (not a temporary or a 'pop up' car park).
It offers all-day parking to the public in the ordinary course of business on payment of a fee. This means parking for a continuous period of at least 6 hours, between the hours of 7:00 am and 7:00 pm, is offered to any member of the public who accepts the car park terms and conditions or restrictions, for example, entering into a lease for a car space to park. It doesn't matter if your employees could or would park there.
It is not on-street parking – parking on a street, road, lane, thoroughfare or footpath (or similar) where parking is paid for by inserting money in a meter or by obtaining a voucher (such as 'pay and display' parking).

A commercial car parking facility is a parking facility that displays certain characteristics that are hallmarks of such a facility. Hallmark characteristics allow characterisation of a commercial car parking facility to be determined objectively.

A parking facility operated by a professional car parking operator is a commercial car parking facility. This includes instances where a parking facility exists within another complex (such as an office, shopping centre or hospital) and the owner or lessor of that complex outsources the management of the parking facility to a professional car parking operator.

If a parking facility is not managed by a car parking operator and 2 or more of the following characteristics are present, the parking facility will generally be a commercial car parking facility:

has clear signage visible from the street advertising that paid parking is available
has mechanisms to control who can enter or exit the parking facility, or park at the facility. This may include boom gates, or 'pay and display' ticketing machines
charges more than a nominal fee for paid parking. This includes charging a user for parking which is not all-day parking (such as parking at an hourly rate).

A facility's fees will usually be considered 'nominal' if they are significantly lower than the local market rate.

The commercial parking station must offer all-day parking in the ordinary course of business which may include a car parking facility operated by a not-for-profit organisation, such as a hospital, government agency or charity. A car parking facility may still qualify as a commercial parking station even if the facility has another purpose other than providing all-day parking, or if it is a dual-purpose parking facility. For example, a shopping centre operator runs a car park as part of their operations – to be used by shopping centre patrons and local commuters as part of a park and ride scheme. In this case, the shopping centre car park is a commercial parking station. In another example, an inner-city hospital offers parking to the public – whilst the majority of its parking spaces are reserved for medical staff, the remaining spaces are offered to the public for all-day parking. In this case, the hospital car park is also considered to be a commercial parking station.

16.1.7.2 Fees for all-day parking

A commercial parking station must charge a fee for all-day parking that cannot be nil. The parking facility must charge more than a nominal fee (usually a significantly lower rate than the local market rate) for paid parking. It does not matter if the fee is above the market rate, so long as the public is willing to pay the fee to park there.

The daily rate for all-day parking may vary due to early bird or online discounts or other types of fees that are charged (for example, hourly rates). It does not matter whether the all-day parking is booked out on the relevant day.

Example 7 – commercial parking station comparison

Towers Pty Ltd purchases 2 properties on which apartments will be built but makes the properties available (through various arrangements) for parking while awaiting development approval. It is not known how long the approvals will take to be granted.

Property 1 – previous commercial building

Property 1 is an office building with sealed car spaces that were used by employees of the previous tenants. Towers Pty Ltd leases the building's car parking facilities to Compark Ltd to operate. Compark Ltd is a well-known parking provider in the area. Compark Ltd charges a fee for daily all-day parking that is comparable with amounts charged for equivalent parking at nearby commercial parking stations. It also advertises parking spaces to the public on their website and installs parking signs and a pay and display machine on the property.

Property 1 is a permanent facility operated by a car parking operator, which offers spaces in the ordinary course of business to members of the public, for all-day parking for payment of a fee and therefore meets the requirements of a commercial parking station.

Property 2 – multi-level car park

Property 2 is a multi-level car park with a sealed surface, marked bays, and on-premises signs that advertise paid parking (including all-day parking) is available. Property 2 was operated by the previous owner, MrPark Ltd, as a commercial parking station. While Towers Pty Ltd awaits the building approvals, it leases the premises back to MrPark Ltd on a periodic monthly lease. MrPark Ltd continues to advertise the parking on their website for the same fees charged prior to the change in ownership of Property 2. The parking station is operated by a car parking operator and therefore is a commercial parking facility, regardless of the fact that the lessor has outsourced the management of the parking facility. Property 2 meets the requirements of a commercial parking station.

Example 8 – commercial parking station – outsourced management

A residential apartment complex has car spaces that are not being used by the residents. As investors own about half the apartments in the complex, the property manager arranges to lease the excess car spaces to a parking operator on their behalf. The property manager meets with numerous parking operators and negotiates terms with the parking operator who was able to present the best commercial deal to the owners of the apartments.

The operator advertises the availability of paid parking – the lowest daily rate is the same as that charged by nearby parking facilities.

The parking facility is operated by a car parking operator and therefore is a commercial parking station, regardless of the fact that the lessor has outsourced the management of the parking facility.

Example 9 – commercial parking station – car park sharing mobile apps

A mobile phone application, 'Park-it', allows car spaces to be listed for the public to book.

Joe occasionally uses Park-it to list his driveway as available for all-day parking.

Fancy Co is a marketing firm with an office building located in an area of the central business district where parking is at a premium. Fancy Co occasionally uses Park-it to list car spaces in its office building car park as being available for all-day parking when a senior executive takes annual leave. Fancy Co lists its car spaces at a fee comparable to nearby commercial parking stations. Fancy Co provides people who book its car spaces access to its car park by giving them a temporary access code.

Joe's driveway and Fancy Co's car park are not commercial parking stations. Joe and Fancy Co's arrangements are ad hoc and temporary, meaning they are not operating permanent commercial car parking facilities.

Example 10 – commercial parking station – shopping centre car park

Snazzy Ltd leases car spaces at an all-day car parking facility adjacent to its business premises. The only car park within a one-kilometre radius of Snazzy's premises is a shopping centre car park that operates between 6:00 am and midnight. The shopping centre is operated by the landlord of the shopping centre and provides 3-hour free parking if a purchase is made at the shopping centre and hourly rates if no purchase has been made. There are boom gates to control entry and exit to the facility. A commercial flat rate is charged for parking exceeding 6 hours. There is signage visible from the street and at each entrance advertising that car parking is available.

The shopping centre car park is a commercial parking station. All 3 hallmark characteristics of a commercial parking facility are evident. The parking facility makes all-day parking available to the public in the ordinary course of its business.

See also:

paragraph 39A(1)(a)(ii) of the FBTAA
section 39B of the FBTAA
Explanatory Memorandum to the Taxation Laws Amendment (Car Parking) Bill 1992
definition of 'commercial parking station' in subsection 136(1) of the FBTAA
WT 94/87 and Commissioner of Taxation [1995] AATA 97

16.1.8 Is the lowest fee for a commercial parking station above the car parking threshold?

The lowest representative fee charged to members of the public for at least 6 continuous hours of parking between 7:00 am and 7:00 pm (all-day parking) by a commercial parking station within a one-kilometre radius of the work car park must be more than the car parking threshold on the first business day of the FBT year for a car parking benefit to arise during the FBT year. The lowest representative fee charged by a commercial parking station may change later during an FBT year, such that this fee may be different to the fee charged by a commercial parking station on the day the car is parked.

The fee for any particular day is not representative if it differs substantially from the average lowest fee usually charged for all-day parking by the same operator. The average fee is the average of fees charged during a 4-week period beginning or ending on that particular day.

All-day parking is parking for a continuous period of 6 hours or more. Therefore, the lowest representative fee charged for all-day parking cannot be calculated from the cumulative total of shorter periods. For example, the fee charged to someone for at least 6 hours of parking because a person came and went from the car park during the day to access discounted parking rates.

See also:

Fringe benefits tax – rates and thresholds
subparagraph 39A(1)(a)(iii) of the FBTAA
section 39AA of the FBTAA
section 39B of the FBTAA
subsection 136(1) of the FBTAA

16.2 Calculating car parking fringe benefits

Once you determine that a car parking benefit is provided to your employee, you need to work out its taxable value. The law provides several ways in which you can calculate the taxable value.

The following table helps you to calculate and meet the FBT liability for a car parking benefit.

Table 2: Working out the taxable value

Step	Action	Detail	Decision
Step 1	Have you elected to value the total number of benefits you provide using either the Register method or the Spaces method prior to your FBT return due date?	Section 16.2.2 discussesthe requirements to be satisfied to make the election.	No: go to Step 2. Yes: if you elected to use the Register method, calculate the value of the benefits based on the register (section 16.2.7). Go to Step 5. If the register becomes invalid, go to Step 2. If you elected to use the Spaces method, calculate the number of car spaces and value of the spaces (section 16.2.8). Go to Step 5.
Step 2	You must calculate the number of benefits you provide.	One car space can give rise to more than one benefit on a day if more than one car is parked in a space for more than 4 hours in total. Section 16.2.3 outlines that you must keep records of the usage of the car spaces provided.	Go to Step 3.
Step 3	Have you elected to value a benefit using the Market value method or Average cost method?	Section 16.2.2 discusses the requirements to be satisfied to make the election.	No: go to Step 4. Yes: go to Step 5. If your election is not valid go to Step 4.
Step 4	Calculate the taxable value using the Commercial parking station method.	Sections 16.2.4.1 to 16.2.4.4 discuss how to identify the lowest fee charged.	This amount is the taxable value of the car parking fringe benefits you provide.
Step 5	Calculate the taxable value using the method you have chosen.	Section 16.2.5 discusses the requirements for the Market value method. Section 16.2.1 summarises the records you are required to keep for each of the methods. Section 16.2.6.1 outlines how you calculate the average cost for the Average cost method.	This amount is the taxable value of the car parking fringe benefits you provide for those car spaces or employees covered by your election.

16.2.1 Taxable value – summary of methods

There are 5 methods you can use to calculate the taxable value of a car parking fringe benefit. Each method has its own requirements. An overview of each method is provided here.

Commercial parking station method

(sections 39C and 39E of the FBTAA)

Overview

Use this method unless you elect to use an alternative method to value some or all of your car parking fringe benefits.
Keep records of the number of car parking fringe benefits you provide.
Identify the lowest representative fee charged by a commercial parking station for all-day parking (see sections 16.2.4.1 to 16.2.4.4) within a one-kilometre radius of each work car park (see section 16.1.6).
The taxable value is equal to the lowest representative fee charged by any commercial parking station within that radius on the day you provided the car parking fringe benefit, provided it represents an arm's length fee (see section 16.2.4.4).

Additional record-keeping requirements

number of car parking benefits provided – remembering that one car space might give rise to more than one benefit on a day (for example, if a space provides parking for more than 4 hours for more than one car)
the days when no car parking benefits arise for a car space (for example, where employees are absent) or the days that are not ordinary business days for your business
evidence of the lowest fee available to members of the public for all-day parking at the relevant time
an advertisement or a screenshot of the operator's website showing fees charged for the day and any conditions for the relevant fee (for example, for an early bird rate, the hours in which the fee was available)
a record of the sign displayed at the entrance to the car park where it shows any conditions attached to fees.

To use the following methods you must make an election (see section 16.2.2)

Market value method

(section 39D of the FBTAA)

Overview

Keep records of the number of car parking benefits provided.
Obtain a valuer's report (see section 16.2.5.2) from a qualified valuer (see section 16.2.5.1), which you need to receive before:
- your return is lodged or due to be lodged, or
- 21 May if you do not have to lodge, or
- such further time that we allow.
The taxable value for each benefit that you choose to value under this method is based on the valuer's report.

Additional record-keeping requirements

number of car parking benefits provided – remembering that one car space might give rise to more than one benefit on a day (for example, if a space provides parking for more than 4 hours for more than one car)
the days when no car parking benefits arise for a car space (for example, where employees are absent) or the days that are not ordinary business days for your business
the valuer's report and the documentation you provided to the valuer.

Average cost method

(sections 39DA and 39E of the FBTAA)

Overview

Keep records of the number of car parking benefits provided.
Identify the lowest representative fee charged by a commercial parking station for all-day parking (see sections16.2.4.2 to 16.2.4.4) within a one-kilometre radius of each work car park (see section 16.1.6) on the first day of the FBT year a car parking benefit is provided (A) and the last day of the FBT year a car parking benefit is provided (B) and calculate the average cost as follows:
A + B ÷ 2
That average cost is the taxable value of each car parking fringe benefit covered by your election.

Additional record-keeping requirements

number of car parking benefits provided – remembering that one car space might give rise to more than one benefit on a day (for example, if a space provides parking for more than 4 hours for more than one car)
the days when no car parking benefits arise for a car space (for example, where employees are absent) or the days that are not ordinary business days for your business
evidence of the lowest fee available to members of the public for all-day parking at the relevant times
an advertisement or a screenshot of the operator's website showing fees charged for the day and any conditions for the relevant fee (for example, for an early bird rate, the hours in which the fee was available)
a record of the sign displayed at the entrance to the car park where it shows any conditions attached to fees.

Register method

(sections 39G to 39GH of the FBTAA)

Overview

You don't need to keep records of car parking benefits provided during an FBT year (see section 16.2.7.1).
Rather, every 5 years, you must record car parking benefits provided over a 12-week period (see section 16.2.7.3).
The 12-week period must be representative of your usual provision of car parking fringe benefits (see section16.2.7.4) and must contain certain details (see section 16.2.7.2).
Using one of the methods above and your 12-week register, work out the total taxable value of car parking fringe benefits provided to the employees covered by your election, and then calculate using a formula (see section 16.2.7.5) the total taxable value of the car parking fringe benefits you have provided during the FBT year.

Additional record-keeping requirements

records of car parking benefits provided during the 12-week register period (and every 5 years thereafter if there are no significant changes to usage) – remembering that one car space might give rise to more than one benefit on a day
the register that is created representing the particular 12-week period
records of how the value of the benefits that the register is based on were calculated and why the particular 12-week period was selected
records that illustrate that the register was representative of usage for the first year in which it is valued
evidence that the number of benefits has not increased by more than 10% since the register was kept (through ad hoc monitoring).

Spaces method

(sections 39F to 39FE of the FBTAA)
You calculate a daily rate amount using the commercial parking station method, the market value method or the average cost method (assuming there was no recipients contribution) for each car space which gave rise to at least one car parking benefit in the FBT year for an employee covered by your election.
You then use the statutory formula to calculate the total value of all benefits provided to your employees covered by your election (see section 16.2.8.1).

Additional record-keeping requirements

evidence showing the number of employees who park on a work car park and number of spaces provided, where the number of car spaces exceeds employee numbers see sections 16.2.8.2 to 16.2.8.3.
evidence showing the first and last day the car spaces in the work car park were available
evidence showing the number of employees and spaces at the beginning and end of the FBT year
evidence showing the fee, number of employees and number of eligible spaces are each representative
other evidence required to support the method chosen to value the benefit.

16.2.2 Making an election

You must use the Commercial parking station method unless you elect to use an alternative method. You may elect to use different methods in different years.

If you elect to use an alternative method, your election can be in writing or be established by your calculations.

If you elect to use the Market value or Average cost method, your calculations should demonstrate:

whether it applies to any or all of your car parking benefits, and
the daily value of the car parking benefits.

If you elect to use the Spaces method or the Register method, your calculations should demonstrate whether the election made applies to all employees, particular employees or all employees of a particular class (for example, only covers those employees who do not travel for work once they arrive at their primary place of employment for the day).

For the Spaces method, your calculations should also demonstrate the number of car spaces available to be used by employees.

Where you elect to use a particular method for only some of the parking benefits provided to your employees, the taxable value calculated under the method only applies to the employees covered by the election. The taxable value of all or some of the remaining car parking benefits provided can be covered by another alternative method or the default Commercial parking station method.

After you lodge your FBT return, you cannot change the method used to value a car parking fringe benefit or revoke your election. However, in certain specific circumstances, the Commissioner may allow you to value the parking benefit using the Commercial parking station method instead of one of the other methods elected.

16.2.3 Record keeping

You need to keep records with enough detail so that if asked, you can show how you arrived at the taxable value of the car parking fringe benefits. You need to retain these records for 5 years.

See also:

section 132 of the FBTAA
Chapter 4 on FBT record keeping
section 16.2.7.1 for record-keeping requirements when using the Register method.

16.2.4 Commercial parking station method

16.2.4.1 Commercial parking station method – identifying the lowest fee on each day

The taxable value of a car parking fringe benefit provided to an employee is the lowest fee charged to members of the public for all-day parking on that day by any commercial parking station within a one-kilometre radius of the work car park. This is reduced by any amount the employee pays towards the cost of the fringe benefit. This must be done on each day a car parking benefit is provided.

16.2.4.2 Commercial parking station method – working out the lowest daily fee from periodic fees

Where all-day parking fees are paid for on a periodic basis, you can determine an equivalent daily rate by dividing the total fee by the number of business days in the period (which includes the day the parking benefit is provided). For this purpose, a business day is a day other than a Saturday, Sunday or public holiday for the State or Territory where the commercial parking station is located. For example, if a commercial parking station offers all-day parking for $12 a day or $50 a week, the lowest all-day parking fee charged by that parking station is $10 ($50 weekly rate ÷ 5 business days).

16.2.4.3 Commercial parking station method – the lowest daily fee based on an early bird rate

The lowest fee charged may include fees charged on early bird parking or car pooling arrangements, where a reasonable number of car spaces are set aside for those purposes.

Example 11 – lowest fee is the early bird rate

Apex Parking charges $18 a day for early bird parking (entry before 7:30 am), $10 hourly from 7:30 am to 6:00 pm with a maximum fee of $50 for the day and a $9 flat rate for cars parked between 6:00 pm and midnight. If someone pre-books their early bird parking online, Apex Parking charges $17 for the day, but there is a $2 booking fee (so the overall fee is $19).

The lowest fee charged by Apex Parking between 7:00 am and 7:00 pm is $18 and this is used in calculating the taxable value under the Commercial parking station method.

16.2.4.4 Commercial parking station method – restrictions on the lowest daily fee

The lowest fee charged cannot be:

nil
a fee charged to store a car for a long-term fixed period (such a fee is not a fee for daily parking as it prevents a vehicle from being removed from the storage bay on a daily basis)
a fee that is not available on the day the car parking benefit is provided.

There are rules that prevent manipulation of the lowest daily fee. For example, the lowest daily fee must be set aside and replaced if the fee:

is set for the main purpose of reducing FBT
comes about because the operator and the customer were not at arm's length.

Example 12 – lowest fee

Qstore Pty Ltd is working out the taxable value of the car parking fringe benefits it has provided to its employees.

There are 2 commercial parking stations within one-kilometre of Qstore's work car park. On 1 April 2022 (the first business day of the 2023 FBT year), one commercial parking station charged $5.50 for all-day parking, and the other charged $10 for all-day parking. Since one of those commercial parking stations charged more than the car parking threshold of $9.72 on 1 April 2022, Qstore may, subject to the other conditions being met, be providing car parking benefits. In calculating the taxable value of any car parking benefits provided, Qstore can use the lower rate of $5.50.

Example 13 – daily rate equivalent

Rent-a-spot is a commercial parking station. Its all-day parking fees are lower the greater the financial commitment. Rent-a-spot customers can prepay for their parking on a weekly, fortnightly or monthly basis.

A Rent-a-spot customer pays $272 to park their car for a month with 22 business days. Rent-a-Spot's facility is open 24 hours a day, 7 days a week. Cars parked on longer term rates are able to enter and exit multiple times a day.

To work out the daily rate equivalent from this monthly rate, divide the monthly rate by the business days in the month.

Total fee ÷ Business days in period

$272 ÷ 22 = $12.36

The lowest rate charged for all-day parking on a particular day by Rent-a-spot is $12.36.

16.2.5 Market value method

16.2.5.1 Market value method – qualified valuer

To use the Market value method, you must obtain a valuation report from a suitably qualified valuer before you lodge your FBT return for the year and base the taxable values of the car parking fringe benefits you provided on that report.

A suitably qualified valuer is a person with expertise in valuing parking facilities, either through relevant experience or by attaining relevant professional qualifications. The valuer must be at arm's length to the valuation.

There is no requirement that the valuer be registered, and registration on its own does not mean that the valuer is suitably qualified. A person who is acceptable as an expert witness on the issue of valuing parking facilities before a court or tribunal is a suitably qualified valuer.

There may be one or more methodologies for working out the value of the car parking benefit (based on valuation industry standards and the available data). The market valuation may differ from the actual rates charged for car parking.

See also:

Market valuation for tax purposes

16.2.5.2 Market value method – details required for a valuation report

A valuation report should include:

a description of the car space, including the precise description of the location of the work car park valued (either the street address or block and section number)
a list of the car parking facilities on which the valuation is based (with information on locality, grading, price, and weighting)
the purpose and context of valuation
the date of valuation
method or methods used
the specific value, including the number of car spaces at different car parking facilities valued, and the value of the car spaces based on a daily rate
information and assumptions used for the valuation
material risks
any use of previous valuations
explanation of material differences between valuation and value of car parking facilities near the work car park or differences between current to previous valuations
expert reports and the use of experts including sufficient detail to confirm that the expert is sufficiently qualified and they are at arm's length in relation to the valuation
the terms of engagement and the relationship between you and the valuer including a declaration stating that the valuer is at arm's length in relation to the valuation
working papers
disclaimers and indemnities that affect the valuation process
the valuer's details and signature, that is, the full name of the valuer and a description of their qualifications as a valuer.

The following factors may be relevant when considering a valuation:

the cost and availability of a car space at a commercial parking station of a similar standard near to the work car park being valued
the impact of monopolies or market forces
recent economic trends and anomalies.

See also:

Valuation reports

16.2.5.3 Market value method – things to keep in mind

When engaging a valuer, it is important to keep in mind:

It is your responsibility to get the taxable value of the car parking benefit correct, even where you rely on a valuation report.
If you doubt a valuation is correct (or whether the valuer is qualified), check and ask for more information. For example, a reasonable person would be expected to seek more information where the fee provided in the report is substantially less than the known fees charged in the area or where the fee is for a property which is not known to be available for parking by members of the public.
You should engage a valuer who is suitably qualified. If you doubt whether the valuer is suitably qualified, approach us and we will assist you.
The valuer needs to make the valuation without any undue commercial or personal influence, interference or direction from you.
You need to obtain the valuer's report annually before the date of lodgment of your FBT return for that year, or such later date as the Commissioner allows.

Example 14 – non-arm's length valuation

Sue has been employed for 5 years by Undercover Parking as a sales manager. Her duties include assessing the value of car parking facilities managed by Undercover and determining the price charged to commercial clients. Although she has no formal qualifications in property valuation, she is considered a suitably qualified valuer based on her experience. Sue is asked by her manager, in the ordinary course of her duties, to prepare a market valuation on Undercover Parking's work car park.

Undercover Parking cannot rely on a valuation prepared by Sue to value the car parking benefits it provided. Sue is an employee of Undercover Parking and is contracted, as an employee, to act under the direction and control of Undercover Parking in providing the valuation. Sue cannot, given the nature of her relationship with Undercover Parking, provide an arm's length valuation.

16.2.6 Average cost method

16.2.6.1 Average cost method – calculating the average cost

To calculate the taxable value of any or all of your car parking benefits you provided in an FBT year using the average cost method, use the following formula:

(A + B) ÷ 2

Where:

A is Lowest representative fee charged on the first day a car parking benefit is provided in the FBT year
B is Lowest representative fee charged on the last day a car parking benefit is provided in the FBT year

The lowest fee charged is the lowest representative fee charged to members of the public for all day parking by any operator of a commercial parking station within a one-kilometre radius of the work car park. Section 16.1.8 explains when fees are representative.

To average the lowest fees charged on each of the relevant days, you do not need to use the fees charged by the same commercial parking station. If there is more than one commercial parking station operator within a one-kilometre radius of the work car park, you may use the lowest fee charged to members of the public by any of the operators on each of the relevant days. The relevant days are the first and last day of the FBT year on which a car parking benefit is provided.

Example 15 – multiple car parking facilities provided

For the whole of the 2022-23 FBT year, Olive Pty Ltd provided car parking to its employees at 2 work car parks (car park A and car park B) near its headquarters, which is the primary place of employment for all its employees. Employees use either car park A or car park B (but not both).

Olive Pty Ltd elects to apply the Average cost method to all the car parking fringe benefits it provides in the 2022-23 FBT year.

On 1 April 2022:

the lowest fee charged by a commercial parking station (PCP 1) within a one-kilometre radius of car park A was $17.
the lowest fee charged by a commercial parking station (PCP 2) within a one-kilometre radius of car park B was $10.

On 31 March 2023:

the lowest fee charged by PCP 1 was $20.
the lowest fee charged by PCP 2 was $18.
the lowest fee charged by a commercial parking station (PCP 3) was $15.

PCP 3 opened during the 2022-23 FBT year within a one-kilometre radius of car park B. PCP 2 and PCP 3 are not within a one-kilometre radius of car park A.

The taxable value of car parking benefits provided in car park A using the Average cost method can only be worked out by referring to commercial parking stations within a one-kilometre radius of that particular work car park. Therefore, the lowest fees charged by PCP 2 and PCP 3 cannot be used to calculate an average cost for car parking benefits provided at car park A because they are more than one-kilometre from car park A. However, they can be used to calculate the average cost for car parking fringe benefits provided at car park B.

Therefore, the average cost for car parking fringe benefits provided at:

car park A is $18.50 ((17 + 20) ÷ 2) using the lowest fees charged by PCP 1.
car park B is $12.50 ((10 + 15) ÷ 2) using the lowest fees charged by PCP 2 and PCP 3.

16.2.7 Register method

16.2.7.1 Register method – keeping a 12-week register

To calculate thetaxable value of the car parking benefits provided to some or all of your employees in an FBT year using the Register method, you must keep a register for a continuous period of 12 weeks throughout which car parking benefits are provided to employees covered by your election. The period you choose must be representative of ordinary use of the work car park by those employees during the first FBT year. You can't use a register compiled over a period that does not reflect ordinary use (for example, during a Christmas and New year shutdown).

The register must include:

the date on which each car was parked
whether the car was parked for more than 4 hours
whether the car was driven between the employee's place of residence and primary place of employment on that day
the place where the car was parked.

To be valid, you must record these details as soon as practicable after the details become known to you. You may automate the register using electronic devices (such as GPS), as long as you collect the required details.

See also:

sections 39GE and 39GG of the FBTAA.

Example 16 – automated register

Nifty Ltd uses GPS devices to monitor all parking by its employees in its work car park. Each GPS device records where the car is parked and the time and date the car enters and exits the work car park. Nifty Ltd uses software to produce a report registering entry and exit times and the hours each car is parked.

As the GPS device was fitted to all of the cars for which a car parking benefit may arise during an FBT year, Nifty Ltd can rely on the report as its 12-week register.

16.2.7.2 Register method – keeping records throughout the FBT year

If you keep a valid register, you are not required to keep records of the car parking benefits you provided to employees you have elected to cover using the Register method. However, you must maintain records which show you conducted periodic reviews to confirm there were no changes in use. The Register method gives a total taxable value for all the fringe benefits for employees you elected to value using this method.

16.2.7.3 Register method – how long is a register valid?

Generally, a register is valid for the FBT year in which the 12-week period occurs, and the 4 following FBT years. However, if the 12-week period begins in one FBT year and ends in the following FBT year, the register is valid only for the second FBT year and the 4 following FBT years. After the end of the fifth FBT year you must prepare a new register.

See also:

section 39GF of the FBTAA

16.2.7.4 Register method – when it becomes invalid

A register is not valid for an FBT year if:

the 12-week period in which the register was kept was not representative of the car parking fringe benefits you provided during that FBT year to employees covered by the election
the number of car parking benefits you provide to employees covered by your election to use the Register method increased by more than 10% in the previous FBT year
you replace it with a new register in that FBT year covering the same employee
it omits the required details
the information required is not recorded as soon as practicable after it is known
it contains false or misleading information.

As part of your annual FBT governance processes, you should consider whether the number of car parking benefits you provided to employees covered by your election to use the Register method has increased.

See also:

sections 39GF to 39GH of the FBTAA

16.2.7.5 Register method – calculating the value

You calculate the taxable value of car parking fringe benefits provided to employees covered by your election using the following steps:

Step 1:
Using the Commercial parking station method, the Market value method or the Average cost method, work out the total taxable value of car parking fringe benefits provided to employees covered by your election using the information in your 12-week register.
Step 2:
Multiply your Step 1 amount by (52 ÷ 12).
Step 3:
Work out the number of days in the FBT year any employee covered by your election to use the Register method was provided with a car parking benefit.
It begins on the first day in the FBT year on which you provide a car parking benefit to an employee covered by your election, and ends on the last day in the FBT year on which you provide a car parking fringe benefit to an employee covered by your election.
Step 4:
Divide your Step 3 amount by 366. (Use 366 even where it is not a leap year.)
Step 5:
Multiply your Step 2 amount by your Step 4 amount.
The result is your total taxable value of the car parking fringe benefits you provided to employees covered by your election for the FBT year.

See also:

section 39GB of the FBTAA
section 39GD of the FBTAA

Example 17 – 12-week register

Imps Pty Ltd starts providing car parking benefits on 1 October 2019 and continues to do so for the rest of the 2019-20 FBT year. The register it kept for 12 weeks records it provided 250 car parking benefits to its employees covered by the election. Using the Market value method, Imps Pty Ltd establishes that the taxable value of each car parking fringe benefit is $10 (being an arm's length value of $20 less $10 recipient contribution). There were 183 days between 1 October 2019 and 31 March 2020.

Based on the formula above, the taxable value of the car parking fringe benefits provided by Imps Pty Ltd to employees covered by its election is $5,416.67. This is calculated under the Register method as follows:

Step 1:
The total taxable value of car parking benefits in Imps Pty Ltd's 12-week register is $2,500 (250 car parking benefits provided, multiplied by their market value of $10 per benefit)
Step 2:
$2,500 × (52 ÷ 12) = $10,833.33
Step 3:
Number of days the benefit was provided = 183
Step 4:
183 ÷ 366 = 0.5
Step 5:
$10,833 × 0.5 = $5,416.67

16.2.8 Spaces method

16.2.8.1 Spaces method – working out taxable value

To calculate the taxable value of the car parking benefits provided to some or all of your employees in an FBT year using the Spaces method, use the following formula:

For each car space which resulted in you providing a car parking benefit in the FBT year to an employee covered by your election to use the Spaces method:

PART 1
Step 1:
Calculate the daily rate amount.
The daily rate amount for each space is the taxable value amount of the car parking fringe benefit worked out using the Commercial parking station method, the Market value method or the Average cost method assuming there were no recipients contribution.
Step 2:
Calculate the availability period for the space.
The availability period for a space begins on the first day of the FBT year on which a car parking benefit for the space is provided (for an employee covered by the election) and ends on the last day of that year the car parking benefit for the car space is provided (for an employee covered by the election).
Step 3:
Divide your Step 2 amount by 366. (Use 366 even when it is not a leap year).
Step 4:
Multiply your Step 1 amount by the Step 3 amount.
Step 5:
Multiply your Step 4 amount by 228.

PART 2
Step 6:
Sum the result for each car space to calculate the total for all car spaces which resulted in you providing a car parking fringe benefit to employees covered by your election to use the Spaces method.
This is called your total statutory benefit.
Step 7:
If the average number of employees covered by the election is less than the average number of spaces made available to those employees see section 16.2.8.2 to calculate your modified total statutory benefit.

PART 3
Step 8:
Obtain the total of all employee contributions for all employees covered by your election to use the Spaces method. It does not matter if the contributions are for more than 228 days.
Step 9:
Reduce your Step 6 amount (or your modified Step 7 amount) by the Step 8 amount. The amount remaining is the total taxable value of the car parking fringe benefits for employees that you elected to value using the Spaces method.

See also:

sections 39FA to 39FD of the FBTAA

16.2.8.2 Spaces method – where average number of employees is less than average number of spaces

If during the parking period the average number of employees covered by your election is less than the average number of spaces made available to those employees, calculate your modified total statutory amount using the following formula:

Step 1:
Calculate the average number of employees, using the following formula:
(A + B) ÷ 2

Where:
A is number of employees covered by the election at the beginning of the parking period
B is number of employees covered by the election at the end of the parking period

Step 2:
Calculate the average number of spaces, using the following formula:
(A + B) ÷ 2

Where:
A is number of spaces made available to employees covered by the election at the beginning of the parking period
B is Number of spaces made available to employees covered by the election at the end of the parking period

Step 3:
Calculate your modified total statutory benefit by multiplying your total statutory benefit (from Step 6 above) by the following fraction:
Average number of employees ÷ average number of spaces

Parking period

The parking period:

begins on the first day in the FBT year on which a car space results in you providing a car parking fringe benefit to an employee covered by your election to use the Spaces method and
ends on the last day in the FBT year on which a car space results in you providing a car parking fringe benefit to an employee covered by your election to use the Spaces method.

Average number of employees and average number of spaces must be representative

You cannot use the Spaces method if either or both of the number of employees and number of spaces used in your calculations is not representative. Those numbers are not representative if one or both differ substantially from the average number throughout whichever of the following periods you choose:

the 4-week period ending on the first day of the parking period, or
the 4-week period beginning on the last day of the parking period.

Example 18 – the Spaces method

Squeeky Clean starts providing car parking fringe benefits for each car space to its employees on 1 October 2022 and continues to do so for 182 days to 31 March 2023. Squeeky Clean elects to use the Spaces method for all of its employees. Squeeky Clean has 4 car spaces available for use by its 3 employees. Using the average cost method, Squeeky Clean establishes that the daily rate amount of each car parking fringe benefit for each car space is $10 (using the average cost method).

Between 31 March 2023 and 28 April 2023 (4-week test period), the average number of spaces is three and a half (one of the spaces is resurfaced during this time). The number of spaces made available from 1 October 2022 to 31 March 2023, being 4, is representative as it does not substantially differ from the average number of spaces available during the 4-week test period.

Each employee is required to contribute $30 a week for parking in the car parks.

Based on the Spaces method formula, the total taxable value of the car parking fringe benefits is $1,061.31 which is calculated as follows:

Step 1:
$10 (using the Average cost method)
Step 2:
182 days (1 October 2022 to 31 March 2023)
Step 3:
182 (Step 2 days) ÷ 366 = 0.49
Step 4:
$10 (Step 1 amount) × 0.49 (Step 3 amount) = $4.97
Step 5:
$4.97 (Step 4 amount) × 228 = $1,133.77
Step 6:
$1,133.77 (Step 5 amount for each space) × 4 spaces = $4,535.08
Step 7:
Step 7 applies because the average number of employees covered by the election to use the Spaces method is less than the average number of spaces.
Step 6 amount × (average number of employees ÷ average number of spaces)

$4,535.08 × (3 ÷ 4) = $3,401.31

Step 8:
$30 × 26 weeks × 3 employees = $2,340
Step 9:
$3,401.31 (Step 7 amount) – $2,340 (Step 8 amount) = $1,061.31

16.3 Ancillary matters

16.3.1 Parking not subject to FBT

You do not pay FBT on:

a car parking benefit that is
- an expense payment benefit and is not a car parking expense payment fringe benefit (see sections 9.8 and 9.9 Expense payment fringe benefits)
- a minor benefit (see section 20.8 Other exemptions)
- a residual benefit that is the provision of motor vehicle parking that does not fall within the requirements of car parking benefits described in this chapter and is not a car parking expense payment benefit. For example, where
the provision of parking is for a motorcycle or an e-bike (not cars)
the parking is for cars that are not used by your employees to travel between their primary place of employment and their primary place of residence
the car space provided is not near to your employee's primary place of employment on that day.
a car space provided to disabled employees who are entitled to use a disabled person's car parking space and display a valid disabled person's car parking permit. A valid disabled person's car parking permit is a permit, label or other document issued by the appropriate authority in the relevant State or Territory authorising your employee to park in a car space that is designated for the exclusive use of disabled persons.

See also:

paragraph 39A(1)(h) of the FBTAA
section 12 of the Fringe Benefits Tax Assessment Regulations 2018
definitions of 'disabled persons' car parking permit' and 'disabled persons' car parking space' in section 5 of the Fringe Benefits Tax Assessment Regulations 2018

16.3.2 Class of exempt employers

You do not provide a car parking benefit if you are:

a scientific institution (other than an institution run for profit or gain to its shareholders or members)
a registered charity
a public educational institution, or
a government body, but only for an employee who is employed exclusively in, or in connection with, a public educational institution.

You may be subject to FBT on the car space if you provide an expense payment benefit (if the car space is also not an eligible car parking expense payment benefit).

See also:

section 58G of the FBTAA
section 9.9 of this Guide discusses when a car space is an eligible car parking expense payment benefit.

16.3.3 Small business employers

A car parking benefit is an exempt benefit where:

the work car park is not a commercial parking station
you are not a government body or a listed public company or a subsidiary of a listed public company on the day the benefit is provided, and
either
- you were a small business entity (defined in section 328-110 of the Income Tax Assessment Act 1997) for the last income year before the relevant FBT year
- your total income for the last income year before the relevant FBT year was less than $50 million. For this purpose, your income includes ordinary income and statutory income as defined in the Income Tax Assessment Act 1997; that is, total assessable income before any deductions.

See also:

section 58GA of the FBTAA

Latest update

November 2023

Section	Changes and updates
Entire chapter	The Chapter has been updated following the amendment to TR 2021/2 that addressed the concept of 'primary place of employment' and to provide further guidance on contemporary car parking arrangements. Minor changes to style and expression have also been made throughout.

Details of previous updates are available through the versions linked to in the table below.

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 17 - Property fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

17.1 What a property fringe benefit is

A property fringe benefit arises when you (the employer) provide an employee with free or discounted property.

For FBT purposes, property includes:

goods (including gas and electricity, unless provided through a reticulation system) and animals
real property, such as land and buildings
rights to property, such as shares or bonds.

Benefits specifically covered by earlier chapters of this Guide are excluded from being property fringe benefits.

17.2 Taxable value – overview of valuation rules

The taxable value of a property fringe benefit depends on which valuation rule applies.

Each valuation rule allows you to reduce the taxable value by the amount of any employee contribution. Each rule recognises different circumstances, such as:

whether the benefit is an in-house property fringe benefit or an external property fringe benefit
if the benefit is an in-house property fringe benefit, whether the property
- was purchased for resale or was manufactured
- is identical to, or merely similar to, property sold by you (or another provider) in the ordinary course of business at or about the time the benefit is provided
- is normally sold directly to the public or to customers who sell to the public
if the benefit is an external property fringe benefit, whether the benefit was provided by you or an associate (rather than a third party) and whether expenditure was incurred in providing the benefit.

The alternative valuation rules are summarised below:

If	Then
the benefit is an in-house property fringe benefit provided under a salary packaging arrangement	the taxable value is: the amount that the employee could reasonably be expected to pay to obtain the property under an arm's length transaction less (minus) any employee contribution. Note: Transitional rules may apply.
The benefit is an in-house property fringe benefit not provided under a salary packaging arrangement	The valuation rule depends on whether the property: was purchased for resale or was manufactured is identical to property sold by the provider in the ordinary course of business is normally sold directly to the public or to retailers who sell the goods to the public.
The benefit is an external property fringe benefit	The valuation rule depends on whether you, or an associate (rather than a third party), incurred expenditure in relation to the provision of the property.

17.3 Taxable value – in-house property fringe benefits

An in-house property fringe benefit must satisfy all of the following requirements:

where you (or an associate) provide the benefit, the property must be identical or similar to property you sell in the ordinary course of business
where you (or an associate) provide the benefit, the property must be acquired by the provider from you (or an associate) and must be identical or similar to property sold by both you (or an associate) and the provider in the ordinary course of business at or about the time the benefit is provided
the property must consist of goods. For this purpose, goods include such things as animals and non-reticulated gas and electricity, but not such things as real estate, buildings, or shares.

Property which is 'identical' or 'similar'

Property you provide to your employee is identical to property you sell in the ordinary course of business when the differences between the two items are small.

Property you provide to your employee is similar to property you sell in the ordinary course of business where the two items are alike and generally resemble each other.

Example – providing goods that are 'similar' to those sold in the ordinary course of business

An employer is a clothing manufacturer which produces and distributes its goods across Australian distribution chains. It has some clothing where manufacturing defects make them unsuitable for general sale. When the employer provides clothes that have manufacturing defects to its employees, the employer is providing an in-house benefit as the defective products are similar products to the clothes normally sold by the employer in the ordinary course of its business.

Goods provided under a salary sacrifice arrangement

The taxable value of an in-house property fringe benefit provided under a salary packaging arrangement is the amount the employee could reasonably be expected to pay to purchase the property from the provider under an arm's length transaction (that is, market or fair value).

Example – taxable value of an in-house property fringe benefit

Kane works at the Geelong Meat Works abattoir. As part of his annual remuneration negotiations, he agrees to a reduction in his salary in exchange for a meat pack for Christmas which includes hams, steaks and other choice cuts. The meat pack is an in-house property fringe benefit.

Under the current law, the taxable value of the benefit provided to Kane is the market value of the meat. As Kane is not a wholesaler, the taxable value is therefore the retail price of the meat.

Salary packaging arrangements

Salary packaging arrangements (also commonly referred to as salary sacrifice or total remuneration packaging) means arrangements where either:

you enter into an agreement with your employee to have their salary and wages reduced (or sacrificed) in order to receive a benefit
a reduction in salary is not negotiated, but you give your employee a benefit as part of their employment contract, and it is reasonable to conclude that the salary and wages they would have received would have been greater if the benefit wasn't provided.

Example – negotiated salary packaging arrangement

Felicity has just started working for a car company. In negotiating her remuneration package she agrees with her new employer to forego $25,000 of her yearly salary in order to receive the use of a car.

As she has entered into an agreement to reduce her salary and wages, Felicity would be taken to have entered into a salary packaging arrangement.

Example – Non-negotiated salary packaging arrangement

McKenzie has started employment with an IT firm. His job was previously advertised as having a total remuneration package of $100,000 per year.

McKenzie only receives $95,000 in salary and wages but is given by his employer, free of charge, gaming and photography software with a retail value of $5,000.

In this case, while McKenzie has not entered into a separate agreement to reduce his salary and wages, the salary and wages he would have received would clearly have been greater if the benefit had not been provided. Therefore, McKenzie has entered into a salary packaging arrangement.

Goods manufactured or produced by the provider

These valuation rules apply to an in-house property fringe benefit consisting of goods manufactured, produced, processed or otherwise treated by you (or another provider) as part of your business.

The valuation rules differ depending on whether you normally supply the goods on a retail or non-retail basis and whether the goods are identical or merely similar.

Non-retail goods (identical)

These are goods you normally supply to manufacturers, wholesalers or retailers (that is, not directly to the public).

The goods provided as the fringe benefit must be identical to the goods sold in the ordinary course of business at or about the time you provide the benefit.

The taxable value is the lowest arm's length selling price under which your goods are sold or could reasonably be expected to have been sold:

at or about the time you provide the benefit
reduced by any employee contribution.

Where you provide a discount for early payment, the discounted price is used when determining the taxable value of the goods.

Example

A manufacturer of electrical goods provides an item of stock to an employee (that is, an item identical to goods sold to wholesalers). The manufacturer usually sells the item for $1,000, including GST, to wholesalers. Each invoice provided allows for a discount of 5% for early payment, if the invoice is paid within seven days.

If the wholesaler pays within seven days, they will pay $950 for the item. However, if the wholesaler does not pay within seven days, they will pay $1,000 for the item.

The lowest arm's length selling price is $950.

Retail goods (identical)

These are goods normally supplied to the public. Where you normally sell goods on both a retail and non-retail basis, value the benefit using the non-retail rules above.

The goods provided as the fringe benefit must be identical to the goods sold in the ordinary course of business at or about the time you provide the benefit.

The taxable value is 75% of the lowest selling price you charge the public:

in the ordinary course of business
at or about the time you provide the benefit
reduced by any employee contribution.

Where you provide a discount for early payment, the discounted price is used when determining the taxable value of the goods.

Example

An employer manufactures desks for sale to the public and the lowest selling price of this type of desk to the public is $900, including GST.

An employee purchases a desk for $500.

The taxable value of the property fringe benefit is (75% × $900) - $500 = $175.

Other goods (similar but not identical)

Where goods are similar but not identical to those sold as part of your business at or about the time you provide the benefit (for example, manufacturing seconds), the taxable value is 75% of the notional value of the goods, reduced by any employee contribution.

'Notional value' (or market value) is the amount the employee could reasonably expect to pay in an arm's length transaction.

Example

A sporting goods manufacturer makes squash racquets for sale by wholesale.

Sometimes racquets are damaged in the manufacturing process. Instead of bringing the normal arm's length selling price (including GST) of $50, the damaged racquets have a market value of $30 each.

An employee purchases a damaged racquet for $5.

The taxable value of the property fringe benefit is (75% × $30) - $5 = $17.50.

Goods purchased and sold as part of the employer's business

These valuation rules apply to an in-house property fringe benefit consisting of goods you purchase for resale as part of your business.

The taxable value is the lesser of the following reduced by any employee contribution:

the arm's length purchase price of the goods to you
the market value of the goods, where the goods have lost value at the time they are provided to your employee, for example because of obsolescence or deterioration.

Market value is the amount the employee could reasonably expect to pay in an arm's length transaction.

Example

A retailer purchases television receivers for $500 for sale to the public at a retail price of $750. The wholesaler paid GST on the sale to the retailer. An employee pays $400 for a receiver under the staff discount purchase scheme.

The taxable value of the property fringe benefit is $500 - $400 = $100.

Any other in-house property fringe benefits

This valuation rule applies to any in-house property fringe benefits that do not fall within the preceding categories, that is, goods that are neither accessed under a salary packaging arrangement, purchased for resale nor manufactured or processed.

However, the goods must be of a type that satisfies the in-house property fringe benefit requirements set out at the beginning of section 17.3.

The taxable value is 75% of the notional or market value of the goods, reduced by any employee contribution. Notional or market value is the amount the employee could reasonably be expected to pay in an arm's length transaction.

17.4 Taxable value – external property fringe benefits

An external property fringe benefit is any property fringe benefit that is not an in-house property fringe benefit.

For example, a property fringe benefit is an external property fringe benefit if the property does not consist of goods that are similar or identical to those you sell in the ordinary course of business.

External property fringe benefit example:

Benefit provider	Benefit provided	Taxable value
You (or an associate)	Property you purchased under an arm's length transaction at or about the time you provided the benefit	The cost price to you reduced by any employee contribution
You (or an associate) incur expenditure to a provider under an arm's length transaction but you do not provide the benefit	Property	Your expenditure amount reduced by any employee contribution

Where neither of the above rules apply, the taxable value is the amount the employee could reasonably be expected to pay for the property:

under an arm's length transaction
reduced by any employee contribution.

Where you receive an early payment discount, the discounted price is used for determining the taxable value.

17.5 Reduction in taxable value where expenditure would have been deductible to the employee

You can reduce the taxable value of a property fringe benefit in accordance with the 'otherwise deductible' rule, but only if the recipient of the benefit is the employee. Broadly, this means that you may reduce the taxable value by the amount the employee would have been entitled to claim as an income tax deduction if both:

the property had not been provided as a fringe benefit
the employee had purchased the property.

For example, if an employee purchased an item of property and used it only to perform employment-related duties, the purchase price would be wholly deductible for income tax purposes. Under the otherwise deductible rule, if you purchased the same item and gave it to the employee to use in performing employment-related duties, the taxable value would be nil, regardless of the amount of the employee contribution you required.

The otherwise deductible rule does not apply to deductions for the decline in value of depreciating assets, except when the cost is less than $301.

There are special rules where the expenditure that would have been deductible to the employee is incurred in relation to a car (refer to section 17.7).

Applying the otherwise deductible rule produces different results depending on whether any employee contribution was intended to be for the private element of the property fringe benefit. This is because the employee is:

entitled to an income tax deduction for expenditure incurred on the portion of the property used to derive assessable income
not entitled to an income tax deduction for expenditure incurred on the portion used for a private or domestic purpose.

You can apply the otherwise deductible rule using the following steps:

Step	Action
1	Disregard any employee contribution and calculate the taxable value of the property fringe benefit as if there was no employee contribution.
2	Now suppose that the employee had purchased the property for an amount equal to the amount of the taxable value calculated in Step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee?
3	Now look at the actual fringe benefit situation. If the employee has made a contribution towards the property fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee? That is, how much of the employee contribution relates to the business use component of the property fringe benefit?
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.

Therefore, where the otherwise deductible rule applies, to work out the taxable value of a property fringe benefit, you:

subtract the amount of any actual employee contribution from the amount that would have been the taxable value if no employee contribution had been made, then
subtract the amount obtained at Step 4 of the otherwise deductible rule.

Example

An employee is provided with goods to the value of $500. The employee contribution of $250 is set without regard to how the employee intends to use the property.

The employee uses the goods 80% for employment-related (and income tax deductible) purposes and 20% for private purposes.

The taxable value of the property fringe benefit (without the otherwise deductible rule) is $250 (that is, $500 reduced by the employee contribution of $250).

Apply the otherwise deductible rule as follows:

Step	Action	Result
1	Disregard any employee contribution and calculate the taxable value of the property fringe benefit as if there was no employee contribution.	$500
2	Now suppose that the employee had purchased the property for an amount equal to the amount of the taxable value calculated in Step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee?	$500 × 80% = $400
3	Now look at the actual fringe benefit situation. If the employee has made a contribution towards the property fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee. That is, how much of the employee contribution relates to the business use component of the property fringe benefit?	$250 × 80% = $200
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.	$400 - $200 = $200
5	Finally, the taxable value of $250 may be reduced by $200.	$250 - $200 = $50

Example

An employee is provided with goods to the value of $500. The employee intends to use the property 50% for employment-related (and income tax deductible) purposes and 50% for private purposes.

The employee contribution of $250 is set by the employer after considering how the employee intends to use the goods. That is, the employer knows that under the otherwise deductible rule there will be no FBT liability on that part of the fringe benefit used to produce income. So the employer calculates an employee contribution that is sufficient to avoid incurring FBT on that part of the fringe benefit used for private or domestic purposes.

At the end of the FBT year the employee finds that the goods have been used 80% for employment-related (and income tax deductible) purposes and 20% for private purposes.

The taxable value of the property fringe benefit (without the otherwise deductible rule) is $250 (that is, $500 reduced by the employee contribution of $250).

Apply the otherwise deductible rule as follows:

Step	Action	Result
1	Disregard any employee contribution and calculate the taxable value of the property fringe benefit as if there was no employee contribution.	$500
2	Now suppose that the employee had purchased the property for an amount equal to the amount of the taxable value calculated in Step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee?	$500 × 80% = $400
3	Now look at the actual fringe benefit situation. If the employee has made a contribution towards the property fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee? That is, how much of the employee contribution relates to the business use component of the property fringe benefit? If the employer, in setting the amount of the employee contribution, had not allowed for the intended use of the goods, the employee would have: paid a contribution of $500 been entitled to a deduction for business use.	$500 × 80% business use = $400
	However, the: employer calculated the amount of the employee contribution after taking into account the intended business use the otherwise deductible rule applies. This means the employee's income tax deduction is limited. To calculate the amount: work out the amount that would have been allowed as a deduction to the employee if no allowance had been made for the income-producing purpose for which the property was to be used subtract the amount of the allowance that was made.	($500 × 80%) – ($500 × 50%) = $150
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.	$400 - $150 = $250
5	Finally, the taxable value of $250 may be reduced by $250.	$250 - $250 = $0

17.5A The otherwise deductible rule and jointly provided property fringe benefits

As described at section 17.5, the 'otherwise deductible' rule only applies if the recipient of a benefit is the employee. The FBT law also contains a design feature so that property fringe benefits provided jointly to an employee and an associate are deemed to be provided solely to the employee. In cases where the otherwise deductible rule also applies, it will only apply to the employee's share of any deductible amount and specifically excludes the associate's share of any deductible amount.

The otherwise deductible amount is calculated as:

taxable value × employee's percentage of interest

Where

the employee's percentage of interest is the employee's (not the associate's) interest in the asset that is

the property
applied or used for the purpose of producing assessable income of the employee.

Example

An employer provides an employee with curtains worth $250 for their rental property. The rental property is:

owned jointly by the employee and their spouse for the full FBT year
rented during this time and the curtains are an external property benefit.

There is no employee contribution.

The otherwise deductible rule applies, but the taxable value is reduced by the employee's share in the income-producing asset, that is $250 × 50% = $125. The taxable value of the property benefit is therefore $250 - $125 = $125.

17.6 Substantiation requirements

Where you use the otherwise deductible rule, you must have documentation to substantiate the extent to which the purchase price of the property would have been 'otherwise deductible' to the employee. You must obtain the documentation from the employee before lodging the relevant FBT return. Where the documentation is a Property benefit declaration by the employee, it must be in a form approved by the Commissioner (refer to About declarations).

Travel diary

A travel diary is a diary or similar document that must be obtained from the employee where the property is provided for either of the following:

for travel within Australia for more than five consecutive nights, not exclusively for performing employment-related duties. The fact that business travel requires the employee to stay away over a weekend does not, in itself, mean the trip is not undertaken exclusively in the course of their employment
for travel outside Australia for more than five consecutive nights.

In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.

A travel diary shows the nature of each work or business activity, where and when it took place, the duration of the activity and the date the entry was made.

The requirement to obtain a travel diary is waived where both of the following apply:

the employee is performing duties of employment as a member of an aircrew travelling outside Australia
the property provided is food or drink, or is for accommodation, or otherwise incidental to the travel.

Employee declaration

You must obtain a Property benefit declaration in the form approved by the Commissioner (refer to About declarations), except where any of the following apply:

the property (other than property used in respect of a car owned or leased by the employee) is used exclusively in the course of performing employment-related duties (for example, protective clothing, tools of trade)
there is a requirement to keep a travel diary
the requirement to keep a travel diary is waived because the employee is a member of an international aircrew
the provision of the fringe benefit is covered by a recurring fringe benefit declaration.

Recurring fringe benefit declaration

The requirement to obtain an employee declaration is waived if the provision of a fringe benefit is covered by a Recurring property benefit declaration (refer to About declarations).

A fringe benefit is covered by a recurring fringe benefit declaration if:

it is provided no later than five years after the day on which the declaration was made
the deductible proportion of the benefit is not significantly less than the deductible proportion of the benefit for which the declaration was first provided (a difference of more than 10% is significant)
it is 'identical' to the fringe benefit for which the declaration was first made.

Benefits are identical if they are the same in all respects except for any differences that:

are minimal or insignificant
relate to the value of the benefits
relate to the deductible proportion of the benefits.

A recurring fringe benefit declaration is automatically revoked by a later recurring fringe benefit declaration made for an identical benefit. This means that the earlier declaration applies to the first benefit and to any identical benefits provided before the later declaration was made. The later declaration applies to the benefit for which it was provided and to any identical benefits provided subsequently.

The declaration must be in writing in a form approved by the Commissioner. The employee must give you the declaration before the due date for lodging your FBT return or, if you are not required to lodge a return, by 21 May.

17.7 Reduction in taxable value where property that would have been deductible to the employee is provided in relation to a car

Special rules apply where you provide a property fringe benefit in relation to a car owned or leased by the employee. You must use these special rules to determine how much (if any) of your expenditure would have been 'otherwise deductible' to the employee.

These special rules are actually two different methods of calculating the amount of the expense that hypothetically would have been income tax deductible to the employee (that is, Step 2 in the four-step procedure explained in section 17.5). The differences arise from the extent to which the car is used for business or employment-related purposes; and/or type of evidence available to substantiate that use.

From 1 April 2016 only the first method – logbook record and the third method – no logbook and no kilometres method are available. The logbook record method is substantiated by means of logbook records and/or odometer records. The no logbook and no kilometres method is substantiated by an employee declaration only. For full details and the appropriate declaration, refer to Employee cars – applying the 'otherwise deductible' rule. The employee declaration shown in section 17.6 is not suitable for an expense incurred in relation to a car.

17.8 Other reductions in taxable value

You calculate the taxable value of a property fringe benefit in accordance with the valuation rules explained in sections 17.2 to 17.4. Where the otherwise deductible rule applies, you then reduce the taxable value as explained in section 17.5.

If the fringe benefit is of a type that attracts any of the concessions listed below, you may then further reduce the taxable value. In some instances, special conditions must be satisfied before the concession applies, for example, keeping certain records.

The following is a list of reductions that may apply to property fringe benefits:

remote area residential fuel
remote area housing assistance
relocation – meals
in-house fringe benefits – tax-free threshold
living away from home – food provided.

See also:

Chapter 19 – Reductions in fringe benefit taxable value

17.9 Exempt property benefits

Payments to worker entitlement funds

Property fringe benefits arising from contributions you make to worker entitlement funds are exempt from FBT, provided the conditions in section 20.9 are met.

Property provided and consumed on employer's premises

Property you provide to an employee is an exempt benefit if the property is both provided and consumed on your premises on a working day (if you are a company, the premises may be those of a related company). For example, there is no FBT on bread given to bakery employees for consumption at work.

This exemption does not apply to:

employers that are exempt from income tax where entertainment arises as a result of providing the property benefit (refer to Chapter 15)
employers who choose to use the meal entertainment provision and calculate the taxable value under the 50:50 split method or the 12-week register method (refer to Chapter 14)
meals provided under a salary sacrifice arrangement.

Remote area – certain meals provided to employees in primary production

Property benefits arising from providing non-entertainment meals to an employee employed in a primary production business located in a remote area are exempt benefits (refer to section 20.7).

See also:

Taxation Determination TD 93/90 Income tax: does the 'otherwise deductible' rule apply to reduce the taxable value of fringe benefits provided to associates of employee?
Taxation Determination TD 2007/12 Fringe benefits tax: minor benefits.

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 18 - Residual fringe benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

18.1 What is a residual fringe benefit?

The term fringe benefit has a very broad meaning. It includes any right, privilege, service or facility provided in respect of employment.

Any fringe benefit that is not subject to the rules outlined in one of the preceding chapters of this guide is called a residual fringe benefit. Essentially, these are the fringe benefits that remain, or are left over, because they are not one of the more specific categories of fringe benefit.

A residual fringe benefit could include you (the employer) providing services such as travel or professional or manual work, or the use of property. It could also include providing insurance cover – for example, health insurance cover you take out for employees under a group policy.

Supply of goods integral to services

Generally, where a benefit consists of providing both goods and services, the goods component and the services component are valued separately. The goods component is valued as a property fringe benefit and the services component as a residual fringe benefit.

However, in certain circumstances the benefit is valued solely under the rules contained in this chapter. These circumstances are where you (or other provider) are in a business where goods and services are supplied together (for example, carrying out repairs that involve supplying spare parts) and the benefit is of that kind. Where such a benefit is treated as a residual fringe benefit, it is excluded from the property fringe benefit rules.

18.2 When a benefit is received

As a general rule, residual fringe benefits are treated as having been received when, or over the period during which, the particular benefits are provided. For example, where a benefit consists of a licence to use particular property for six months, the benefit is treated as having been received over that period.

An exception to this applies where you provide the benefits in return for regular payments, generally on receipt of a periodic account. Where you provide benefits (such as discounted services) to an employee on the basis of regular billing, and you provide identical services to members of the public on the same basis, the services provided during each period are treated as a benefit provided when the periodic payment is due. For example, if electricity is supplied at a concessional rate on the basis of quarterly billing, the benefit is taken to have arisen for each quarter at the relevant billing due date.

18.3 Taxable value

For valuation purposes, there are two types of residual fringe benefits: in-house residual fringe benefits and external residual fringe benefits. Each type has specific valuation rules.

The taxable value of a residual fringe benefit is the GST-inclusive value of the residual benefit (determined according to the appropriate valuation rule), less any employee contribution.

You calculate the taxable value of a residual fringe benefit in accordance with the valuation rules explained in sections 18.4 to 18.6. These rules are summarised in the following table:

Valuation rules

If	Then
the benefit is an in-house residual fringe benefit provided under a salary packaging arrangement	the taxable value is: the amount the employee could reasonably be expected to pay to obtain the benefit under an arm's length transaction less (minus) any employee contribution. Note: Transitional rules may apply.
the benefit is an in-house residual fringe benefit, but it is not provided under a salary packaging arrangement	the valuation rule depends on whether the identical benefits were provided by the benefit provider: In the ordinary course of business to members of the public under arm's length transactions in similar circumstances, and subject to identical terms and conditions.
the benefit is an external residual fringe benefit	the valuation rule depends on whether you, or an associate (rather than a third party), incurred expenditure in relation to the provision of the benefit.

Where the 'otherwise deductible' rule applies, you reduce the taxable value, as explained in section 18.7.

If a residual fringe benefit is of a type that attracts any of the concessions listed in section 18.10, you may reduce the taxable value further. In some instances, special conditions may have to be satisfied before the concession applies – for example, keeping certain records.

See also:

Chapter 1 – What is fringe benefits tax?

18.4 In-house residual fringe benefits

A residual fringe benefit is valued as an in-house residual fringe benefit if you (or an associate) provide the benefit and it is identical or similar to rights, services or facilities you (or an associate) provide to the public in the ordinary course of business. Examples include professional advice provided free or at a discount by a law firm to its employees, and video recorders hired out to employees of a television rental firm at a discount.

A benefit provided under a contract of investment insurance doesn't qualify for valuation under these rules. Such a benefit is valued under the rules detailed below for external residual fringe benefits. A contract of investment insurance means a contract of life assurance under which a payment of money will be made if the person whose life is insured is alive on a specified date, whether or not the contract also insures the payment of money in any other event.

Taxable value of in-house residual fringe benefits – not accessed under a salary packaging arrangement

The taxable value of an in-house residual fringe benefit is 75% of the lowest arm's length price charged to the public at the time for identical benefits, less any amount paid by the employee.

Identical benefits are the same in all respects except for any differences that are minimal or insignificant, or that relate to the value of the benefits.

Example

An employer who operates a television rental store allows an employee the use of a video recorder for three months during the FBT year.

The normal arm's length cost of an equivalent rental granted to a member of the public at that time is $100.

The employee is charged $50.

The taxable value is (75% × $100) - $50 = $25.

Where no identical benefits are provided to the public, the taxable value is 75% of the amount the employee could be expected to pay to acquire the benefit under an arm's length transaction, less any amount paid by the employee.

An example might be where an employer who charters boats to the public provides a boat for a trip by the employee's family under significantly different conditions of use from those that ordinarily apply to the public, such that there is a material difference in the value of the benefit.

Where the period during which the benefit is provided extends past the end of the FBT year, you apportion the taxable value between the two years on a pro rata basis.

Taxable value of in-house residual fringe benefits – accessed under a salary packaging arrangement

The taxable value of an in-house residual fringe benefit provided under a salary packaging arrangement is its notional value at the comparison time, reduced by any recipient's contribution.

Example – taxable value of an in-house residual fringe benefit

Cecilia works for an appliance rental franchise. As part of her remuneration, she agreed to salary package the rental of a flat screen television and video gaming console for a six-month period.

The employer determines the taxable value on the basis of its notional value (which is its market value) and is therefore determined to be the retail price of the rental contract.

Salary packaging arrangements

Salary packaging arrangements (also commonly referred to as salary sacrifice or total remuneration packaging) are arrangements where either:

you enter into an agreement with your employee to have their salary and wages reduced (or sacrificed) in order to receive a benefit, or
a reduction in salary is not negotiated, but you give your employee a benefit as part of their employment contract, and it is reasonable to conclude that the salary and wages they would have received would have been greater if the benefit wasn't provided.

Example – negotiated salary packaging arrangement

As she has entered into an agreement to reduce her salary and wages, Felicity would be taken to have entered into a salary packaging arrangement.

Example – non-negotiated salary packaging arrangement

McKenzie has started employment with an IT firm. His job was previously advertised as having a total remuneration package of $100,000 per year.

McKenzie only receives $95,000 in salary and wages but is given by his employer, free of charge, gaming and photography software with a retail value of $5,000.

18.5 External residual fringe benefits

Any residual fringe benefit that is not an in-house residual fringe benefit is an external residual fringe benefit.

Commonly, an external residual fringe benefit arises where:

you provide the residual fringe benefit but the benefit is not of a kind provided to the public in the ordinary course of business – for example, a hairdresser provides his employees with health insurance cover under a group policy taken out for the benefit of the employees
you arrange for the residual fringe benefit to be provided by a third party – for example, a solicitor arranges for an accountant to provide discounted services to the solicitor's employees.

Taxable value of external residual fringe benefits

Where you purchased the service, right or privilege under an arm's length transaction, the taxable value is the cost price to you, less any employee contribution.

If the above rule doesn't apply, the taxable value is the amount the employee could reasonably be expected to pay to obtain the benefit under an arm's length transaction, reduced by any amount paid by the employee.

Where the period during which the benefit is provided extends past the end of the FBT year, you apportion the taxable value between the two years on a pro rata basis.

Hire cars

If you hire a car for less than three months, you are not considered to 'hold' the car and it will not result in a car fringe benefit. However, if you make a rental car or taxi available for the private use of an employee, and the car is hired for less than three months, a residual fringe benefit may arise. The taxable value of this benefit will normally be equal to the arm's length hire fees, and may be reduced under the 'otherwise deductible rule'.

For the otherwise deductible rule to apply, a Residual benefit declaration must be obtained from the employee, in accordance with the substantiation requirements explained in section 18.8. Where the hire car is being provided in place of a car that is unavailable, for example because it is at the panel beaters for 10 weeks, the employer can rely on the logbook kept for the car the employee usually uses to establish the business use of the short-term hire car (where there is a similar pattern of use of the hire car relative to the damaged car).

18.6 Taxable value of motor vehicles other than cars

If the private use of the vehicle other than a car exceeds the limits set out in section 7.6, the right to use the vehicle is a residual benefit.

The legislation doesn't require the same level of detail as is required for valuing car benefits. This takes into account the type of vehicles involved, their expected high business use, and their general lack of suitability for significant private use.

Detailed logbook requirements of the kind specified for calculating the value of car benefits are not required for vehicles other than cars. However, many businesses would maintain some form of logbook records and these should be used, where possible, in determining the extent of private use of the vehicle.

In the absence of such records, soundly-based estimates of the number of private kilometres travelled are acceptable. For example, you could determine the home-to-work component of private use by multiplying the number of journeys during the year by the distance between the employee's residence and place of employment.

There are two methods for valuing the benefit:

Operating cost method – this is the same as the calculation for cars outlined in section 7.5.
Cents per kilometre basis – this method can be used only where there is extensive business use of the vehicle. For the current cents per kilometre rates, see Fringe benefits tax – rates and thresholds.

The methods assume that you provide the vehicle on a fully maintained basis, including fuel. Where it is the employee's responsibility to provide fuel, the value of the benefit is based on the operating costs, excluding fuel. If the cents per kilometre method is used and there are no specific records, it is acceptable to multiply the number of private kilometres travelled by the estimated fuel costs per kilometre (based on average fuel costs and average fuel consumption of the vehicle) and reduce the value of the benefit accordingly.

A reduction for business travel applies only where you obtain a Residual benefit declaration – vehicles other than cars from the employee (refer to About declarations). The declaration must be in a form approved by the Commissioner, specifying the deductible percentage of the operating costs – that is, the business proportion of total kilometres travelled. If using the cents per kilometre method, it is acceptable for the declaration to state the number of private kilometres travelled rather than the deductible percentage.

Example

An employee takes their employer's one-tonne utility with an engine capacity in excess of 2,500cc home each day and has private use of the vehicle in the evenings and on weekends. The employee has estimated his home to work, evening and weekend travel at 100 kilometres a week (5,200 kilometres a year) and has provided a declaration to the employer. The employee doesn't make any employee contributions.

The vehicle travelled a total of 5,200 kilometres during the FBT year ending 31 March 2016 and the operating costs, including deemed interest and depreciation, were $20,080.

Cents per kilometre method

Taxable value = A × B – C

Where:
A is number of private kilometres travelled
B is rate per kilometre
C is the employee contribution (direct contributions only, not fuel)

Taxable value = (5,200 km × 61c per km) - $0 = $3,172

Operating cost method

Taxable value = A × B – C

Where:
A is the total operating costs
B is the percentage of private use
C is the employee contribution (direct contributions only, not fuel)

Taxable value = ($20,080 × 10%) - $0 = $2,080

18.7 Reduction in taxable value where expenditure would have been deductible to the employee

The taxable value of a residual fringe benefit may be reduced in accordance with the otherwise deductible rule, but only if the recipient of the benefit is the employee. Broadly, this means that you may reduce the taxable value by the amount the employee would have been entitled to claim as an income tax deduction if both of the following conditions are satisfied:

the residual benefit has not been provided as a fringe benefit
the employee acted as a consumer or member of the public in purchasing the service or privilege that comprises the residual benefit.

For example, if an employee hired an item of property and used it only to perform employment-related duties, the hire cost would be wholly deductible for income tax purposes. Under the otherwise deductible rule, if you hired the same item and made it available to the employee to use in performing their employment-related duties, the taxable value of this residual fringe benefit would be nil, regardless of the amount of employee contribution you required.

There are special rules where the expenditure that would have been deductible to the employee is incurred in relation to a car (refer to section 18.9).

Applying the otherwise deductible rule produces different results depending on whether any employee contribution was intended to be for the private element of the residual fringe benefit. This is because the employee is entitled to an income tax deduction for expenditure incurred on the portion of the residual benefit used to derive their assessable income, but not for expenditure incurred on the portion used for private or domestic purposes.

You can apply the otherwise deductible rule using the following steps:

Step	Action
1	Disregard any employee contribution and calculate the taxable value of the residual fringe benefit as if there was no employee contribution.
2	Now suppose that the employee had purchased the service or privilege for an amount equal to the amount of the taxable value calculated in Step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee?
3	Now look at the actual fringe benefit situation. If the employee made a contribution towards the residual fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee? That is, how much of the employee contribution relates to the business use component of the residual fringe benefit?
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which you may reduce the taxable value of the residual fringe benefit.

Therefore, where the otherwise deductible rule applies, the taxable value of a residual fringe benefit is:

the amount that would have been the taxable value if no employee contribution had been made

less

the amount of any actual employee contribution

less

the amount obtained at Step 4 of the otherwise deductible rule.

Example – contribution set without regard to employee's use of property

An employee is provided with the use of goods (hired by the employer) to the value of $500. The employee contribution of $250 is set without regard to how the employee intends to use the property.

The employee uses the hired property 80% for employment-related (and income tax deductible) purposes and 20% for private purposes.

The taxable value of the residual fringe benefit (without the otherwise deductible rule) is $250 (that is, $500 reduced by the employee contribution of $250).

Apply the otherwise deductible rule as follows:

Step	Action	Result
1	Disregard any employee contribution and calculate the taxable value of the residual fringe benefit as if there was no employee contribution.	$500
2	Now suppose that the employee had hired the goods for an amount equal to the amount of the taxable value calculated in Step 1. How much of this hypothetical hiring cost would have been income tax deductible to the employee?	$500 × 80% = $400
3	Now look at the actual fringe benefit situation. If the employee made a contribution towards the residual fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee? That is, how much of the employee contribution relates to the business use component of the residual fringe benefit?	$250 × 80% = $200
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.	$400 - $200 = $200
5	Finally, the taxable value of $250 may be reduced by $200.	$250 - $200 = $50

Example – contribution set with regard to employee's use of property

An employee is provided with the use of goods (hired by the employer) to the value of $500. The employee intends to use the hired property 50% for employment-related (and income tax deductible) purposes and 50% for private purposes.

The employee contribution of $250 is set by the employer after considering how the employee intends to use the goods. (That is, the employer knows that under the otherwise deductible rule there will be no FBT liability on that part of the fringe benefit used to produce income, so the employer calculates an employee contribution sufficient to avoid incurring FBT on that part of the fringe benefit used for a private or domestic purpose).

At the end of the FBT year, the employee finds that the hired property has been used 80% for employment-related (and income tax deductible) purposes and 20% for private purposes.

The taxable value of the residual fringe benefit (without the otherwise deductible rule) is $250 (that is, $500 reduced by the employee contribution of $250).

Apply the otherwise deductible rule as follows:

Step	Action	Result
1	Disregard any employee contribution and calculate the taxable value of the residual fringe benefit as if there was no employee contribution.	$500
2	Now suppose that the employee had hired the property for an amount equal to the amount of the taxable value calculated in Step 1. How much of this hypothetical purchase price would have been income tax deductible to the employee?	$500 × 80% = $400
3	Now look at the actual fringe benefit situation. If the employee made a contribution towards the residual fringe benefit, how much of this contribution is allowable as an income tax deduction to the employee? That is, how much of the employee contribution relates to the business use component of the residual fringe benefit? If the employer, in setting the amount of the employee contribution, had not allowed for the intended use of the hired goods, the employee would have paid a contribution of $500 and would have been entitled to a deduction for business use.	$500 × 80% = $400
3	However, because the employer calculated the amount of the employee contribution after taking into account the intended business use and the effect of the otherwise deductible rule, the employee's income tax deduction is limited to the amount calculated as follows: The amount that would have been allowed as a deduction to the employee if no allowance had been made for the income-producing purpose for which the hired property was to be used, reduced by the amount of the allowance that was made.	($500 × 80%) – ($500 × 50%) = $150
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.	$400 - $150 = $250
5	Finally, the taxable value of $250 may be reduced by $250.	$250 - $250 = 0

18.7A The otherwise deductible rule and jointly provided residual fringe benefits

As described at section 18.7, the 'otherwise deductible' rule only applies if the recipient of a benefit is the employee. The FBT law also contains a design feature so that residual fringe benefits provided jointly to an employee and an associate are deemed to be provided solely to the employee. In cases where the otherwise deductible rule also applies, it will only apply to the employee's share of any deductible amount and specifically excludes the associate's share of any deductible amount.

The otherwise deductible amount is calculated as:

taxable amount × employee's percentage of interest

Where

the employee's percentage of interest is the employee's (not the associate's) interest in the asset that

the residual fringe benefit relates to
is applied or used for the purpose of producing assessable income of the employee.

Example

An employer provides an employee with tradesman services (not in-house) worth $2,000 to do repairs on their rental property. The rental property is owned jointly by the employee and their spouse for the full FBT year and is rented during this time. The tradesman services are an external period residual benefit. There is no employee contribution.

The otherwise deductible rule applies, but the taxable value can only be reduced by the employee's share in the income producing asset – that is $2,000 × 50% = $1,000. Therefore, the taxable value of the property benefit would be $2,000 - $1,000 = $1,000.

18.8 Substantiation requirements

Where you use the otherwise deductible rule, you must have documentation to substantiate the extent to which the purchase price of the residual benefit would have been 'otherwise deductible' to the employee. You must obtain the documentation from the employee before lodging the relevant FBT return. Where the documentation is a Residual benefit declaration by the employee, it must be in a form approved by the Commissioner (refer to About declarations).

Travel diary

A travel diary is a diary or similar document that you must obtain from an employee where the residual benefit is provided:

for travel within Australia for more than five consecutive nights and the travel is not exclusively for performing employment-related duties (the fact that the business travel requires the employee to stay away over a weekend will not, in itself, mean the trip is not undertaken exclusively in the course of their employment)
for travel outside Australia for more than five consecutive nights.

In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.

A travel diary shows where the activity took place, the date and the approximate time when the activity commenced, and the duration and the nature of the activity.

If the provision of the residual benefit is covered by an annual 'no private use declaration – residual benefits' (refer to section 20.3), the requirement to obtain a travel diary is waived. That is, if the residual benefit arises from the use of property which is subject to a consistently enforced prohibition on private use and would result in a taxable value of nil, you will then be able to make an annual no private use declaration.

Such a declaration would state that the benefits were provided only for employment related purposes and that there was no private portion.

Employee declaration

You must obtain a Residual benefit declaration in a form approved by the Commissioner except where:

the residual benefit is used exclusively in the course of performing employment-related duties (for example, protective clothing and tools of trade)
there is a requirement to keep a travel diary
the requirement to keep a travel diary is waived because the employee is a member of an international aircrew
the provision of the fringe benefit is covered by a recurring fringe benefit declaration.

Recurring fringe benefit declaration

The requirement to obtain an employee declaration is waived if the provision of a fringe benefit is covered by a Recurring residual fringe benefit declaration (refer to About declarations).

A fringe benefit is covered by a recurring fringe benefit declaration if:

it is provided no later than five years after the day on which the declaration was made
the deductible proportion of the benefit is not significantly less than the deductible proportion of the benefit for which the declaration was first provided (a difference of more than 10 percentage points is regarded as being significant)
it is 'identical' to the fringe benefit for which the declaration was first made.

Benefits are to be treated as being identical if they are the same in all respects, except for any differences that:

are minimal or insignificant
relate to the value of the benefits
relate to the deductible proportion of the benefits.

The declaration must be in a form approved in writing by the Commissioner. The employee must give you the declaration before the due date for lodging your FBT return or, if you are not required to lodge a return, by 21 May.

Example

An employee lives in a house provided by the employer. The telephone service to the house is in the name of the employer and the employer pays each telephone bill. Use of the telephone is a residual fringe benefit.

The employee gives the employer a recurring fringe benefit declaration which specifies that the deductible proportion of the use of the telephone is 80%. The declaration covers all further use of the telephone over the next five years, providing that the employment-related use of the telephone is not less than 70%. If the employment-related use of the telephone drops to less than 70%, another declaration is required.

18.9 Reduction in taxable value where an expense that would have been deductible to the employee is incurred in relation to a car

Where you provide a residual benefit in relation to a car owned or leased by the employee, there are special rules for determining how much (if any) of your expenditure would have been 'otherwise deductible' to the employee.

These special rules are two different methods of calculating the amount of the expense that hypothetically would have been income tax deductible to the employee (that is, step 2 in the four-step procedure explained in section 18.7). The differences arise from the extent to which the car is used for business or employment-related purposes, and/or the type of evidence available to substantiate that use.

From 1 April 2016 only the first method – logbook record and the third method – no logbook and no kilometres requirement method are available. The logbook record method is substantiated by means of logbook records and/or odometer records. The no logbook and no kilometres method is substantiated by an employee declaration only. For full details and the appropriate declaration, refer to Chapter 21. The employee declaration shown in section 18.8 is not suitable for an expense incurred in relation to a car.

18.10 Other reductions in taxable value

The following is a list of reductions that may apply to residual fringe benefits:

remote area residential fuel
remote area holiday transport
overseas employment holiday transport
relocation – temporary accommodation
in-house fringe benefits – tax-free threshold
overseas employees – education of children.

See also:

Chapter 19 – Reductions in fringe benefit taxable value

18.11 Exempt residual benefits

The following is a list of exemptions that may apply to residual fringe benefits:

use of motor vehicles
use of public transport
use of recreational or child care facilities that are located on employer's business premises
use of property that is located on employer's business premises
living away from home – leasing of household goods
accommodation where employee lives away from home
'fly-in fly-out' transport for oil rig and remote area employees
priority of access to child care facility
no private use declaration
incidental benefits arising from use of employer's motor vehicle
employment interviews and selection tests – transport
relocation – removal and storage of household effects
relocation – sale or acquisition of dwelling
relocation – connection or reconnection of certain utilities
relocation – transport
parking facilities for motor vehicles
small business car parking
newspapers and periodicals
compensable work-related trauma (including workers' compensation insurance cover)
in-house health care facilities
travel in a foreign country to obtain medical treatment
travel for compassionate reasons
occupational health and migrant language training
emergency assistance
minor benefits
long service awards
safety awards
Australian Traineeship System
live-in domestic employees – religious institutions
live-in help for elderly or disadvantaged persons
provision of certain work-related items
taxi travel
remote area – certain meals provided to employees in primary production.

See also:

Chapter 20 – Exempt benefits
Miscellaneous Tax Ruling MT 2024 Fringe benefits tax: dual cab vehicles eligibility for exemption where private use is limited to certain work related travel
Miscellaneous Tax Ruling MT 2034 Fringe benefits tax: private use of vehicles other than cars
Taxation Ruling TR 1999/6 Income tax and fringe benefits tax: flight rewards received under frequent flyer and other similar consumer loyalty programs
Taxation Determination TD 93/90 Income tax: does the 'otherwise deductible' rule apply to reduce the taxable value of fringe benefits provided to associates of employees?

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 19 - Reductions in fringe benefit taxable value

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

19.1 When the value can be reduced

The taxable value of a fringe benefit is calculated in accordance with valuation rules. Where the 'otherwise deductible' rule applies, the taxable value is then reduced.

If the fringe benefit is of a type that attracts any of the concessions listed in this chapter, you (the employer) may reduce the taxable value further. In some instances there may be special conditions that must be satisfied before the concession applies – for example, keeping certain records.

Some of the explanations given in this chapter are necessarily brief. For more on each concession refer to the relevant section of the FBTAA, a link to which is provided at each concession.

19.2 Remote area reductions

Residential fuel

Residential fuel is any form of fuel (including electricity) used for domestic purposes. If you provide a current employee with residential fuel for use in connection with their usual place of residence, you may reduce the taxable value of the fringe benefit by 50% in the following circumstances:

the fringe benefit is an expense payment fringe benefit, a property fringe benefit or a residual fringe benefit
the fringe benefit was not provided to the employee under a non-arm's length arrangement, or an arrangement that was entered into by any of the parties for the purpose, or partial purpose, of enabling you to obtain the residential fuel concession
the employee is also
- the recipient of a remote area housing benefit that is an exempt benefit as described in section 10.8
- under an obligation to repay the whole, or a part of, a remote area housing loan connected with the dwelling and you provide a form of housing assistance referred to below, or
- incurring remote area housing rent in connection with a unit of accommodation and you provide a form of housing assistance referred to below.

Free water provided to an employee under a residential tenancy agreement is part of the remote area housing benefit, as described in section 10.8, and is not considered residential fuel.

Remote area housing

Where you subsidise certain costs your employees may incur in acquiring accommodation in remote areas, you may be eligible for a reduction of the taxable value of the benefit arising from subsidising these costs.

These reductions are different from the remote area housing benefit exemption explained in section 10.8. There are different requirements you must meet in order to be entitled to the reduction.

Remote area loan

If	Then
you provide a loan fringe benefit connected with a dwelling to your employee the employee occupied or used the dwelling as their usual place of residence during part of the FBT year (the occupation period) when they had to repay some or all of the loan, and the shared conditions are met	you are entitled to a reduction of 50% of the taxable value of the loan fringe benefit that relates to the occupation period.

Remote area interest

If	Then
you provide an expense payment fringe benefit for interest accrued by your employee on a remote area housing loan connected with a dwelling that employee occupied or used the dwelling as their usual place of residence during part of the FBT year (the occupation period) when the interest accrued, and the shared conditions are met	you are entitled to a reduction of 50% of the taxable value of the expense payment fringe benefit that relates to the occupation period.

Remote area rent

If	Then
you provide an expense payment fringe benefit for rent accrued by your employee for a unit of accommodation the employee used the unit of accommodation as their usual place of residence during part of the FBT year (the occupation period) when the rent accrued, and the shared conditions are met	you are entitled to a reduction of 50% of the employee's expenditure that relates to the occupation period. The reduction applies to 50% of the employee's expenditure (the gross rent), not to 50% of the taxable value.

Remote area property benefit

If	Then
you provide an employee with a property fringe benefit consisting of land, or house and land the employee's property is a remote area residential property, and the shared conditions are met	you are entitled to a reduction of 50% of the taxable value of the property fringe benefit.

Remote area residential property

Remote area residential property is:

land on which there is a dwelling that is used by the employee immediately after the provision of the fringe benefit as their usual place of residence
land on which the employee proposes to build, or finish building, a dwelling for use as their usual place of residence.

The Commissioner must be satisfied that the employee has made sustained reasonable efforts to:

start building within six months of acquiring the land
within 18 months of acquiring the land, use the dwelling as their usual place of residence.

Remote area residential property expense payment benefit

If	Then
you provide an expense payment fringe benefit to your employee the employee's expenditure is in respect of a remote area residential property, and the shared conditions are met	you are entitled to reduction of 50% of the taxable value of the expense payment fringe benefit.

Expenditure in respect of remote area residential property

The expenditure must be in relation to the:

employee's purchase of land on which they intend to build, or complete the building of, a dwelling (expenditure 1)
building of a dwelling on land held by the employee (expenditure 2)
purchase of land on which there is already a dwelling (expenditure 3), or
extension of a dwelling on the employee's land by adding a room or part of a room to the dwelling (expenditure 4).

The following conditions must also be satisfied:

If expenditure 1 or 2 applies:
- where expenditure in 1 or 2 is incurred by the employee, they must intend to occupy the dwelling as their residence
- the Commissioner must be satisfied that the employee made sustained reasonable efforts to start building within six months and to occupy the dwelling within 18 months after the employee incurred the expenditure.
If expenditure 3 or 4 applies:
- where expenditure in 3 or 4 is incurred by the employee, they must use the dwelling as their usual place of residence as soon as reasonably practicable after incurring the expenditure.

Mortgaged remote area residential property

Where the remote area residential property is mortgaged by the employee, the 50% reduction can still apply as long as your payment or reimbursement relates to the original purchase cost of the land or property.

If your payment or reimbursement relates to an employee's mortgage repayments, the 50% reduction would not apply. However, you may be eligible for the remote area interest reduction as explained above.

Example

An employee purchases a remote area residential property and pays a 10% deposit and uses a mortgage to pay for the rest. The employer agrees to reimburse the employee 20% of the original purchase price of the property. In this case, the remote area residential property benefit reduction may apply provided the other conditions are met.

If, however, the employer agreed to reimburse the employee 20% of their total loan repayments (which includes interest and other charges), the remote area residential expense payment benefit reduction would not apply. This is because the reimbursement is not wholly in respect of the purchase of the property, but rather it is in respect of the employee meeting the conditions of their mortgage. The reimbursement of interest may qualify for the remote area interest reduction above.

Remote area residential option fee

If	Then
you provide an employee with a property fringe benefit their property is a remote area residential property option fee, and the shared conditions are met	you are entitled to a 50% reduction of the taxable value of the property fringe benefit.

Remote area residential property option fee

A remote area residential property option fee is property consisting of a fee paid to an employee in return for the employee granting you an option to buy an interest in land. The following conditions must be satisfied:

the employee must hold an interest in the land to which the option relates
the land must, at the time when the option fee was paid to the employee, either have a dwelling on it which is the employee's usual place of residence or be land on which the employee intends to build, or complete the building of, such a dwelling
if the employee intends to build, the Commissioner must be satisfied that they have made sustained reasonable efforts to
- commence building or start completing the construction of the dwelling within six months
- to occupy the dwelling within 18 months of the time when the option fee was paid
when the option fee is paid, the shared conditions must be met
the contract under which the option fee is paid must be entered into no later than when the employee obtains an interest in the land subject to the option, and the option must also be a recognised remote area housing obligation restricting the employee's right to dispose of the interest in the land.

Remote area residential property repurchase consideration

If	Then
you provide your employee with a property fringe benefit the property is remote area residential property repurchase consideration, and the shared conditions are met	you are entitled to a 50% reduction of the taxable value of the property fringe benefit. However, the 50% discount is denied on that portion of a benefit, arising on repurchased, which is attributable to you paying a repurchase price excessively above market value under a buy-back clause in a remote area housing agreement.

Remote area residential property repurchase consideration

the employee must hold an interest in the land to which the repurchase relates
the land must, at the time when the repurchase consideration was paid to the employee, either have a dwelling on it which is the employee's usual place of residence or be land on which the employee intends to build, or complete the building of, such a dwelling
if the employee intends to build, the Commissioner must be satisfied that they have made sustained reasonable efforts to
- commence building or start completing the construction of the dwelling within six months
- to occupy the house within 18 months of the time when the option fee was paid
when the repurchase consideration is paid, the shared conditions must be met
the contract under which the repurchase consideration is paid must be entered into no later than when the employee obtains an interest in the land subject to the repurchase, and the repurchase must also be a recognised remote area housing obligation restricting the employee's right to dispose of the interest in the land.

Recognised remote area housing obligation

A recognised remote area housing obligation is a contractual obligation, binding the employer and the employee, which restricts the employee's ability to dispose of their interest in the relevant land other than to the employer and for a price that can be determined by reference to the contract.

The restriction must exist for a period of at least five years from:

for a property fringe benefit in relation to 'remote area property repurchase consideration' – the time when the employee acquired their interest in the land
for any other type of property fringe benefit – the time when the benefit was provided to the employee
for an expense payment fringe benefit – the time when the expenditure was incurred by the employee.

Shared conditions

To qualify for the FBT concession, you must meet the following shared conditions.

Remote area

The concessions apply only to accommodation located in areas that meet the requirements outlined below.

It is located in a remote area if it is not in or near an urban centre. This means the accommodation must be located at least 40 km from a town with a census population between 14,000 and 130,000, and at least 100 km from a town with a census population of 130,000 or more (population figures based on the 1981 Census).

If the accommodation is in zone A or B (for income tax purposes), it must be located at least 40 km from a town with a census population between 28,000 and 130,000, and at least 100 km from a town with a census population of 130,000 or more.

Where the shortest practical surface route between a locality and an eligible urban area includes a route by water, the distance travelled by water is doubled for the purposes of working out how remote that locality is from the eligible urban area.

No application of extended remote area test for certain employers

The extension of the remote area test for hospitals, charities, public ambulance services and the police force that applies to the remote area housing exemption doesn't apply to remote area housing assistance concessions.

Current employee

The employee (not an associate or third party) receiving the remote area housing assistance must be a current employee of your business in the FBT year in which you provide the benefit, and their usual place of employment must be in a remote area.

Customary

At the time the employee's expenditure was incurred, it was customary for employers in the industry in which the employee was employed to provide housing assistance for their employees.

A benefit will be accepted as being customary in the industry where it is normal, or common, for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where it is unique, rare or unusual within an industry to provide the benefit, it would not be accepted as being customary.

In industries where it is considered customary for employers to provide housing assistance for their employees, the need for the assistance would ordinarily arise from the nature of the employment or the conditions under which the person is employed. For example, housing assistance would be customary in occupations which require employees to live at or near a work site or where employees could be directed by the employer to perform their duties at a new location.

Necessary

It was necessary because, at the time the employee's expenditure was incurred, it was customary for employers in the industry in which the employee was employed to provide housing assistance for their employees.

It is necessary for you to provide accommodation to employees if:

the nature of your business is such that employees are likely to move frequently from one residential location to another
there is not sufficient suitable residential accommodation otherwise available in the area in which the employee is employed, or
it is customary in your industry to provide free or subsidised housing to employees.

Usual place of residence

The accommodation must be the employee's usual place of residence. The following factors may be considered when deciding where an employee's usual place of residence is:

an employee's usual place of residence is normally found near to their fixed or permanent employment base
the terms of the employee's employment contract or award may indicate whether their move to a new place of residence is merely temporary or of a more lasting nature
the longer the employee is required to work at a place, the more indicative it is that the move is not temporary in nature.

A dwelling

All of the concessions, other than the remote area housing rent, must be in respect of a dwelling. A dwelling is (a unit of) accommodation constituted by, or contained in, a building, being a unit that consists in whole or in substantial part of residential accommodation. Examples of dwellings are houses and apartments. A caravan is not considered a dwelling.

Arm's length arrangement

The fringe benefit was not provided to the employee under:

a non-arm's length arrangement, or
an arrangement that was entered into by any of the parties for the purpose, or partial purpose, of enabling you to obtain the remote area housing concession.

Remote area holiday transport – not subject to ceiling

Under an award or industry custom, an employee working in a remote area may be reimbursed for the costs of travelling from (or may be provided with transport from) the remote area for the purpose of having a holiday and, similarly, back to the remote area after the holiday. The employee may also be entitled to be provided with accommodation and/or meals in connection with the transport from and to the remote area. A remote area is defined in section 10.8.

You may reduce the taxable value of the fringe benefits arising from the transport, accommodation and meals by 50% if:

the employee travels from the work locality to the town where they lived before being engaged to work at that locality
the employee travels to the capital city of the state or territory in which the workplace is located (for this purpose, Perth and Adelaide are treated as if they were the capital cities of Christmas Island and the Northern Territory, respectively).

The following requirements must also be satisfied:

the holiday is of three working days or more
where the benefit is an expense payment fringe benefit, you are provided with proof of the expenditure – that is, originals or copies of receipts or invoices – or a Remote area holiday transport declaration in a form approved by the Commissioner (refer to About declarations).

The reduction in taxable value extends also to holiday transport, accommodation and food benefits given to the employee's family, whether accompanied by the employee or not. If a child or the spouse of the employee doesn't live at the employee's work locality, the concession will also apply if the holiday travel by the spouse or child is for the purpose of meeting the employee.

If the benefit is a reimbursement for car expenses calculated on a cents per kilometre basis, the reduction in taxable value is limited. The maximum reduction is 50% of the amount that would be paid if the reimbursement were to be calculated at a certain rate per kilometre. That rate per kilometre is the applicable rate for claiming income tax deductions on a cents per kilometre basis. In addition, a rate of 0.63c per kilometre is permitted where more than one family member travels in the car.

The reduction of taxable value doesn't apply to a reimbursement of car expenses calculated on a cents per kilometre basis unless you obtain a Remote area holiday transport declaration, in a form approved by the Commissioner, from the employee.

Cents per kilometre changes

Each of the methods below refers to reimbursement on a cents per kilometre basis. From 1 July 2015, there are changes to the cents per kilometre method and separate rates based on the size of the employee's car are no longer available. Only for the FBT return for 2016, you had the ability to choose either the 2014-15 car rates or the single 66c rate. However, from 1 April 2016 onwards, employers must use the single rate that applies for the following income year, per the table below.

Cents per kilometre singles rates

FBT year	Cents per kilometre rate
1 April 2015 – 31 March 2016	64c, 76c or 77c depending on engine capacity or 66c
1 April 2016 – 31 March 2017	Rate for the income year 1 July 2016 – 30 June 2017: 66c
1 April 2017 – 31 March 2018	Rate for the income year 1 July 2017 – 30 June 2018: 66c
1 April 2018 – 31 March 2019	Rate for the income year 1 July 2018 – 30 June 2019: 68c
1 April 2019 – 31 March 2020	Rate for the income year 1 July 2019 – 30 June 2020: 68c

Remote area holiday transport – subject to ceiling

Where a particular fringe benefit satisfies all but one of the requirements necessary to gain the concession described under Remote area holiday transport – not subject to ceiling, a reduction in taxable value may nonetheless be available. If the only requirement not satisfied is that of the locality of the place to which the employee travels from the remote area, and from which the employee travels to return to the remote area, you may reduce the taxable value of the fringe benefit by 50% of the taxable value, or 50% of the 'benchmark travel amount' (whichever is less).

The benchmark travel amount is the usual cost of return travel between the work locality and capital city of the state in which the workplace is located. This is normally the return economy air fare plus any incidental costs you would ordinarily meet under relevant industrial arrangements. The benchmark travel amount is worked out at the beginning of the employee's holiday.

For remote areas in the Northern Territory and for Christmas Island, the reduction in taxable value is limited to 50% of the usual cost of travel to Adelaide and Perth, respectively.

Remote area home ownership schemes

Broadly, this concession permits the amortisation of fringe benefits provided in connection with remote area home ownership schemes. The period of amortisation is generally five to seven years.

The benefits may consist of:

a discount on the purchase of a home or of land on which to build a home
a reimbursement of the cost of buying land and/or building a home
an option fee entitling you to first choice in repurchasing the home.

There must be a restriction on the employee's freedom to sell the house during the amortisation period.

The remote area home ownership scheme must be genuine rather than merely a contrived attempt to take advantage of this concession.

If you repurchase the home during the amortisation period, the unamortised balance is brought to account in your FBT return for that year.

Where an employee is forced by a contractual buy-back arrangement to suffer a loss in selling the home back to you, you may deduct 50% of that loss from your aggregate taxable values in that FBT year. (The rationale for this reduction is that any fringe benefit given to the employee to facilitate the original purchase of the house is being offset by the loss on its resale to you.)

19.3 Transport reductions

Cents per kilometre changes

Each of the methods below refers to reimbursement on a cents per kilometre basis. From 1 July 2015, there are changes to the cents per kilometre method, and separate rates based on the size of the employee's car are no longer available. Only for the FBT return for 2016, you have the ability to choose either the 2014-15 car rates or the single 66c rate. However, from 1 April 2016 onwards, employers must use the single rate that applies for the following income year, per the table below.

Cents per kilometre rates

FBT year	Cents per kilometre rate
1 April 2015 – 31 March 2016	64c, 76c or 77c depending on engine capacity or 66c
1 April 2016 – 31 March 2017	Rate for the income year 1 July 2016 – 30 June 2017: 66c
1 April 2017 – 31 March 2018	Rate for the income year 1 July 2017 – 30 June 2018: 66c
1 April 2018 – 31 March 2019	Rate for the income year 1 July 2018 – 30 June 2019: 68c
1 April 2019 – 31 March 2020	Rate for the income year 1 July 2019 – 30 June 2020: 68c

Overseas employment holiday transport

Fringe benefits arising from holiday travel provided in accordance with an award or industry custom to employees posted overseas, receive concessional treatment. The travel must be in connection with leave of more than three days. The concession is a reduction in the taxable value of the fringe benefits. The reduction in taxable value may vary in amount, depending on whether the travel is to the employee's home country or to some other destination.

Benefits eligible for the reduction are those that arise from providing transport and, where appropriate, meals and accommodation in connection with that transport. The concession applies to both Australian employees posted overseas and overseas residents posted to Australia.

Where the travel is not to the home country, the concession is limited to 50% of what is called the 'benchmark travel amount'. The benchmark travel amount is normally the cost of a return economy air fare, determined at the commencement of the employee's holiday.

Where the travel is to the home country, the 50% discount applies to the actual cost of travel, even if the cost exceeds the benchmark travel amount. For example, this would occur when an employee travels to their home country on a first-class flight.

If an employee is provided with more than one overseas holiday trip during an FBT year, the concession is determined by calculating the 50% discount for each trip and using the highest discount as the concession for that year.

These concessions also apply where holiday travel benefits are given to the employee's family, whether or not they live with the employee at the overseas post.

If the holiday travel benefit is in the form of a reimbursement of the employee's expenses, you must obtain documentary evidence of the expenses by the time you are required to lodge your FBT return. However, if the benefit is a reimbursement of car expenses on a cents per kilometre basis, you must obtain a signed declaration from the employee that sets out the make, model and engine capacity of the car, the number of kilometres it travelled on the holiday, and the number of persons who travelled in the car.

Employment interviews and selection tests – transport by employee's car

You may reduce the taxable value of an expense payment fringe benefit where an employee:

travels in their own car solely for the purpose of attending an interview or selection test connected with an application for a new job or for promotion, or transfer in employment, and
is reimbursed on a cents per kilometre basis for the car expenses incurred.

However, the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

The reduction in taxable value is conditional on you obtaining a signed Employment interview or selection test declaration – transport in employee's car in a form approved by the Commissioner (refer to About declarations).

Occupational health and migrant language training – transport by employee's car

Where you reimburse an employee on a cents per kilometre basis for car expenses incurred in attending a work-related medical examination or screening, preventative health care, counselling session or migrant language training (refer to section 20.8), the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

You may reduce the taxable value of the expense payment fringe benefit where an employee:

travels in their own car for the purpose of attending a work-related medical examination, screening, preventative health care or counselling session, or for migrant language training, and
is reimbursed on a cents per kilometre basis for the car expenses incurred.

However, the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

The reduction of taxable value is conditional on you obtaining a signed Declaration of car travel to work-related medical examination, medical screening, preventative health care, counselling or migrant language training in a form approved by the Commissioner (refer to About declarations).

19.4 Relocation reductions

Relocation – where transport by employee's car

If you reimburse an employee on a cents per kilometre basis for using their own car as relocation transport, you may reduce the taxable value of the expense payment fringe benefit. However, the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

The reduction in taxable value is conditional on you obtaining a signed Relocation transport declaration in a form approved by the Commissioner (refer to About declarations).

For this purpose, relocation transport is transport that enables an employee to relocate to a new residence in circumstances where they are required to live away from home in order to perform employment-related duties, or are similarly required to relocate their usual place of residence.

The reduction also applies where the employee is returning to their usual place of residence after working at another location.

There have been changes to the cents per kilometre rate with the rates based on the size of the employee's car no longer being available.

Relocation – temporary accommodation

This concession reduces the taxable value of fringe benefits that arise from providing temporary accommodation (including the costs of hiring household goods) to an employee. The temporary accommodation must be required solely because the employee is required to change their usual place of residence in order to perform the duties of employment or in order to commence employment.

The fringe benefits eligible for this reduction are:

an expense payment, housing or residual benefit that relates to a lease or licence for the temporary accommodation of the employee
an expense payment or a residual benefit that relates to a lease or licence for household goods for use in temporary accommodation of the employee.

The benefit must be provided under an arm's length arrangement.

Temporary accommodation at former location

This concession applies to temporary accommodation at the employee's former location, only if the temporary accommodation is necessary because the former home is unavailable or unsuitable for occupancy as a result of furniture removal or other factors relating to the relocation. In this case, the concession applies to the temporary accommodation for a maximum of 21 days, ending on the day the employee starts work at the new location.

Temporary accommodation at new location

Where the temporary accommodation is at the new location, the employee must begin to make sustained and reasonable efforts to buy or lease suitable long-term accommodation as soon as reasonably practicable after starting work at the new location.

In order for the concession to apply, the employee must either:

begin to occupy a long-term unit of accommodation within four months of starting at the new location, or
where the employee has not started to live in a long-term unit of accommodation within four months, give a declaration to the employer relating to their efforts to find suitable long-term accommodation by the due date of the lodgment of the FBT return. The Temporary accommodation relating to relocation declaration must be in a form approved by the Commissioner (refer to About declarations).

Employee has started to occupy a unit of accommodation within four months

Where the employee has started to occupy a long-term unit of accommodation within four months, the concession is limited to a period that begins seven days before the day the employee starts work at the new location and ends on the day the employee could reasonably be expected to occupy the unit of accommodation after it had been purchased or leased.

Employee has not started to occupy a unit of accommodation within four months

If the employee has not started to occupy a unit of accommodation within four months, the concession is limited to a period that begins seven days before the day the employee started work at the new location and ends on the earlier of:

the day the employee could reasonably be expected to occupy the unit of accommodation after it has been purchased or leased
six months after the day the employee started work at the new location, or
12 months after the day the employee started work at the new location.

The 12-month period will apply where:

the employee owned an interest in a unit of accommodation which was their former usual place of residence
within six months after the relocation day a contract for the sale of their former usual place of residence has been entered into, and
during that period, the employee has attempted to purchase a unit of accommodation at the new location.

Otherwise the six-month period will apply.

However, if the employee enters into a contract to purchase or lease long-term accommodation before the six or 12-month time period finishes, the concession ends on the day the employee could reasonably be expected to occupy that unit of accommodation.

In all of the above circumstances, the employee is required to give the employer a Temporary accommodation relating to relocation declaration in a form approved by the Commissioner (refer to About declarations).

Note that the concession will end before the specified timeframe has elapsed if the employee ceases to make reasonable and sustained efforts to buy or lease suitable long-term accommodation.

Relocation – meals

Where you provide meals to an employee (or family member) while they are staying in a hotel, motel, hostel or guesthouse, and that accommodation qualifies for the concession explained under Relocation – temporary accommodation, the taxable value of the meals is reduced to a maximum of $2 per meal (or $1 if the family member is under 12 years of age).

Living away from home – food provided

Rather than paying a cash living-away-from-home allowance to an employee whose duties of employment require them to live away from their normal residence you may reimburse the employee's food costs (giving rise to an expense payment fringe benefit), or provide food to the employee (giving rise to a property fringe benefit).

You may reduce the taxable value of the expense payment fringe benefit or property fringe benefit to the equivalent of $42 a week for each adult and $21 a week for each child (an adult is a person who had attained the age of 12 years before the beginning of the FBT year). You apply this particular reduction to the taxable value before applying the employee contribution.

Food provided because the employee is living away from home from 1 October 2012 onwards

To apply this reduction, the following requirements must be met. The declarations provided to you must be in a form approved by the Commissioner (refer to About declarations).

Food – living away from home requirements

If	Then
the employee works on a fly-in fly-out or drive-in drive-out basis	the employee must have residential accommodation at or near their usual place of employment the employee must give you the appropriate declaration about living away from home.
the employee does not work on a fly-in fly-out or drive-in drive-out basis and is not eligible for the transitional rules	the employee must maintain a home in Australia at which they usually reside and it is available for their use and enjoyment at all times the fringe benefit must relate to the first 12 month period at a particular work location the employee must give you the appropriate declaration about living away from home.

The terms temporary resident and foreign resident have their meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). The meaning of temporary resident can also be found by referring to Foreign income exemption for temporary residents – introduction.

19.5 Other reductions

Personal services entities

From 1 July 2000, the taxable value of a fringe benefit can be reduced by the same amount as is made non-deductible to the provider by virtue of the personal services income provisions under the ITAA 1997.

Sections 85-15, 85-20 and 85-60 of the ITAA 1997 limit the extent to which a person can deduct payments to associates that relate to personal services income.

In-house fringe benefits – tax-free threshold

If you provide one or more in-house fringe benefits to an employee during the FBT year, you may reduce the aggregate of the taxable values of the in-house fringe benefits by $1,000.

Broadly, in-house fringe benefits are benefits that are identical or similar to the benefits you provide to customers in the ordinary course of business.

This concession applies only to:

in-house expense payment fringe benefits
in-house property fringe benefits
in-house residual fringe benefits.

You don't need to keep specific records of in-house benefits provided to individual employees if you don't expect the value of the benefits provided in the year to exceed the $1,000 limit.

If a particular fringe benefit is eligible for both this concession and another concession outlined in this chapter, you reduce the taxable value first by the other concession, and then by this concession.

In-house fringe benefits – tax-free threshold where the benefit is accessed under a salary packaging arrangement

Since 22 October 2012, the $1,000 annual reduction of the aggregate taxable value has not applied to in-house benefits where the employee accesses the benefit under a salary packaging arrangement.

This reduction continues to apply if either:

the transitional rules apply
the benefit is not accessed under a salary packaging arrangement.

See also:

section 17.3 – Taxable value – in-house property fringe benefits
section 18.4 – In-house residual fringe benefits

Entertainment expense payments

A reduction in the taxable value of an expense payment fringe benefit is available where the expense payment fringe benefit arises from expenditure an employee incurs in entertaining people other than the employee or associates – for example, expenditure incurred by the employee on entertaining your clients.

You may reduce the taxable value of the expense payment fringe benefit by the percentage of the expenditure incurred in entertaining the other people.

The taxable value may not be reduced under this concession if the otherwise deductible rule applies.

Overseas employees – education of children

A reduction is available for:

any car or expense payment fringe benefit provided in respect of the full-time education costs of an employee's child
any property or residual fringe benefit provided solely for the purposes of the child's full-time education.

The reduction is available where:

any part of the full-time education is undertaken by the child when the employee is posted overseas
the benefits are provided in accordance with an award or industry custom.

The concession applies to both Australian employees posted overseas and overseas residents posted to Australia. The employee's child doesn't have to accompany the employee overseas in order for you to be entitled to this concession.

The full-time education can be provided to a child at a school, college or university, or by a tutor. Where the child receives their education at a school, college or university, the employee must be posted overseas for 28 days or more.

Education costs you bear for children of employees who are posted overseas will be reduced proportionately, in accordance with the extent that the benefit relates to the period of the employee's service overseas. If the overseas service commences or ceases during a school term, and the child receives their education at a school, college or university, the education costs relating to the whole term will be subject to the reduction.

Where the child receives their education by a tutor, the reduction applies to the education costs relating to the period from the day the posting started to the day the posting ended.

For the purposes of this concession, a child is an employee's child who is less than 25 years of age at the time the benefit is provided.

If you reimburse the education expenses incurred by the employee, you must obtain documentary evidence of the expenses before you lodge your FBT return (21 May).

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 20 - Exempt benefits

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

20.1 What is an exempt benefit?

Exempt benefits are not only exempt from FBT, they are also (with one exception) exempt from income tax in the hands of the employee to whom they are provided. The exception relates to car expense payments, which is explained in section 20.2.

20.2 Transport exemptions

Cars

There are circumstances in which private use of a car may be exempt from FBT.

An employee's private use of a taxi, panel van or a utility designed to carry less than one tonne, or any other road vehicle designed to carry a load of less than one tonne (that is, one not designed principally to carry passengers) is exempt if their private use of such a vehicle is limited to:

travel between home and work
travel that is incidental to travel in the course of performing employment-related duties
non-work-related use that is minor, infrequent and irregular – for example, occasional use of the vehicle to remove domestic rubbish.

Example – exempt use

An electrical company employee takes the company van (carrying capacity of less than one tonne) home each night because there is no security at the company premises. The only non-work-related use during the FBT year was a trip to pick up some furniture and take it to the employee's home – this use of the van would be exempt from FBT.

If the use of the vehicle exceeds the limits set out above, it is a car fringe benefit. All the private use of the vehicle, including the travel between home and work, is taken into account in determining the business percentage under the operating cost method. If no logbook records are maintained, the statutory formula method must be used to value the car fringe benefit.

Where the vehicle is not a car as defined in section 7.1, a residual benefit will arise (refer to section 18.6).

Example – non-exempt use

A council employee takes a utility (carrying capacity of less than one tonne) home each night and on the weekends. Although the utility is clearly marked as a council vehicle, the employee uses it for shopping and other private purposes during the week and often for country trips on the weekends.

This use of the utility would not be exempt from FBT and would be treated as a car fringe benefit. Assuming there are no logbook records, the taxable value of the utility would be calculated using the statutory formula method.

Dual cab vehicles

Dual cab vehicles are variants of conventional goods vehicles, with additional seating positions behind the driver and front passenger seats. They share a common chassis, to which the single or dual passenger cab and alternative tray sections may be fitted.

Dual cabs qualify for the work-related use exemption only if they are either:

designed to carry a load of one tonne or more, or more than eight passengers, or
while having a designed load capacity of less than one tonne, are not designed for the principal purpose of carrying passengers.

A dual cab that has a designed load-carrying capacity of less than one tonne may qualify for the work-related use exemption only if the vehicle is not designed for the principal purpose of carrying passengers. To determine whether the majority of the designed load capacity is attributable to passenger-carrying capacity, multiply the designed seating capacity (including the driver's) by 68 kg, which is the figure used for applying the Australian Design Rules. If the resulting total passenger weight exceeds the remaining 'load' capacity, the vehicle is treated as being designed for the principal purpose of carrying passengers and so is ineligible for the work-related use exemption.

Example

A dual cab vehicle with a gross vehicle weight of 1,950 kg, a basic kerb weight of 1,400 kg, and a designed seating capacity of five would be considered a vehicle designed principally for carrying passengers. This is because the majority of the total load capacity (340 kg (5 × 68 kg) of a total of 550 kg) would be absorbed by its designed passenger carrying capacity.

Unregistered vehicles

If a car is unregistered for the full FBT year and used principally for business purposes, any private use is exempt from FBT. A car that may be lawfully driven on a public road is regarded as being registered.

See also:

Car fringe benefits – for an explanation of the types of motor vehicles that are cars, refer to section 7.1

Personal services entities

A car benefit is an exempt benefit in relation to an FBT year if the person providing the benefit can't deduct an amount under the ITAA 1997 for providing the benefit because of section 86-60 of that Act.

Section 86-60 of the ITAA 1997 limits the extent to which a personal services entity can deduct car expenses. Deductions are not allowed for more than one car for private use.

The use of these cars is an exempt benefit because the entity is not entitled to claim an income tax deduction for these cars.

Car expenses – expense payments

With some exceptions, where you reimburse the operating expenses of an employee's own car according to the distance travelled in the car, an exempt benefit arises – for example, where expenses are reimbursed on the basis of an agreed number of cents per kilometre travelled.

These exempt benefits are a unique category of exempt benefits – they are the only exempt benefits that constitute assessable income in the hands of the employee. All other exempt benefits are both exempt from income tax in the hands of the employee to whom they are provided, and exempt from FBT.

Where the benefits are not exempt, some valuation concessions are available (refer to Chapter 19).

The exemption is not available where the reimbursement of the car expenses relates to any of the following circumstances:

transport to enable an employee to go on holiday (including remote area and overseas employment holiday transport)
relocation transport
transport to an employment interview or selection test
transport to a work-related medical examination, work-related medical screening, work-related preventative health care, work-related counselling or migrant language training
transport was provided after the employee had ceased to perform the duties of that employment.

Public transport – residual benefits

Where you operate a business of providing transport to the public, providing free or discounted travel (other than in an aircraft) to employees of that business for travelling to and from work is an exempt benefit. Free or discounted travel on a scheduled metropolitan service you operate is also exempt.

Where the benefit is provided by an associate company, it is also exempt if both you and the associate carry on a public transport business.

Providing travel on public transport to a police officer for travelling between the officer's place of residence and their primary place of employment is an exempt benefit.

Public transport – residual benefits where the benefit is accessed under a salary packaging arrangement

The specific exemption that applies to residual benefits in respect of private home to work travel through public transport and travel on scheduled metropolitan services (where the employer and associate are in the business of providing transport to the public) does not apply from 22 October 2012 where:

the benefit is provided in-house and
the employee accesses the benefit under a salary packaging arrangement.

Motor vehicles – residual benefits

Where you provide an employee with the use of a motor vehicle that is not a car

This use is an exempt benefit if any private use is restricted to the following circumstances:

travel to and from work
use that is incidental to travel in the course of performing employment-related duties
non-work-related use that is minor, infrequent and irregular – for example, occasional use of the vehicle to remove domestic rubbish.

See also:

Car fringe benefits – for an explanation of the types of motor vehicles that are cars, refer to section 7.1

If the use of the vehicle exceeds the limits set out above, a residual benefit will arise and the taxable value can be worked out using either the cents per kilometre method or operating cost method (refer to section 18.6).

All the private use of the vehicle, including travel between home and work, is taken into account in determining the business percentage under the operating cost method.

Where the motor vehicle is used wholly or principally in connection with your business operations and is at all times unregistered, any private use by the employee is also an exempt benefit. A motor vehicle that may be lawfully driven on a public road is regarded as being registered.

Fly-in fly-out arrangements – residual benefits

Transport you provide to employees who work in remote areas in Australia or overseas, or on oil rigs or other installations at sea

This arrangement, commonly known as 'fly-in fly-out' (FIFO) transport, is exempt where all of the following apply:

an employee's usual place of employment is at a remote location in Australia or overseas, or on oil rigs or other installations at sea
employees are provided with accommodation at or near the worksite on working days
on a regular basis the employee works for a number of days followed by a number of days off, returning to their usual place of residence on their days off
you provide the employee with FIFO transport between their usual place of residence and their place of employment
the FIFO transport provided is a residual benefit

having regard to the location of the two places, it would be unreasonable to expect the employee to travel to and from work on a daily basis.

Transport provided is a residual benefit

The transport provided must be a residual benefit for this exemption to apply.

If the transport provided is a property or expense payment fringe benefit, the otherwise deductible rule may apply to reduce the taxable value of the benefit (see sections 17.5 or 18.7 respectively).

Example – transport provided is a residual benefit

An employee works on a FIFO basis and salary packages the cost of their airfares to travel between their home and remote worksite. The employee arranges flights through a travel supplier who invoices the employer for the flight and issues a ticket to the employee. The travel supplier then charges the cost of the flight to the salary packaging provider. The invoice is paid from the salary packaged funds provided by the employer.

The employer has provided a residual benefit in this case and the provision of the FIFO transport to the employee is an exempt benefit (provided the other conditions are met).

Example – transport provided is an expense payment benefit

An employee works on a FIFO basis and salary packages the cost of their airfares between their home and remote worksite.

The employee books the flights in their own name and submits the invoices to a salary packaging provider. The provider credits the cost of the flights to the employee's bank account on behalf of the employer. Alternatively, the employee books the flights in their own name and submits the invoices to their employer for reimbursement.

The FIFO transport provided in this example is not a residual benefit and so the exemption does not apply. The employee incurs the expense – the employee is invoiced for the flights and liable for payment. If the invoice is not paid, the airline would pursue the employee. The employer has reimbursed the employee for the cost of the flights or has paid for an expense incurred by the employee. The employer has provided an expense payment benefit. The taxable value may be reduced under the 'otherwise deductible rule' if the employee is travelling in the course of their employment.

Accommodation considered to be in a remote area in Australia

Accommodation is considered to be in a remote area if the accommodation:

is not in or near an urban centre. This means the accommodation must be located at least 40 km from a town with a census population between 14,000 and 130,000, and at least 100 km from a town with a census population of 130,000 or more (population figures based on the 1981 census)
is in zone A or B (for income tax purposes), it must be located at least 40 km from a town with a census population between 28,000 and 130,000, and at least 100 km from a town with a census population of 130,000 or more.

Accommodation considered to be in a remote area overseas

If the accommodation is inaccessible or sparsely populated and is not located close to a built up area such as a town or city it is considered to be in a remote area.

Factors that should be considered to determine if an overseas location is remote (having regard to comparable Australian standards) are:

the distance and time it takes to travel from the worksite to the nearest urban area
the population of the nearest urban area
accessibility of the overseas site
safety and the crime rate, adequacy of local law enforcement, or health risks in the surrounding areas to the worksite (whether the nearest urban area is reasonably safe if adequate precautions are taken, the ability to take safety precautions)
location of the worksite relative to the arrival destination in the foreign country – for example, an international airport
the quality of the roads between the nearest urban area and the worksite
amenities and facilities available at the nearest urban area (in close proximity to the worksite), such as (but not limited to)
- public transport
- availability of accommodation/housing
- a library, public park or other recreational facilities
- places for buying a variety of foods
- a reliable electricity supply and access to clean drinking water/running water and a sewage system
- availability of access to the internet, mobile phone reception and access to facilities such as banks and medical supplies and facilities.

No single factor is expected to be determinative – each location will need to be considered on a case-by-case basis, and all of the factors balanced to see whether it would be considered remote.

See also:

FBT exemption for fly-in/fly-out arrangements remote and non-remote overseas locations

Operating costs of motor vehicle

Where the use of a motor vehicle gives rise to a fringe benefit, the benefits associated with the costs of operating the vehicle are exempt benefits. There is no additional FBT liability for operating expenses you provide, such as for registration, insurance, repairs and fuel. This is because the valuation rules for use of the motor vehicle also take into account the operating costs of the vehicle.

Employment interviews and selection tests

A benefit that meets the costs of travelling to an interview or selection test, in connection with an application for employment with a new employer or a promotion or transfer with an existing employer, is an exempt benefit.

Where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure.

If the applicant or current employee uses their own vehicle and is reimbursed on a cents-per-kilometre basis for the distance travelled, the benefit is not exempt – however, a reduction in the taxable value may be available (refer to section 19.3).

Motor vehicle parking

The following car parking benefits are exempt from FBT:

residual benefits
certain expense payment benefits
parking for the disabled
benefits provided by certain employers.

Residual benefits

Employer-provided parking that is not a car parking fringe benefit is a residual benefit that is exempt from FBT.

Expense payment benefits

Where you pay or reimburse a car parking expense incurred by an employee, it is exempt from FBT if the expense is not a car parking expense payment fringe benefit as explained in section 16.8.

Parking for the disabled (regulation 13A)

Car parking provided for a car used by a disabled employee who is legally entitled to use a disabled person's parking space and has a valid disabled person's car parking permit displayed on the car is exempt from FBT.

Exempt employers

You are exempt from FBT in relation to car parking fringe benefits and car parking expense payment fringe benefits if you are one of the following employers:

a scientific institution (other than an institution run for the purposes of profit or gain to its shareholders or members)
a registered religious institution
a registered charity with the ACNC and endorsed by us
a public educational institution
a government body where the employee is exclusively employed in, or in connection with, a public educational institution.

Small business car parking

If you are a small business, car parking benefits you provide are exempt if all the following conditions are satisfied:

the parking is not provided in a commercial car park
you are not a government body, a listed public company, or a subsidiary of a listed public company
you were either a small business for the last income year before the relevant FBT year (note the turnover threshold increases to less than $50 million from 1 April 2021), or your total income for the last income year before the relevant FBT year was less than $10 million – for this purpose, your income includes ordinary income and statutory income as defined in the ITAA 1997, that is, total gross income before any deductions.

Travel to obtain medical treatment

Benefits that meet the costs of travel from a workplace located in a foreign country in order to obtain medical treatment are exempt benefits.

The exemption applies where the travel is undertaken solely because the employee (or a family member living with the employee) requires medical treatment. It also applies to travel of a person who is required to accompany the patient as an escort for medical reasons, who accompanies a patient who is under 18, or who, as a family member, visits or accompanies the patient.

A condition of exemption is that the place of treatment is the place nearest the work locality where suitable medical treatment could be provided, or the place where suitable treatment could be obtained at least cost.

Accommodation and meals are also exempt if provided en route or during any period in which the person travelling must stay at the place of treatment for reasons related to the medical treatment. However, hospital accommodation and meals provided to the patient are not exempt.

Travel for compassionate reasons

Certain benefits you provide in connection with compassionate travel are exempt benefits.

Compassionate travel is restricted to:

travel by an employee for the sole purpose of visiting a close relative who is seriously ill
travel by an employee for the sole purpose of attending the funeral of a close relative
travel by a close relative of an employee for the sole purpose of visiting the employee, if the employee is seriously ill
travel by a close relative of an employee for the sole purpose of attending the funeral of the employee
travel by a close relative of an employee for the sole purpose of visiting a seriously ill close relative of the employee (the traveller must ordinarily reside with the employee)
travel by a close relative of an employee for the sole purpose of attending the funeral of a close relative of the employee (the traveller must ordinarily reside with the employee).

For the purpose of this exemption, a close relative of an employee means a spouse, a child or a parent of the employee, or a parent of the employee's spouse.

One of the following conditions must be satisfied when the compassionate travel starts:

the employee is travelling in the course of performing employment-related duties
the employee is living away from home while performing employment-related duties
the employee's usual place of residence is in a remote area (refer to section 10.8).

The exemption applies to benefits that would be fringe benefits of the following types, if it were not for the exemption:

a car fringe benefit where the car is the means of the compassionate travel
an expense payment fringe benefit where the expenditure is for transport, meals or accommodation for the person travelling (you must obtain documentary evidence of the expenditure)
a property fringe benefit consisting of meals for the person travelling
a residual fringe benefit consisting of transport or accommodation for the person travelling.

Taxi travel and ride-sourcing vehicles

Any benefit arising from taxi travel by an employee is an exempt benefit if the travel is a single trip beginning or ending at the employee's place of work.

Any benefit arising from taxi travel by an employee is also an exempt benefit if the travel is both:

a result of sickness of, or injury to, the employee
the whole or a part of the journey directly between any of the following
- the employee's place of work
- the employee's place of residence
- any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.

From 1 April 2019, the exemption applies to travel by way of a motor vehicle (other than a limousine) involving the transport of passengers for a fare. That is, the exemption can apply to travel in ride-sourcing vehicles where the above requirements are met.

For prior FBT years, the exemption was limited to travel in a vehicle licensed by the relevant State or Territory to operate as a taxi. It did not extend to ride-sourcing vehicles that were not licensed to operate as a taxi.

20.3 Residual exemptions

Recreational facilities, child care facilities – residual benefits

Recreational or child-minding facilities are exempt benefits if the facilities are provided on your business premises for the benefit of employees. Where such facilities are provided on business premises of a related company in a wholly-owned company group, they are also exempt.

Use of property – residual benefits

Where plant or equipment located on your business premises is used wholly or principally in connection with the operation of that business, any private use of that plant by an employee on those premises is an exempt benefit – for example, private telephone calls. This exemption applies regardless of whether the plant or equipment is used on a working or a non-working day.

The limited use of equipment off your business premises qualifies for exemption provided the equipment is ordinarily located on those premises or at your worksite for use in connection with business operations. This exemption would extend, for example, to business equipment that an employee borrows to use overnight or at weekends. A power tool or personal computer taken home in these circumstances would give rise to an exempt benefit – however, the exemption doesn't extend to use of one of your motor vehicles.

The use by employees of amenities, such as tea making or coffee making facilities, vending machines and water dispensers located on the business premises is also exempt from FBT.

Child care facility, priority of access – residual benefits

Payments you make to obtain priority access to certain child care facilities for children of employees may be exempt benefits.

The payments must be made under a program administered by the relevant government department to a child care service that is one of the following:

an eligible child care centre for the purposes of any provision of the Child Care Act 1972
family day care
care outside school hours
care in school vacations.

Residual benefits – no private use declaration

A residual benefit that is covered by a No private use declaration – residual benefits is an exempt benefit.

A condition of the exemption is that the residual benefit arises from the use of property that is subject to a consistently enforced prohibition on private use and that, as such, under the 'otherwise deductible' rule, would have a taxable value of nil.

In such instances, you will then be able to make an annual declaration. The declaration must cover all residual benefits provided to employees where you are able to state that the benefits were provided only for employment-related purposes and there was no private portion.

The declaration must be in a form approved by the Commissioner and be made by the date your FBT return is due to be lodged (refer to About declarations).

20.4 Relocation exemptions

Living-away-from-home accommodation – expense payments

Rather than paying a cash living-away-from-home allowance to an employee whose duties of employment require them to live away from their normal residence, you may prefer to reimburse the employee for the accommodation expenses or pay these expenses on behalf of the employee – that is, as with an expense payment fringe benefit.

In these circumstances, the payment is an exempt benefit where the living-away-from-home accommodation requirements below are met.

Living-away-from-home accommodation – requirements

To apply the living-away-from-home accommodation – expense payments and/or residual benefits – exemptions, the following requirements must be met:

Living-away-from-home accommodation exemption requirements

If	Then
the employee works on a fly-in fly-out or drive-in drive-out basis	the employee must have residential accommodation at or near their usual place of employment, and the employee must give you a declaration about living away from home.
The employee does not work on a fly in fly out or drive in drive out basis and is not eligible for the transitional rules	the employee must maintain a home in Australia at which they usually reside and it is available for their use and enjoyment at all times the fringe benefit must relate to the first 12 month period at a particular work location, and the employee must give you a declaration about living away from home.

The declarations provided to you must be in a form approved by the Commissioner (refer to About declarations).

Living-away-from-home accommodation – residual benefits

Where an employee whose duties of employment require them to live away from their normal residence and they are provided with the use of a unit of accommodation, this use is an exempt benefit if the living-away-from-home accommodation requirements above are met.

Relocation – engagement of relocation consultant

If a relocation consultant is used to help relocate an employee, or their family members, you may be eligible to access an FBT exemption for costs associated with the engagement of the relocation consultant.

A relocation consultant is a person who helps an employee, or their family members, move and settle into a new location.

In order for a benefit, consisting of the engagement of a relocation consultant, to qualify as an FBT exempt benefit, the following conditions must be met:

the engagement of the relocation consultant must be an expense payment or residual benefit
the engagement of the relocation consultant must be in respect of the employment of your employee
the benefit is provided under an arm's length arrangement
if the benefit is an expense payment benefit – documentary evidence is provided to you before the date your employee declarations are due (refer to section 4.1)
the engagement of the relocation consultant is required solely for one or more of the following reasons
- the employee is required to live away from home in order to fulfil their employment duties
- the employee returns to their usual place of residence, having previously been relocated from their usual place of residence, in order to fulfil his or her employment
- the employee, having previously been relocated from their usual place of residence, returns to their usual place of residence because they cease to perform the employment duties he or she had previously been relocated for
- in order to fulfil their duties of employment, the employee moves from his or her usual place of residence.

Any expenses a relocation consultant pays on behalf of an employee or their family member is not exempt from FBT.

The common services a relocation consultant can provide to help an employee (or their family member) relocate include:

obtaining removalist quotes
finding accommodation, including temporary accommodation
lease negotiation
providing information about transportation to the new location
providing information about education and community services at the new location.

Relocation advice provided incidental to the provision of another good or service – for example, by real estate agents – doesn't qualify for this exemption, but may qualify for other relocation exemptions.

Example

Jenny is an employee of Zig & Co Mining in Lightning Ridge. She is required to move from Lightning Ridge to Kalgoorlie in order to perform her duties as a geologist. Her employer engages a relocation consultant to help Jenny relocate.

The relocation consultant:

provides accommodation and transportation quotes
arranges and pays for six months of furniture rental
provides information about medical facilities at Kalgoorlie.

Zig & Co Mining is eligible for an FBT exemption for the costs involved in engaging the relocation consultant to provide information about and arranging for Jenny's relocation to Kalgoorlie – however, Zig & Co Mining is not eligible for an FBT exemption for the six-month furniture rental because this expense was paid by the relocation consultant on Jenny's behalf.

Relocation – removals and storage of household effects

Where you meet the costs of removal and storage of household effects of employees (both new and existing) who are required to live away from home because their job location changes, the benefit is exempt.

The exemption includes the costs of removal, storage, packing, unpacking and insurance of household effects (including pets) kept primarily for the personal use of the employee or family.

Similarly, the exemption also applies where the employee's usual place of residence changes to another location if the removal takes place, or the storage commences, not more than 12 months after the employee begins employment-related duties at the new location.

Relocation – sale or acquisition of dwelling

It is not unusual for employers to bear the cost of various relocation expenses, be it for new employees or for existing employees who are required to change their job location.

Relocation expenses that are incidental to the sale and/or purchase of a dwelling by the employee may be exempt benefits. These expenses are:

stamp duty, advertising, legal fees, agent commission
discharge of a mortgage and borrowing expenses on funds wholly applied in respect of the dwelling (excluding repayments of principal, interest and loan service fees), or
any similar capital expenses such as those incurred for building surveys, pest inspections and geo-tech reports.

Expenses related to insurance or rates are not incidental to the sale and/or purchase of a dwelling

The exemption applies to the dwelling that is sold only if all of the following apply:

the sale is made solely because the employee changed their usual place of residence in order to carry out employment-related duties
the house was owned when you notified the employee of the change to the new locality
the house was the employee's usual place of residence
the sale contract was made within two years of commencing duty at the new locality.

The exemption applies to the dwelling that is purchased only if all of the following apply:

the employee owned a dwelling at the former locality
the purchase was made solely because of the relocation to another job locality
the new dwelling was occupied as the employee's usual place of residence
the contract to purchase was made within four years of commencing duty at the new location.

Costs associated with the connection or reconnection of gas, electricity and telephone services to the new dwelling are also exempt.

Several other requirements must be satisfied for the exemption to apply, namely:

the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption
where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure
in the case of telephone connections, the employee must have had a telephone connected at the former residence.

Costs incidental to the purchase of a new dwelling by an employee relocating for employment purposes are FBT exempt, providing the employee sells, or proposes to sell, their old dwelling within two years after the day of commencing their new employment position – that is, the employee is no longer required to sell their old dwelling before the employer can access this exemption.

If the employee doesn't sell their old dwelling within two years after the day of commencing their new employment position, the benefit will become FBT liable in the year of tax in which the two-year period expires.

Example

Frances was required to relocate from Geelong to Ballarat in order to perform her duties as a police officer, commencing in Ballarat on 1 January 2017.

She purchases a new house in Ballarat on 12 February 2017. On 16 February 2017, her employer pays the conveyancing costs associated with the purchase of the new house.

Frances fails to sell her home in Geelong by 2 January 2019. The conveyancing costs paid by her employer are exempt at the time they are provided – however, because Frances did not sell her dwelling within two years after the day of commencing her new employment position, the benefit provided on the 16 February 2017 will now become FBT liable in the 2018-19 FBT year.

Relocation – connection or reconnection of certain utilities

Where an employee is required to live away from home in order to perform employment duties, the costs of connecting or reconnecting gas, electricity and telephone services to the new place of residence may be exempt benefits. Similarly, where there is a change in the employee's usual place of residence, these costs may be exempt benefits.

Several requirements must be satisfied for the exemption to apply, namely:

the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption
where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure
in the case of telephone connections, the employee must have had a telephone connected at the former residence
where the employee has permanently relocated, the benefits will be exempt only if the connection or reconnection of services is made within 12 months of the employee starting work at the new location.

Living-away-from-home – leasing of household goods

A benefit that consists of leasing household goods used primarily for domestic purposes while an employee is living away from home may be an exempt benefit.

To qualify for this exemption:

the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption
the employee must be provided with living-away-from-home accommodation that is an exempt expense payment or exempt residual benefit.

Relocation – transport

Where an employee is required to live away from home, or is required to relocate their usual place of residence, in order to perform employment-related duties, the costs of providing relocation transport (and any meals and accommodation en route) to the employee (and family members) are exempt benefits. The exemption also applies where the employee is returning to their usual place of residence after working at another location.

The exemption doesn't apply to a reimbursement of the employee's car expenses where the reimbursement is calculated by reference to the distance travelled by the car – however, a reduction of the taxable value may be available (refer to section 19.4).

20.5 Religious and not-for-profit organisation exemptions

Registered religious institutions

Benefits provided by registered religious institutions to a religious practitioner are exempt benefits if the benefits are provided principally because of the practitioner's pastoral duties or any other duties relating to the practice, study, teaching or propagation of religious beliefs.

A religious practitioner is someone who is any of the following:

a minister of religion
a student at an institution who is undertaking a course of instruction in the duties of a minister of religion
a full-time member of a religious order
a student at a college conducted solely for training people to become a member of a religious order.

See also:

Taxation Ruling TR 2019/3 Fringe benefits tax: benefits provided to religious practitioners

Registered public benevolent institutions, registered health promotion charities, some hospitals and public ambulance services

Registered public benevolent institutions and registered health promotion charities

A public benevolent institution (PBI) is distinct from a charitable institution. Generally, an organisation is recognised as a PBI if its principal objects are the relief of poverty, sickness, suffering, distress, misfortune, destitution or helplessness, and its activities are carried on without the purpose of private gain for particular people.

A health promotion charity (HPC) is a not-for-profit charitable institution whose principal activity is promoting the prevention or control of diseases in human beings.

An institution with charitable activities, but which doesn't have as its principal objects the provision of such relief, is not a PBI.

From 3 December 2012, all PBIs and HPCs have to be registered with the ACNC and endorsed by us in order to claim FBT concessions.

Benefits you provide to your employees (except if you are also a public or not-for-profit hospital) are exempt from FBT where the total grossed-up taxable value of certain fringe benefits for each employee during the FBT year is $30,000 or less. If you are a PBI and a public or not-for-profit hospital, the hospital threshold applies (see below).

If your employees receive benefits above this threshold you are liable for FBT on the excess (or the aggregate non-exempt amount).

For more on registered and endorsed PBIs and registered and endorsed HPCs, refer to Chapter 6.

Benefits exempted by this provision may be subject to fringe benefits reporting requirements as explained in Chapter 5.

Public and not-for-profit hospitals and public ambulance services

Public and not-for-profit hospitals and public ambulance services are exempt from FBT if the grossed-up taxable value of certain fringe benefits provided to each employee is less than the relevant cap ($17,000 per employee).

If your employees receive benefits above this threshold, you are liable for FBT on the excess (or the aggregate non-exempt amount).

See also:

Chapter 6 – Not-for-profit organisations and fringe benefits tax – for more on public and not-for-profit hospitals and public ambulance services
section 6.3 – FBT exemption – subject to capping

Benefits exempted by this provision may be subject to fringe benefits reporting requirements as explained in Chapter 5.

Live-in residential care workers

Accommodation, residential fuel, meals or other food and drink provided to employees (and their spouse or children) of government bodies, registered religious institutions and not-for-profit organisations, may be exempt benefits.

The exemption applies only where employees are engaged in caring for elderly or disadvantaged people or their children who reside with them. The employees must also reside in the same residential premises as those they are caring for. Residential premises mean a house or hostel used exclusively for the purpose of providing such accommodation.

Elderly people are those over 60 years of age; disadvantaged people are those who are intellectually, psychiatrically or physically handicapped, or who are in necessitous circumstances.

Benefits exempted by this provision may be subject to fringe benefits reporting requirements as explained in Chapter 5.

Live-in domestic employees – registered religious institutions

Accommodation, household fuel, meals and other food and drink provided to an employee may be exempt benefits – however, the employer must be either a registered religious institution or a religious practitioner.

A religious practitioner is someone who is any of the following:

a minister of religion
a student at an institution who is undertaking a course of instruction in the duties of a minister of religion
a full-time member of a religious order
a student at a college conducted solely for training people to become a member of a religious order.

The employee's duties must be principally the provision of domestic and/or personal services to one or more religious practitioners (and relatives, if any). The performance of those duties must necessitate the employee living in with the practitioner or living in accommodation within the same grounds.

Domestic services may include child care, gardening, repairs or maintenance to the home, house cleaning, nursing care and the preparation of meals. Personal services may include those of a personal secretary or chauffeur.

Non-live-in domestic employees

Food and drink you provide to domestic employees who don't 'live-in' may be exempt benefits – however, the exemption is limited to food and drink consumed by the employee at the place of employment, at or about the time the employee performs the employment-related duties. The employer must be a registered religious institution or a natural person (other than a trustee).

A domestic employee's duties may include child care, gardening, home renovations, repairs or maintenance to the home, house cleaning, nursing care and the preparation of meals.

An example of this exemption is a situation where a babysitter cares for children in their own home and shares lunch with them.

20.6 Property exemptions

Property

Property you provide to an employee may be an exempt benefit. The exemption applies if the property provided to the employee is both provided and consumed on a working day on your premises (if you are a company, the premises may be those of a related company). For example, there is no FBT on bread rolls given to bakery employees for consumption at work.

This exemption doesn't apply to:

employers who are exempt from income tax when entertainment arises from the provision of food and/or drink
income tax-paying bodies who elect to value the entertainment as meal entertainment
meals provided under a salary sacrifice arrangement after 7.30pm AEST on 13 May 2008.

20.7 Remote area exemptions

Remote area housing

A remote area housing benefit is an exempt benefit. Remote area housing benefits are explained in section 10.8.

Certain meals provided to primary production employees

Expense payment, property, board or residual benefits arising in respect of the provision of meals on a working day are exempt benefits if the following conditions are satisfied:

you are carrying on a business of primary production for the purposes of the ITAA 1997
your business is carried on in a remote area (as explained in section 10.8) – that is, the location of the employee's primary place of employment
the meal is provided to the employee (except where the benefit is a board benefit, in which case it may also be provided to an associate of the employee)
the provision of the meal doesn't amount to the provision of a meal entertainment benefit (as explained in section 14.3).

A business of primary production is:

cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things) in any physical environment
maintaining animals for the purpose of selling them or their bodily produce (including natural increase)
manufacturing dairy produce from raw material that you produce
conducting operations relating directly to taking or catching fish, turtles, dugong, bêche-de-mer, crustaceans or aquatic molluscs
conducting operations relating directly to taking or culturing pearls or pearl shell
planting or tending trees in a plantation or forest that are intended to be felled
felling trees in a plantation or forest
transporting trees, or parts of trees, that you felled in a plantation or forest to either the place
where they are first to be milled or processed
from which they are to be transported to the place where they are first to be milled or processed.

There is no requirement for the benefit to be provided on the business premises of the employer for this exemption to apply.

20.8 Other exemptions

Loans

An exempt benefit arises from a loan in any of the following circumstances:

You are engaged in the business of money lending and the interest rate on a loan to an employee is fixed at a rate at least equal to the interest applicable under a comparable loan made to a member of the public in the ordinary course of business at about the time the loan was made to the employee.
You are engaged in a business of money lending and, for each year of tax over which the loan extends, the rate of interest is variable, but never less than the arm's length rate you charged on loans made about the time the loan was made to the employee.
You advance money to an employee solely for the purpose of meeting expenses to be incurred within a six-month period of the advance being made. The expense must be incurred in carrying out employment-related duties with you (the employer who made the advance), and the expenses must be accounted for by the employee and any excess advance refunded or otherwise offset.
You make an advance, repayable within 12 months, to an employee solely to pay a security deposit (for example, rental bond or service connection deposit) in respect of accommodation. The accommodation must give rise to an exempt benefit in accordance with the conditions relating to living-away-from-home accommodation outlined in section 20.4, or the accommodation must be temporary accommodation eligible for a reduced taxable value, in accordance with the relocation concessions explained in section 19.4.

Expense payments – no private use declaration

An expense payment benefit that is covered by a No private use declaration – expense payment benefits is an exempt benefit.

A condition of this exemption is that the expense payment benefit that arises from the reimbursement of expenditure is wholly employment related and that, as such, under the 'otherwise deductible' rule, would have a taxable value of nil.

In such instances, you will be able to make an annual declaration. The declaration must cover all expense payment benefits provided to employees where you are able to state that the benefits were provided only for employment-related purposes and that there was no private portion.

The declaration must be in a form approved by the Commissioner and be made by the declaration date (refer to About declarations).

Food or drink

Where employees receive meals that are board fringe benefits, any additional food and drink supplied to them, such as morning and afternoon tea, is exempt. However, it is a condition of the exemption that the food and drink must be provided on your premises or worksite – food and drink supplied at a party, reception or other social function is not exempt.

International organisations, and diplomatic and consular immunities

Benefits provided by the following employers are exempt benefits:

certain international organisations that are exempt from income tax and other taxes by virtue of the International Organisations (Privileges and Immunities) Act 1963
organisations established under international agreements to which Australia is a party and which oblige Australia to grant the organisation a general tax exemption.

A benefit that would be exempt from tax in Australia by the operation of the Consular Privileges and Immunities Act 1972 or the Diplomatic Privileges and Immunities Act 1967 is an exempt benefit.

Newspapers and periodicals

The costs of providing newspapers and periodicals to employees for business purposes are exempt benefits. The exemption doesn't apply where the business use is merely incidental.

Compensable work-related trauma

Benefits provided for work-related injury are exempt benefits.

To qualify for exemption, such benefits (for example, the payment of hospital or medical costs or associated ambulance, travel and accommodation costs) must be provided for 'compensable work-related trauma' suffered by an employee.

Compensable work-related trauma is an injury or disease related to employment, for which the employee is entitled to receive compensation under a workers' compensation law. If the employee's employment is not covered by a workers' compensation law, an ailment will qualify if it would have been compensable if such a law had applied – for example, where public sector employers don't pay workers' compensation insurance but directly compensate the employee.

Benefits constituted by the insurance cover provided under a workers' compensation insurance policy are also exempt benefits.

In-house health care facilities

Medical services and other forms of health care are exempt benefits if provided in worksite first aid posts and medical clinics.

The exemption applies to any form of care or test relating to a person's health – for example, medical treatment, first aid, physiotherapy, diagnostic services, health counselling or the provision of drugs in a clinic or other medical facility operated wholly or principally to provide health care relating to work-related injuries of employees. Such a clinic must be on your premises, or those of a related company, or at or adjacent to the employees' worksite – for example, a construction site.

While the clinic or facility must be operated principally for treating employees' work-related injuries, incidental treatment provided in the clinic for illness or injuries not related to work, as well as treatment of members of employees' families, also qualifies for exemption; so does health care provided away from the clinic by a member of the clinic's staff – for example, a home visit by a company doctor.

Occupational health and migrant language training

Several categories of work-related health and counselling benefits are exempt benefits:

Work-related medical examinations - These are examinations or tests carried out by a medical practitioner, nurse, dentist, optometrist or audiometrist where the employee is required to undergo the examination or test in order to commence new employment, to transfer to a different job with the same employer, or to gain entry to a superannuation fund.
Work-related medical screening - This is an examination or test carried out by a medical practitioner, nurse, dentist, optometrist or audiometrist to determine whether the employee is suffering from, or is at risk of suffering from, an injury or illness related to the employee's employment. It is a condition of exemption that the examination or test is carried out as part of a screening program that applies generally to employees with similar work-related risks.
Work-related preventative health care - This is any form of care provided by a medical practitioner, nurse, dentist or optometrist for the purpose of preventing the employee from suffering from an injury or illness relating to the employee's employment. It is a condition of exemption that the care is generally provided to employees with similar work-related risks. The provision of drugs, vaccines or other medical preparations in connection with the preventative health care is also exempt.
Work-related counselling - This is individual or group counselling (for example, a seminar) related to matters such as safe work practices, health, fitness, stress management, drug or alcohol abuse, rehabilitation or retirement problems. You must provide the benefit in order to improve or maintain the efficiency of employees or prepare them for retirement and not as a form of remuneration. If counselling is given to an associate of an employee (for example, the employee's spouse), the employee must accompany the associate.
Migrant language training - This is an English language course attended by a non-English speaking person who is, or intends to be, an immigrant to Australia. The exemption extends to associates of the employee.

The exemption also applies to benefits that meet the cost of travelling to attend these forms of examinations, screening, preventative health care, counselling or training which, but for the exemption, would be fringe benefits of the following types:

a car fringe benefit, where the car is the means of travelling to attend the examination, screening, preventative health care, counselling or training
an expense payment fringe benefit, where the expenditure is for transport, meals or accommodation for the person travelling (you must have documentary evidence of the expenditure)
a property fringe benefit, consisting of meals for the person travelling
a residual fringe benefit, consisting of transport or accommodation for the person travelling.

Where a cents per kilometre reimbursement is made of car expenses incurred in travelling to attend a work-related medical examination, screening, preventative health care, counselling session or migrant language training, this exemption doesn't apply – however, a reduction in taxable value may be available as explained in section 19.3.

Emergency assistance

Benefits you provide by way of emergency assistance are exempt from FBT.

Emergency assistance is assistance for immediate relief of a victim, or potential victim, of an emergency where the assistance is any of the following:

first aid or other emergency health care
emergency meals, food supplies, clothing, accommodation, transport or use of household goods
temporary repairs
any similar matter.

For the purposes of this exemption, an emergency is a natural disaster, an armed conflict, a civil disturbance, an accident, a serious illness, or any similar matter.

If the emergency assistance is health care, the exemption applies only if the treatment is provided by an employee of yours (or a related company), or on your premises (or those of a related company) or at or near an employee's worksite – that is, the exemption would not apply if you pay for an accident victim's medical or hospital bills, but would apply to emergency treatment by a company doctor at the accident site.

Long-term benefits, such as providing a new house or car to replace one destroyed as a result of an emergency, are not exempt as emergency assistance.

Minor benefits

Minor benefits are exempt benefits. A minor benefit is a benefit which is both:

less than $300 in value (before 1 April 2007 the amount was less than $100), and
unreasonable to treat as a fringe benefit.

Less than $300 in value

A minor benefit is a benefit which has a 'notional taxable value' of less than $300. The notional taxable value of a minor benefit is, broadly, the amount that would be the taxable value if the benefit was a fringe benefit.

Where you provide an employee with separate benefits that are in connection with each other (for example, a meal, a night's accommodation and taxi travel) you need to look at each individual benefit provided to the employee to see if the notional taxable value of each benefit is less than $300.

When determining if the notional taxable value of the benefit is less than $300, benefits provided to associates are not included.

If the notional taxable value of a benefit is less than $300, you then need to determine if it would be unreasonable to treat the benefit as a fringe benefit.

Special rules that apply to car benefits

There are different rules for car benefits. The notional taxable value of a car benefit is determined by applying the residual fringe benefit rules – that is, to determine whether a car benefit is less than $300, you may either:

apportion the operating costs of the vehicle, or
apply the cents per kilometre method.

Criteria for determining whether it would be unreasonable to treat the minor benefit as a fringe benefit

The following five criteria need to be considered when deciding if it would be unreasonable to treat the minor benefit as a fringe benefit:

1	The infrequency and irregularity with which associated benefits, being benefits that are identical or similar to the minor benefit and benefits given in connection with the minor benefit, are provided. The more frequently and regularly associated benefits are provided, the less likely that the minor benefit will qualify as an exempt benefit.
2	The total of the notional taxable values of the minor benefit and identical or similar benefits to the minor benefit. The greater the total value of the minor benefit and identical or similar benefits, the less likely it is the minor benefit will qualify as an exempt benefit.
3	The likely total of the notional taxable values of other associated benefits – that is, those provided in connection with the minor benefit. For example, where a meal, which is a minor benefit, is provided in connection with a night's accommodation and taxi travel, which themselves may or may not be a minor benefit, the total of their taxable values must be considered. The greater the total value of other associated benefits, in this case being the accommodation and the taxi travel, the less likely it is that the minor benefit will qualify as an exempt benefit.
4	The practical difficulty in determining what would be the notional taxable value of the minor benefit and any associated benefits. This would include consideration of the difficulty for you in keeping the necessary records in relation to the benefits.
5	The circumstances in which the minor benefit and any associated benefits were provided. This would include consideration as to whether the benefit was provided as a result of an unexpected event, and whether or not it could be considered principally as being in the nature of remuneration.

If, after considering the five criteria, you conclude that it would be unreasonable to treat the benefit as a fringe benefit, the benefit will be an exempt benefit.

In determining if the minor benefit exemption applies, you need to examine the nature of the benefit provided and consider each of the various criteria – value, frequency and regularity of provision, and recording and valuation difficulties – before concluding whether the exemption should apply to a minor benefit.

When the minor benefits exemption doesn't apply

The exemption doesn't extend to airline transport fringe benefits or other in-house fringe benefits, the taxable values of which are, in any case, reducible by $1,000 under the concession explained in the respective chapters for these types of fringe benefits.

The exemption also does not apply to minor entertainment benefits provided to employees of income tax exempt organisations, unless they are incidental to the provision of entertainment to persons who are neither employees of the employer nor associates of employees. However, even in those circumstances, the exemption doesn't apply to meals or benefits provided in connection with meals.

This later exclusion doesn't prevent minor entertainment benefits provided by a tax-exempt organisation to recognise a special achievement of an employee from being exempt as long as they are provided on the employer's premises or a place where the employee performs their employment-related duties. For example, a meal given to the family of a professional footballer in the club's dining room to mark a milestone such as selection in a representative team, or being awarded best and fairest player, may be exempt under this rule.

The exemption doesn't apply to meal entertainment where you elect to use the meal entertainment provisions and calculate the taxable value under the 50:50 split method. If you elect to use this valuation rule, all of your expenditure on meal entertainment must be included when calculating your total meal entertainment expenditure for the FBT year.

Similarly, where you elect to use the 50:50 split method for valuing entertainment facility leasing expenses, the minor benefits exemption doesn't apply.

However, where you elect to use the 12 week register method for valuing meal entertainment, the minor benefits exemption can apply when calculating your registered percentage over the 12-week period.

The minor benefits exemption will not apply to benefits that are provided under an effective salary sacrifice arrangement. Benefits provided under a salary sacrifice arrangement are provided principally as part of a remuneration package. When all of the criteria are considered, and in particular the circumstances in which benefits are provided under a salary sacrifice arrangement, it would be reasonable to conclude that all such benefits are not exempt minor benefits.

Examples

It is common practice for employers to give employees gifts on special occasions, such as at Christmas time. A single gift to each employee of, say, a bottle of whisky or perfume would be an exempt benefit, where the value was less than $300. If the gift is provided at a Christmas party, the gift needs to be considered separately to the Christmas party when considering the minor benefits threshold.

Flowers given to employees on special occasions would be given on an irregular and infrequent basis – this could include flowers given to an employee on the birth of a child, for a birthday, or as a get well gift. These would be an exempt benefit where each individual benefit had a notional taxable value of less than $300 because, looking at the five factors, it would be unreasonable to treat the benefit as a fringe benefit.

By contrast, flowers given to an employee each fortnight would be given on a frequent and regular basis and would not be an exempt benefit, even where the value of each individual benefit is less than $300.

The occasional use of one of your vehicles by an employee for a special purpose, such as rubbish removal or for travel from home to work during a transport strike, would be an exempt benefit provided the employee in question doesn't have a general entitlement to use the vehicle for private purposes.

Subject to the above criteria being satisfied, the following are further examples of benefits that are likely to be exempt under the minor benefits rules:

a welcome gift provided to a new employee – for example, a food hamper
meals provided on an ad hoc basis to an employee three times in the year, where on each occasion the value is $75
tolls provided to an employee through an e-tag facility 20 times during the year, which is not provided as part of a salary packaging arrangement, where each benefit has a value of $7
a short-term advance to help an employee pay unexpected debts
the recovery of overpaid salary by instalment arrangements
permitting staff to have waste or leftover materials of a business, such as packing cases or fabric remnants.

See also:

Fringe benefits tax and road tolls

Long service awards

Long service awards granted in recognition of 15 years or more service are exempt, provided the value of the award doesn't exceed a specified maximum amount – for this purpose, the value of the award is the amount that would be the taxable value if the award was a fringe benefit.

Where the period of service being recognised by the award is 15 years, the specified maximum value is $1,000. If the first long service award received by an employee recognises a period of service greater than 15 years, the maximum value increases by $100 for each additional year – for example, the maximum value for a first award recognising 20 years' service is $1,500.

If the employee has received a previous long service award (that is, in recognition of 15 years or more service) from you, the maximum value of any subsequent award is $100 for each year in excess of 15 years that is being recognised by the additional award.

Where the value of an award exceeds the relevant maximum value, no part of the award is exempt.

Safety awards

An award genuinely related to occupational health or occupational safety achievements that is granted to an employee is exempt from tax if its value doesn't exceed $200. Where you grant more than one award to an employee during an FBT year, each award is exempt, provided the aggregate value of the awards doesn't exceed $200 – for this purpose, the value of the award is the amount that would be the taxable value if the award was a fringe benefit.

Where the $200 limit is exceeded, no part of the award (or awards) is exempt.

You don't need to keep specific records of awards to individual employees if you can conclude on a reasonable basis that the value of any awards granted to an employee will not exceed the $200 limit.

Australian Traineeship System

Food, drink and accommodation provided to people training under the Australian Traineeship System may be exempt benefits. To be exempt, the benefits must be provided in accordance with an award or an industry custom, and must not be provided at a party, reception or other social function.

Live-in help – elderly or disadvantaged persons

An exemption from FBT applies to certain benefits that you provide to people who are employed in caring for elderly or disadvantaged persons and who reside with them in their own homes. An elderly person is aged 60 or more. Disadvantaged people are those who are intellectually, psychiatrically or physically handicapped, or who are in necessitous circumstances.

The benefits that are exempt are:

the provision of accommodation, in the home of the person being cared for, to the employee (and to the employee's spouse and children)
the provision of residential fuel in connection with that accommodation
meals provided in that home to the employee (and to the employee's spouse and children)
other food or drink similarly provided.

Provision of certain work-related items

An FBT exemption applies for the following work-related items:

a portable electronic device
an item of computer software
an item of protective clothing
a briefcase
a tool of trade.

Even if you provide your employee with these work-related items, you still need to consider the limitations on the exemption.

Portable electronic device

A portable electronic device is a device that is all of the following:

easily portable and designed for use away from an office environment
small and light
can operate without an external power supply
designed as a complete unit.

Examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer, and portable global positioning system (GPS) navigation receiver.

Limitations on exemption

The exemption is limited to:

items primarily for use in your employee's employment – that is, for work-related use
one item per FBT year for items that have a substantially identical function, unless the item is a replacement item.

From 1 April 2016, small businesses with an aggregated turnover of less than the relevant small business turnover threshold can provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions. From 1 April 2021, the small business turnover threshold for FBT concessions will increase to less than $50 million.

The income tax year and the FBT year do not align; accordingly for the purpose of determining whether an entity is a small business for a relevant FBT year, the aggregated turnover must be below the relevant threshold for the year of income:

starting most recently after the start of the FBT year, or
ending most recently after the start of the FBT year.

There are no restrictions where you only provide an employee with the use of an item (that is, it is a residual benefit and not an expense payment or property benefit).

See also:

Work out if you're a small business for the income year

Primarily for use in the employee's employment

An item is primarily for use in the employee's employment if it is provided principally to enable your employee to do their job.

When determining whether or not an item is primarily for use in the employee's employment, the decision is based on the employee's intended use at the time the benefit is provided to them. You don't have to look at the employee's actual usage over the FBT year to determine whether the item is used primarily in the employee's employment.

However, you must use a reasonable basis to determine whether an item is primarily for use in your employee's employment – for example, the employee's job description, duty statement or employment contract.

Alternatively, if you are aware that there may be private use of an item, you could document factors such as those listed below to determine whether the item is primarily for use in the employee's employment:

the reason or reasons the item was provided to your employee
the type of work your employee will be performing
how the use of the item relates to your employee's employment duties
your policy and any conditions relating to the use of the item.

Substantially identical functions

An eligible work-related item will not be exempt from FBT if earlier in the same FBT year you have provided your employee, by way of an expense payment or property benefit, with an item that has substantially identical functions. This does not apply if the employer is a small business.

It is the features or design specifications that are examined when determining whether items have substantially identical functions, not the intended use of the items.

Items will have substantially identical functions where the functions of two items are the same in most respects. However, items may be different in a number of ways which do not impact on an item's function. For example, colour, shape, brand and design would not generally be relevant considerations when determining whether two items have substantially identical functions.

Where a tablet computer can perform the functions of a laptop computer, even in a reduced capacity, it would be considered to have substantially identical functions to the laptop computer. However, where a tablet computer is designed primarily as a means of digital media consumption, rather than creation, it would not have substantially identical functions to a laptop.

Example – items do not have substantially identical functions

An employer gives their employee a laptop during the FBT year so that they can work from home and access their email, prepare work-related material such as word processing documents and complex spreadsheets and access the internet.

In the same FBT year, the employer gives that employee a tablet as it is more portable than the laptop and is useful for the employee when they are travelling. The tablet is designed to access email and browse the internet. It is not designed to create word processing documents or complex spreadsheets. The tablet does not have substantially identical functions to the laptop computer and would not be considered to be able to replace the laptop. The tablet would also be exempt from FBT, provided it was used primarily for work-related purposes.

Replacement items

An item is a replacement item if the previous item is lost or destroyed, or needed replacing because of developments in technology.

Example

A financial planning company provides its employees with a laptop computer, which are portable electronic devices. The laptops are primarily for use at client visits to provide advice and also between client visits to produce and update reports.

One of the laptop computers is damaged beyond repair during a client visit. The employee is provided with a new laptop computer. The new laptop computer is a replacement item and the employer is exempted from paying FBT on the provision of the second laptop.

Membership fees and subscriptions

Expense payment or property benefits arising in respect of the following are exempt benefits:

a subscription to a trade or professional journal
an entitlement to use a corporate credit card
an entitlement to use an airport lounge membership.

Approved student exchange programs

A benefit consisting of an employee (or an associate of an employee) being placed in an approved student exchange program is an exempt benefit where you (or an associate) have not selected or taken part in selecting the participant.

For a program to be approved, it must be run by a body registered with the relevant state or territory body in accordance with the National Guidelines for Student Exchange. These guidelines are published by the National Coordinating Committee for International Secondary Student Exchange.

No fringe benefit where benefit results in a dividend under Division 7A

Where a loan benefit or a debt waiver benefit is provided by a private company to an employee (or associate) who is also a shareholder (or associate), a fringe benefit will not arise if the loan or debt waiver results in the company being taken to have paid a dividend under Division 7A of the ITAA 1936 to the shareholder (or associate).

Retraining and reskilling

An FBT exemption is available for employer-provided retraining and reskilling provided on or after 2 October 2020, so long as certain conditions are met.

Requirements for the exemption to apply

Benefits provided by an employer will be exempt benefits where all the following requirements are met:

the benefit is provided in respect of education or training undertaken by their employee
the employee is 'redundant'
the employer has complied with any obligations under the Fair Work Act 2009 that apply in relation to the redundancy, and
the education or training is for the primary purpose of enabling the employee to gain or produce salary or wages in respect of any employment to which the education or training relates.

Benefit in respect of education or training

The benefit must be provided in respect of education or training undertaken by an employee of the employer (including current and former employees). This covers the provision of the education or training (such as reimbursing or paying the course fees or giving training) and also benefits associated with the education or training (such as related course materials, textbooks, travel and accommodation).

When an employee is 'redundant'

For the purposes of this exemption, an employee is redundant if their employer no longer requires, or reasonably expects to no longer require, the employee's job to be performed by anyone because of changes in the operational requirements of the employer's business or undertaking.

Redundancy includes circumstances where:

an employee is made redundant in one part of the employer's business but can be redeployed to another part of its business (or within an associate's business).
the employer reasonably expects the employee to be redundant but has not yet been made redundant.

If circumstances change and the employee is not made redundant (for example, because the employer restructures its business in such a way so as to retain the employee), the employer will receive the FBT exemption for any benefits provided while the redundancy test has been satisfied (provided the other requirements are met).

Compliance with obligations under the Fair Work Act 2009

When an employee is redundant, the Fair Work Act 2009 may impose obligations that an employer must comply with in relation to the redundancy. If an employer does not meet these obligations if and when they are required to, they will not be eligible for the exemption.

Education or training undertaken for the primary purpose to earn salary or wages in respect of employment

The employer must also be satisfied that the education or training is being undertaken for the primary purpose of enabling the employee to gain or produce salary or wages in respect of any employment to which the education or training relates. Education or training that is undertaken primarily for personal reasons or interest will not satisfy this test. There must be a direct link between the education or training and the expected employment the employee is planning to pursue.

When the exemption does not apply

The exemption does not apply in respect of the following benefits:

Benefits provided under a salary packaging arrangement
Benefits that are a payment or other amount covered by subsection 26-20(1) of the Income Tax Assessment Act 1997 (such as student contributions towards a Commonwealth supported place at a higher education institution), and
Benefits that involve a primary course or secondary course as defined under the A New Tax System (Goods and Services Tax) Act 1999- broadly primary and secondary school education courses.

Certain employees are also excluded from the exemption, as outlined in the table below.

Table: The retraining and reskilling exemption does not apply

If the employer is..	And the employee is..
An individual	A relative of the employer
A partnership	A relative of a partner in the partnership
A company (other than a widely held company within the meaning of the Income Tax Assessment Act 1997)	A shareholder in, or a relative of a shareholder in, the company; or A director of, or a relative of a director of, the company.

A relative means:

a spouse
a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, lineal descendant or adopted child, or a spouse of any of these individuals.

Examples

Example 1: Employee's redundancy and departure from an employer

Michael is a production supervisor employed by Paper Mill Pty Ltd (Paper Mill), a pulp and paper manufacturing company based in Australia. Paper Mill is not a widely held company.

Paper Mill is planning to shut down its Australian operations over the next five years. In May 2021, it advises all affected employees, including Michael, that it expects their positions will be made redundant by May 2026.

In relation to these expected redundancies, Paper Mill is complying with all relevant obligations under industrial relations law and is offering affected employees the opportunity to reskill for future employment.

Michael is not a director or shareholder, or a relative of a director or shareholder, of Paper Mill.

Michael wishes to undertake a gardening course to gain future employment as a horticulturalist. Michael also plans to use the skills and knowledge acquired to cultivate a vegetable patch at his home. However, this is not the main reason why he wishes to undertake this training.

Paper Mill is satisfied that this training is for the primary purpose of gaining future employment and agrees to support Michael's studies.

Michael accepts a full fee-paying place at the Australian Nature University to undertake a Science of Gardening degree.

Paper Mill covers the costs associated with the degree by reimbursing Michael for the tuition fees. This benefit is covered by the FBT exemption for retraining and reskilling.

If Michael had instead accepted a Commonwealth supported place for this degree it would not have been covered by the exemption for retraining and reskilling – Paper Mill would be liable for FBT on any benefit provided to Michael in respect of this education or training.

As expected, in May 2026, Michael is made redundant from his position at Paper Mill. Michael is not able to find employment as a horticulturalist as planned. Instead, Michael takes up a job at another manufacturing plant, that is not related to the gardening studies. This does not change Paper Mill's eligibility for the FBT exemption for retraining and reskilling.

Example 2: Employee's redundancy and redeployment to another job within the same employer

Gio is a retail store manager employed by Paperclip Pty Ltd (Paperclip), a company based in Australia with retail stores selling office supplies and stationery across Australia. Paperclip is not a widely held company.

In March 2021, due to a decline in foot traffic and sales from its retail shopfronts, Paperclip announced a series of store closures over the next year as it transitions its business model to online sales. Employees at affected locations, including Gio, were advised their positions would be made redundant within the next year.

In relation to these redundancies, Paperclip is complying with all relevant obligations under industrial relations law and is offering affected employees the opportunity to reskill for future employment.

Gio is not a director or shareholder, or relative of a director or shareholder, of Paperclip.

Gio wishes to undertake a diploma in information technology at the Institute of Technology for the purpose of gaining future employment as a web developer. Gio does not currently have the skills required to pursue this career.

Upon hearing about Gio's study plans, Paperclip offers to redeploy Gio to its web development team on completion of the studies to work on the development and maintenance of its online sales platform. Gio accepts.

Paperclip covers the costs associated with the diploma by paying the tuition fees directly to the Institute of Technology. Paperclip also reimburses Gio for the costs of the textbooks required for the course. These benefits are covered by the FBT exemption for retraining and reskilling.

On completion of the studies in December 2021, Gio is redeployed to a new position within Paperclip in its web development team.

Example 3: Expected redundancy from an employer

Scranton Media Pty Ltd (Scranton Media) publishes the local newspapers in regional areas across Australia. Scott is employed as an editor at Scranton Media, based in Warrnambool, Victoria.

On 8 October 2021, Scranton Media announces that it will restructure and consolidate its media and print operations by the end of the year – reducing its number of print publications overall. As part of this restructure, several employees in Victoria, including Scott, are expected to be made redundant.

In relation to these expected redundancies, Scranton Media is complying with all relevant obligations under industrial relations law and is offering affected employees the opportunity to reskill for future employment.

Scott is not a director or shareholder, or a relative of a director or shareholder, of Scranton Media.

Scott wishes to undertake a short course in illustration to gain future employment as an illustrator for children's books. The course involves an intensive workshop over one weekend in Melbourne, Victoria in late October.

Scranton Media is satisfied that the course is for the primary purpose of gaining future employment as an illustrator.

Scranton Media covers the costs associated with the short course by reimbursing Scott for the tuition fees, as well as reasonable travel and accommodation expenses for the intensive workshop in Melbourne.

These benefits are covered by the FBT exemption for retraining and reskilling.

In November, after Scott has completed the short course, Scranton Media's circumstances change following renewed interest in its print publications. It decides that it no longer needs to consolidate its media and print operations in Victoria. This means Scott's redundancy is no longer required. Scott agrees to remain employed as an editor with Scranton Media.

It doesn't matter if Scott agrees to remain in an editor role with Scranton Media or leaves to pursue a change in career. The change in circumstance does not affect the FBT exemption previously claimed.

20.9 Worker entitlement contributions

A worker entitlement fund is a (trust) fund for employee long service leave, sick leave or redundancy payments. These funds are often referred to as redundancy trusts or redundancy funds. Although these funds operate in a variety of ways, their purpose is to manage employee entitlements and provide portability and protection.

Contributions to worker entitlement funds for the FBT year commencing 1 April 2006, and for all later FBT years, are exempt benefits where the payment is:

made to an approved worker entitlement fund
made under an industrial agreement, and
either for leave, redundancy or the reasonable administrative expenses of the fund.

A payment made according to an existing industrial practice or an existing fund will not be exempt from FBT unless it satisfies the above criteria.

Approved worker entitlement funds

A fund can only be an approved worker entitlement fund if it is limited to making payments to the employee for whom contributions were received. However, upon the death of an employee, the fund is able to make payments to the employee's dependants or the trustee of the employee's deceased estate without losing its status as an approved worker entitlement fund.

Approved worker entitlement funds comprise:

all long service leave funds established by or under a Commonwealth, state or territory law
funds that have been prescribed in the FBT regulations as approved worker entitlement funds (pre 28 June 2011)
funds that we have endorsed since 28 June 2011.

Funds that were prescribed before 28 June 2011 will be taken to be endorsed from 28 June 2011.

From 28 June 2011:

the Australian Business Registrar (ABR) is required to enter a fund or entity as an endorsed fund or entity on the ABR by 28 December 2012
all approved worker entitlement funds must have an Australian business number (ABN)
existing funds that did not have an ABN had until 28 December 2011 to obtain an ABN
we are able to revoke the endorsement of a worker entitlement fund in certain situations.

Latest update

June 2021

Section	Changes and updates
20.8 – Other exemptions – retraining and reskilling	This is new content which has been added to provide guidance about the FBT exemption for certain education and training.

Details of previous updates are available through the versions linked to in the table below.

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 21 - Employee cars - applying the 'otherwise deductible' rule

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

Various chapters in this Guide describe a four-step procedure for calculating the reduction available under the otherwise deductible rule. Step 2 of the four-step procedure is calculating an amount that hypothetically would have been allowable as an income tax deduction to the employee. However, you have to use a different Step 2 where the costs of operating the employee's own car are involved. Three methods are available, with different substantiation requirements and varying results.

21.1 Explanation of methods

First method – logbook record

Logbook records and/or odometer records must be maintained by, or on behalf of, the employee, as explained in section 21.2.
The employee must provide the logbook records and/or odometer records (or copies of them) to you by the due date for lodging your annual FBT return or, where you are not required to lodge a return, by 21 May.
Using the formula described in section 21.3, you calculate the percentage of business use. You then use this percentage when applying the otherwise deductible rule, with Step 2 modified as follows:

Logbook method

Step	Action
1	Ignoring any payment or contribution made by the employee, calculate the taxable value of the fringe benefit.
2	Multiply the Step 1 amount by the percentage of business use calculated according to the formula described in section 21.3.
3	Now look at any payment or contribution made by the employee. How much of this payment or contribution is allowable as an income tax deduction to the employee?
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.

Second method – car travelled 5,000 business kilometres or more

You can no longer use this method from 1 April 2016. This method can't be used unless the car has travelled a minimum of 5,000 business kilometres during the year.
The employee must provide a declaration to you by the due date for lodging your annual FBT return or, where you are not required to lodge a return, by 21 May. You can find more information about the approved format for such a declaration in section 21.6.
Because the car has travelled a minimum of 5,000 business kilometres during the year, the percentage of business use is deemed to be 33¹/₃% (the actual percentage of business use is irrelevant). You then use the deemed percentage of business use when applying the otherwise deductible rule, with Step 2 modified as follows:

Car travelled 5,000 business kilometres or more

Step	Action
1	Ignoring any payment or contribution made by the employee, calculate the taxable value of the fringe benefit.
2	Multiply the Step 1 amount by the deemed percentage of business use – that is, 33¹/₃%.
3	Now look at any payment or contribution made by the employee. How much of this payment or contribution is allowable as an income tax deduction to the employee?
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.

Third method – no logbook and no requirement to travel 5,000 business kilometres or more

The employee must provide a declaration to you by the due date for lodging your annual FBT return or, where you are not required to lodge a return, by 21 May. You can find more information about the approved format for such a declaration in section 21.6. The declaration requires the employee to calculate a percentage of business use from the other information in the declaration.
The maximum percentage of business use that may be used is 33¹/₃%. It is used when applying the otherwise deductible rule, with Step 2 modified as follows:

No logbook and no requirement to travel 5,000 business kilometres or more

Step	Action
1	Ignoring any payment or contribution made by the employee, calculate the taxable value of the fringe benefit.
2	Multiply the Step 1 amount by the percentage of business use specified on the employee declaration (the maximum is 33¹/₃%).
3	Now look at any payment or contribution made by the employee. How much of this payment or contribution is allowable as an income tax deduction to the employee?
4	Subtract the actual deductible amount (Step 3) from the hypothetical deductible amount (Step 2). The result is the amount by which the taxable value of the fringe benefit may be reduced.

21.2 Logbook and odometer records

This section is relevant only to the first method described in section 21.1.

In a logbook year, both logbook records and odometer records must be maintained by, or on behalf of, the employee. In a year that is not a logbook year, odometer records must be maintained.

A year is a logbook year if:

none of the previous four years were a logbook FBT year for that car (for example, when a car is first used for business or employment-related purposes)
you elect to treat the year as a logbook year (for example, to monitor the percentage of business travel), or
the Commissioner, by written notice, requires you to treat the year as a logbook year.

The logbook records contain a record of business use and are usually maintained for a 12-week period. The odometer records are a record of the total distance travelled during the same 12 weeks that the logbook records are maintained, and also of the total distance travelled in each year.

You should maintain records of additional information, such as the car's make, model, registration number and percentage of business use, as part of your business records.

21.3 Estimating the percentage of business use

This section is relevant only to the first method described in section 21.1.

You calculate the percentage of business use of a car using the following formula:

A ÷ B × 100

Where:
A is your estimate of business kilometres travelled by the car during the FBT year (or part-year, as the case may be).
B is the total kilometres actually travelled by the car during the same period.

The business use percentage and your estimate of the business kilometres must be entered into your business records by the due date for lodging your annual FBT return or, where you are not required to lodge a return, by 21 May.

Estimating the business kilometres travelled in a logbook year

When estimating the business kilometres travelled in a logbook year:

a logbook recording details of business journeys undertaken in the car must be kept for a continuous period of at least 12 weeks, as well as odometer records of total kilometres travelled during that period
odometer records of the total kilometres travelled during the year must be kept
you must estimate the number of business kilometres travelled during the full FBT year (or part-year if appropriate). The estimate must take into account all relevant matters, including the logbook records, odometer records, any other records you keep, and any variations in the pattern of business use throughout the year, for example, holidays or seasonal factors.

Estimating the business kilometres travelled in a year that is not a logbook year

When estimating the business kilometres travelled in a year that is not a logbook year:

you must keep odometer records of the total kilometres travelled during the year (or part-year if appropriate)
you must estimate the number of business kilometres travelled during the full FBT year (or part-year if appropriate). The estimate must take into account all relevant matters, including the logbook records from the logbook year, odometer records for the current year, any other records you keep, and any variations in the pattern of business use throughout the year, for example, holidays or seasonal factors.

Replacement cars

If you have replaced a car during the year, the replacement car may be treated as though it were the replaced car for the purposes of complying with the requirements outlined in section 21.5.

If you kept logbooks and odometer records during the year, or in a previous year, for the purpose of estimating a business percentage for the replaced car, that percentage may be transferred to the new car if it remains appropriate.

The transfer of a business percentage in this way is conditional on you recording in your business records the make, model and registration number of both cars and the date on which the replacement was made. These entries must be made on or before 21 May (or such later date as is agreed on for lodging the annual return). Odometer records kept for the cars during the replacement year must show details of the odometer readings of both the replaced car and the new car on the replacement date.

21.4 Information to be recorded in logbook records

This section is relevant only to the first method described in section 21.1.

We don't produce an official logbook. You are entitled to keep records of your own design, or to purchase one of the many commercial products available. However, the following details must be entered in the logbook for each business journey:

the date(s) on which the journey began and ended
the odometer readings at the start and end of each journey
the kilometres travelled
the purpose of the journey.

The logbook records must be in English and entries must be made at the end of the trip or as soon as reasonably practicable afterwards.

The period during which the logbook was kept must be specified in the logbook at the end of the logbook period.

21.5 Information to be recorded in odometer records

This section is relevant only to the first method described in section 21.1.

Odometer records are a record of the total kilometres travelled by the car during the FBT year or, if the car was not used to provide fringe benefits for the whole year, for that part of the year when it was used for this purpose.

Odometer records should also be kept for the same period for which a logbook is kept.

We don't produce an official odometer record. You are entitled to keep records of your own design, or to purchase one of the many commercial products available. However, the following details must be entered in the odometer records for the beginning of each period (that is, year, part-year or logbook period) and also for the end of each period:

the date the period began, or ended, as the case may be
the odometer reading at the start of the period, or at the end of the period, as the case may be.

The odometer records must be in English, and the entries should be made at the times the readings relate to, or as soon as reasonably practicable afterwards.

If you replace a car during the year and transfer the business percentage to the new car, the odometer records must also include an entry showing odometer readings for the replaced car and the new car on the replacement date.

21.6 Employee declaration

This section is relevant only to the second and third methods described in section 21.1. The second method is no longer available from 1 April 2016.

In order to substantiate the percentage of business use of an employee's car, the employee must provide a declaration to you and it should be in the approved form for the type of benefit that you provided.

Therefore, if you have provided:

an expense payment fringe benefit, you would use the Expense payment benefit declaration
a loan fringe benefit, you would use the Loan fringe benefit declaration
a property fringe benefit, you would use the Property benefit declaration
a residual fringe benefit, you would use the Residual benefit declaration.

However, the information contained in the declaration must be extended by the addition of either section B or C (whichever is appropriate) as shown on the Employee's car declaration. For a list of employee declarations, refer to About declarations.

21.7 The otherwise deductible rule and jointly provided fringe benefits

Where a fringe benefit (loan fringe benefit, expense payment fringe benefit, property fringe benefit or residual fringe benefit) is provided jointly to an employee and an associate in relation to an income-producing asset, the taxable value of the fringe benefit can be reduced by the employee's share of any deductible amount. In these cases, the amount ascertained as the reduction available forms the 'unadjusted notional deduction', as described in sections 8.8A, 9.4A, 17.5A and 18.7A.

This rule also applies to car fringe benefits provided jointly to an employee and an associate for income-producing purposes.

Example

A car which is owned jointly by an employee and an associate (50% each) is applied by both persons to derive assessable income. A valuation under this Chapter is required because of the extent of the documentation held. The deduction otherwise available under this Chapter will be reduced to the employee's share of any deductible amount – that is, to 50% of the 'unadjusted notional deduction'.

See also:

Taxation Determination TD 93/90 Income tax: does the 'otherwise deductible' rule apply to reduce the taxable value of fringe benefits provided to associates of employees?

Latest update

January 2020

Section	Changes and updates
Throughout	Updated to provide consistency between chapters and style in accordance with corporate requirements

Details of previous updates are available through the versions linked to in the table below.

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

Chapter 22 - Definition of key terms

Relying on this Guide

We are committed to providing you with accurate, consistent and clear information to help you understand your rights and entitlements and your obligations.

A

Activity statement

Used to report your business tax entitlements and obligations, including FBT instalments, goods and services tax (GST), pay as you go (PAYG) instalments and withheld amounts.

Aggregate non-exempt amount

The amount that exceeds the capping threshold of the grossed-up taxable value of benefits provided to employees.

All-day parking

The parking of a single car for a continuous period of at least six hours or more between the hours of 7.00am and 7.00pm on a particular day.

Associate

People and entities closely associated with you – such as relatives, or closely connected companies or trusts. A formal definition is contained in section 318 of the Income Tax Assessment Act 1936 and is modified by sections 148, 158 and 159 of the Fringe Benefits Tax Assessment Act 1986.

Available for private use

A car is considered to be available for private use if it is either:

not at your premises, and the employee is allowed to use it for private purposes
garaged at or near an employee's home.

If a car is garaged at an employee's (or an associate's) home, it is treated as being available for their private use, regardless of whether they are actually allowed to use it privately. If the employee's home is their workplace, the car is considered to be available for their private use if it is garaged there.

B

Base value

The base value of a car owned includes:

the original cost price paid
the cost of any fitted non-business accessories
dealer delivery charges, excluding registration and stamp duty charges.

The base value of a car leased to an employer is the cost price or market value at the time the lease commenced.

Base year

For purposes of the record-keeping exemption arrangements, this is the FBT year ended 31 March 1997 or any following year.

Benchmark interest rate

Also known as the statutory interest rate. This interest rate is published by the ATO each year and must be used to calculate the taxable value of either:

a fringe benefit provided by way of a loan
a car fringe benefit where an employer chooses to value the benefit using the operating cost method.

See Fringe benefits tax – rates and thresholds for the current benchmark interest rate.

Benefit

Includes any right, privilege, service or facility.

Business premises

Premises, or part of premises, that are used, in whole or in part, for the purposes of business operations.

C

Car

The following types of vehicles (including four-wheel drive vehicles) are cars:

motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of one tonne or more)
all other goods-carrying vehicles designed to carry less than one tonne
all other passenger-carrying vehicles designed to carry fewer than nine occupants.

Commercial parking station

Is one that, in relation to a particular day, means a permanent commercial car parking facility where any or all of the car parking spaces are available in the ordinary course of business to members of the public for all-day parking on that day on payment of a fee. It doesn't include a parking facility on a public street, road, lane, thoroughfare or footpath paid for by inserting money in a meter or by obtaining a voucher.

Cost price

Generally, the expenditure incurred by you or the lessor for the acquisition or delivery of the car. Usually, this is the purchase price that has been paid, although there may be arrangements in place that have an impact on the cost price.

For example, where an employee provides a trade-in, the cost price would be the purchase price minus the trade-in.

Alternatively, where:

the transaction involves a payment by another person directly to a car dealer, the cost price would normally be the net amount you actually pay
an employee pays an amount directly to you, you will need to look at the terms of any agreements and contracts in place to determine whether this payment is an employee contribution or not.

An employee contribution doesn't reduce the cost price of the car.

D

Declaration

A declaration is generally a written advice given to an employer by an employee about the following information relating to fringe benefits received:

the percentage of business/private use
the reduction allowed under the 'otherwise deductible' rule.

Declarations are required to be in a form approved by the Commissioner. See About declarations for the approved wording and information to be contained in these declarations.

Declaration date

The date an employer is required to lodge their FBT return (21 May) for the FBT year, or such later date as the Commissioner allows.

E

Employee

Means a:

current employee
future employee, or
former employee.

An employee is generally someone who receives, or is entitled to receive, salary and wages in return for work or services provided, or for work under a contract that is wholly or principally for the person's labour.

For FBT, 'employees' includes company directors, a beneficiary of a trust who works in the business, office holders, common law employees and recipients of compensation payments.

Employee or recipient's contribution

Also known as a recipient's payment or recipient's rent.

Generally, the payment is a cash payment made by an employee to you or the person who provided the benefit. The employee or recipient's contribution must be made from the employee's after-tax income.

An employee or recipient's contribution may have to be included in your assessable income (as a general rule, the costs incurred by providing fringe benefits are income tax deductible).

Excluded fringe benefits

Benefits that are excluded from the reportable fringe benefits arrangements. They are still taxable benefits.

Exempt benefits

Benefits that are not considered to be fringe benefits and, therefore, are not subject to FBT.

F

FBT year

Runs from 1 April to 31 March.

Fringe benefit

Benefit provided to an employee (or their associate, such as a family member) in respect of employment. Benefits can be provided by you, your associate or by a third party under an arrangement with you. An employee can be a current, future or former employee.

G

Goods and services tax

Broad-based tax of 10% on the supply of most goods, services and anything else consumed in Australia, and the importation of goods and digital products and services into Australia.

Grossing up

Increasing the taxable value of benefits you provide to reflect the gross salary employees would have to earn at the highest marginal tax rate (including Medicare levy) to buy the benefits after paying tax.

GST (input tax) credit

You are entitled to a GST input tax credit for the GST included in the price of purchases you make for use in your business. You are not entitled to a credit to the extent you use the purchases for private purposes or, in many cases, to make input taxed supplies. You will need to have a tax invoice to claim a GST credit (except for purchases with a GST-inclusive price of A$82.50 or less, although you should have some documentary evidence to support these claims).

I

Income tax exempt charity

A charity that has been endorsed by the Australian Taxation Office (ATO) as exempt from income tax.

Individual fringe benefits amount

Total taxable value of all fringe benefits (other than excluded fringe benefits) provided to a particular employee in an FBT year. It includes benefits provided to an associate of the employee. The individual fringe benefits amount also includes benefits provided by your associate or under an arrangement between you and a third party.

L

Logbook year

A year is a logbook year if either:

none of the previous four years was a logbook year for that car
you elect to treat the year as a logbook year (for example, to increase the nominated percentage of business travel)
the Commissioner, by written advice, requires you to treat the year as a logbook year.

M

Market value

The arm's length price payable by a member of the general public in a normal commercial transaction.

Meal entertainment

The provision of meal entertainment means the provision of either:

entertainment by way of food or drink
accommodation or travel in connection with, or to facilitate the provision of, such entertainment
the payment or reimbursement of expenses incurred in obtaining something covered by the above.

N

Notional tax amount

The amount on which FBT instalments are based. Generally, this is the amount of tax assessed for the last return lodged.

O

One-kilometre radius

For the purposes of a car parking fringe benefit, the one-kilometre distance is measured not by radius but by the shortest practicable direct route (by whichever means this route is travelled – for example by foot, car or boat).

Operating cost method

Also known as the logbook method. The taxable value of a car fringe benefit is a percentage of the total costs of operating the car during the FBT year. The percentage varies with the extent of actual private use. The lower the private use of the car, the lower the taxable value will be.

Otherwise deductible rule

The taxable value of certain benefits may be reduced by the amount that an employee would have been entitled to claim as an income tax deduction in their personal tax return if the benefit was not paid for, reimbursed or provided by you, the employer.

P

Place of residence

A place where a person lives or has sleeping accommodation. It doesn't matter whether it is on a permanent or temporary basis. It also doesn't matter whether the person shares the place with someone else.

Primary place of employment

Basically, the employer's premises at which the employee performs the majority of their employment-related duties on a particular day.

Private use

A car is made available for private use by an employee on any day the car is not at your premises and the employee is allowed to use it for private purposes, or the car is garaged at the employee's home.

Q

Quasi-fringe benefits

Benefits that are exempt from FBT solely because they are provided to either:

employees of public benevolent institutions, certain charitable institutions or some hospitals (including government employees who work in public hospitals) or public ambulance services
live-in carers of disadvantaged or elderly people where the employer is a government body, religious institution or not-for-profit company.

Quasi-fringe benefits are included in the employee's reportable fringe benefits amount.

R

Rebatable employer

Certain non-government, not-for-profit organisations. Those that may qualify for an FBT rebate include:

registered charities (other than public benevolent institutions or health promotion charities) that are an institution; not established under a government law and are endorsed by us as a tax concession charity
certain scientific or public educational institutions
certain trade unions and employer associations located in Australia exempt from income tax
not-for-profit tax exempt organisations established for
- musical purposes
- community service purposes
not-for-profit tax exempt organisations established for the encouragement of
- science
- animal racing
- art
- a game or sport
- literature
- music
not-for-profit tax exempt organisation established for the purpose of promoting the development of
- aviation or tourism
- Australian information and communications technology resources
- Australia's agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources.

Remote area

For most employers, accommodation is in a remote area if it is not in or near an urban centre. The accommodation must be located at least 40 kilometres from a town with a census population of 14,000 to less than 130,000, and at least 100 kilometres from a town with a census population of 130,000 or more (population figures based on the 1981 Census).

If the accommodation is in zone A or B (for income tax purposes), it must be located at least 40 kilometres from a town with a census population of 28,000 to less than 130,000, and at least 100 kilometres from a town with a census population of 130,000 or more.

Where the circumstances warrant it, the Commissioner of Taxation has the discretion to treat a person who resides or works in an area adjacent to an eligible urban area as residing or working outside that area if people who live or work near that person are outside the area.

An extended exemption applies to housing benefits provided to employees of certain hospitals, charitable institutions, public ambulance service or a police service. For such benefits, accommodation is treated as being in a remote area where it is situated at least 100 kilometres from a town with a census population of 130,000 or more.

Reportable fringe benefits amount

If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year, you must report the grossed-up taxable value on the employee's payment summary or income statement. These are called reportable fringe benefits.

Representative fee

For the purposes of a car parking fringe benefit, the fee for any particular day is not representative if it differs substantially from the average lowest fee ordinarily charged for all-day parking. For this purpose, an employer may compare the fee for a particular day with the average fee charged during either of the four-week periods beginning or ending on that particular day.

Residence

The place, especially the house, in which a person resides. It also means a dwelling place or a dwelling.

Residual fringe benefit

Any fringe benefit that doesn't fit into one of the other 11 categories of fringe benefits.

S

Salary packaging or salary sacrifice arrangement

An arrangement between an employer and an employee, whereby the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer or associate providing them with benefits of a similar value.

Small business entity

An entity that carries on a business and satisfies the annual aggregated turnover test of $10 million. A formal definition is contained in section 328-110 of the Income Tax Assessment Act 1997. From 1 April 2021, the turnover threshold for FBT concessions will increase to less than $50 million.

Statutory formula method

The statutory formula method for car fringe benefits is based on applying a statutory percentage to the car's base value.

Statutory interest rate

Also known as the benchmark interest rate. This interest rate is published by the Commissioner of Taxation each year and must be used to calculate the taxable value of either:

a fringe benefit provided by way of a loan
a car fringe benefit where an employer chooses to value the benefit using the operating cost method.

See Fringe benefits tax – rates and thresholds for the current statutory interest rate.

Statutory percentage

When calculating the taxable value of a car fringe benefit using the statutory formula method, the car's base value is multiplied by a statutory percentage.

For all car fringe benefits provided after 7.30pm AEST on 10 May 2011 (except where there is a pre-existing commitment in place to provide a car) a flat statutory rate of 20% applies.

For car fringe benefits provided prior to 7.30pm AEST on 10 May 2011, or where you have a pre-existing commitment in place to provide the car after this time, the statutory percentage varies according to the total number of kilometres travelled by the car during the FBT year.

T

Taxable supplies (sales)

For GST, a sale or supply includes a sale of goods or services, a lease of premises, hire of equipment, giving of advice, export of goods and the supply of other things. You are required to pay GST on taxable supplies (sales) you make. You are entitled to claim GST credits for the GST included in the price of purchases you use to make taxable supplies.

You make a taxable supply if you are registered or required to be registered for GST and:

you make the supply for consideration
you make the supply in the course of furtherance of a business (enterprise) you carry on
the supply is connected to Australia.

However, the supply is not taxable to the extent it is either GST-free or input taxed.

Taxable value

The value of fringe benefits that you use as a basis for calculating your FBT liability. There are different rules for calculating the taxable value of the different types of fringe benefits.

Type 1 gross-up rate

Used where an employer (or other provider) is entitled to claim a GST (input tax) credit.

See Fringe benefits tax – rates and thresholds for the current type 1 gross-up rate.

Type 2 gross-up rate

Used where an employer (or other provider) is not entitled to claim a GST (input tax) credit.

See Fringe benefits tax – rates and thresholds for the current type 2 gross-up rate.

U

Usual place of residence

An employee is regarded as living away from their usual place of residence if they are required to do so in order to perform their employment-related duties and could have continued to live at the former place if they did not have to work temporarily in a different locality.

Whether a place is an employee's usual place of residence is a question of fact, based on all the circumstances.

You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).

ATO references:
NO Fringe benefits tax - a guide for employers

SAV/FBTGEMP

	Date:	Version:
	30 March 1997	Original document
	13 December 2013	Updated document
	1 July 2014	Updated document
	7 December 2016	Updated document
	22 May 2017	Updated document
	11 July 2017	Updated document
	17 August 2017	Updated document
	4 September 2017	Updated document
	11 April 2018	Updated document
	9 June 2018	Updated document
	13 July 2018	Updated document
	13 February 2019	Updated document
	5 April 2019	Updated document
	2 May 2019	Updated document
	3 June 2019	Updated document
	19 August 2019	Updated document
	29 January 2020	Updated document
	24 June 2020	Updated document
	8 December 2020	Updated document
	1 July 2021	Updated document
	23 September 2022	Updated document
	8 November 2023	Updated document
	29 May 2024	Updated document
You are here	22 November 2024	Current document
Chapter 3 has been updated. See the Changes and updates sections in the relevant chapters for details.

View full documentBack to top