Taxation Laws Amendment Act (No. 4) 2003 (66 of 2003)
Schedule 7 FBT exemption for worker entitlements
Fringe Benefits Tax Assessment Act 1986
1 After section 58P
Insert:
58PA Exempt benefits - worker entitlement contributions
If:
(a) a person makes a contribution to an approved worker entitlement fund; and
(b) the person is required to make the contribution under an industrial instrument; and
(c) the contribution is either:
(i) required for the purposes of ensuring that an obligation under the industrial instrument to make leave payments (including payments in lieu of leave) or payments when an employee ceases employment is met; or
(ii) for the reasonable administrative costs of the fund;
the contribution is an exempt benefit.
58PB Meaning of approved worker entitlement funds
(1) A fund is an approved worker entitlement fund if the fund:
(a) is established by or under a law of the Commonwealth, a State or a Territory for the purpose of ensuring that long service leave is paid; and
(b) is operating under that law.
(2) A fund is also an approved worker entitlement fund if:
(a) the fund is prescribed for the purposes of this paragraph; and
(b) a declaration under subsection (3) is not in force in relation to the fund.
(3) The Treasurer may declare, in writing, that a fund is not an approved worker entitlement fund. The declaration is a disallowable instrument for the purposes of section 46A of the Acts Interpretation Act 1901.
(4) Before the Governor-General makes a regulation under paragraph (2)(a) prescribing a fund for the purposes of that paragraph, the Commissioner must be satisfied that:
(a) the management of the fund (including the management of the investments of the fund) is carried out at arm's length from the contributors to the fund and their associates; and
(b) under the fund's constituting documents:
(i) no more than 5% of the total assets of the fund are to be invested in an entity controlled by a contributor or an associate of a contributor; and
(ii) the assets of the fund are not to be used to provide or facilitate any form of financial assistance, including a loan, to a contributor, a person in respect of whom contributions are made or an associate of a contributor or an associate of a person in respect of whom contributions are made; and
(c) under the fund's constituting documents, payments from contributions to the fund are to be made only for the following purposes:
(i) to pay worker entitlements to persons in respect of whom contributions are made;
(ii) to make investments to generate income from the assets of the fund;
(iii) to reimburse contributors who have paid entitlements directly to persons in respect of whom contributions are made;
(iv) to return contributions to contributors;
(v) to pay, for the benefit of a person in respect of whom contributions are made, an eligible termination payment (within the meaning of section 27A of the Income Tax Assessment Act 1936) into a complying superannuation fund (within the meaning of section 45 of the Superannuation Industry (Supervision) Act 1993), a complying approved deposit fund (within the meaning of section 47 of the Superannuation Industry (Supervision) Act 1993) or a retirement savings account (within the meaning of the Retirement Savings Account Act 1997);
(vi) to transfer contributions to another approved worker entitlement fund;
(vii) to pay the reasonable administrative expenses of the fund;
(viii) to pay amounts to a contributor's external administrator that would otherwise be payable as mentioned in subparagraph (iii) or (iv) to the contributor;
(ix) to pay interest on, or to repay, money lent to the fund; and
(d) under the fund's constituting documents, payments from the income of the fund are to be made only for the following purposes:
(i) a purpose mentioned in subparagraphs (c)(ii) to (ix);
(ii) to make payments to contributors to the fund;
(iii) to make payments to other persons where the payment is specified in subsection (5); and
(e) under the fund's constituting documents:
(i) an account must be kept for each person in respect of whom contributions to the fund are made; and
(ii) the account must be kept in a manner that enables entitlements in respect of the person to be calculated.
(5) A payment made by a fund to a person in the following circumstances is specified for the purposes of subparagraph (4)(d)(iii):
(a) a contribution has been made to the fund in respect of the person; and
(b) the contribution would be an exempt benefit under section 58PA if the fund were an approved worker entitlement fund; and
(c) either:
(i) the payment is of a worker entitlement the contribution for which would be an exempt benefit under section 58PA if the fund were an approved worker entitlement fund; or
(ii) the payment is of some kind other than a worker entitlement.
58PC Exempt benefits - existing worker entitlement funds
(1) If:
(a) a person makes a contribution to an existing worker entitlement fund; and
(b) the contribution is made in accordance with existing industrial practice; and
(c) the contribution is either:
(i) made for the purposes of ensuring that an obligation to make leave payments (including payments in lieu of leave) or payments when an employee ceases employment is met; or
(ii) for the reasonable administrative costs of the fund; and
(d) the contribution is made during the FBT year beginning on 1 April 2003;
the contribution is an exempt benefit.
(2) A fund is an existing worker entitlement fund if the fund accepted contributions during the FBT year beginning on 1 April 2002 for the purposes of ensuring that obligations to make leave payments (including payments in lieu of leave) or payments when an employee ceases employment are met.
(3) A contribution is made in accordance with existing industrial practice if the taxpayer or another person in the taxpayer's industry made payments in the FBT year beginning on 1 April 2002 to an existing worker entitlement fund for the purposes of ensuring that an obligation to make leave payments (including payments in lieu of leave) or payments when an employee ceases employment is met.