House of Representatives

Explanatory Memorandum

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

GENERAL OUTLINE

Fringe Benefits Tax Assessment Bill 1986

This Bill provides for the assessment and collection of fringe benefits tax payable by employers. Its provisions:

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contain specific rules for valuing the following kinds of fringe benefits provided by employers to employees on and after 1 July 1986:

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private use of motor cars;

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interest-free or low interest loans;

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release of debts;

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payment of private expenses;

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free or subsidised residential accommodation;

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excessive living-away-from-home allowances;

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free or subsidised board;

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concessional fares for airline transport;

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entertainment (tax-exempt bodies only);

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free or discounted goods or other property;

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free or discounted services and other benefits;

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specify that fringe benefits tax is an annual tax payable in respect of benefits provided in each year ending on 31 March;

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treat the 9 month period 1 July 1986 to 31 March 1987 as a "transitional year of tax", and specify rules for valuing fringe benefits provided in that period;

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require employers to pay fringe benefits tax by 3 quarterly instalments by 28 July, 28 October and 28 January (for the transitional year 2 instalments payable on 28 October 1986 and 28 January 1987 are required);

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impose an obligation on employers to calculate their annual liability for fringe benefits tax and remit the amount calculated (less instalments paid) with an annual fringe benefits tax return by 28 April each year;

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contain measures for the assessment, collection and recovery of tax, to afford usual rights of objection and appeal, and general machinery provisions consistent with those in other taxation laws.

Fringe Benefits Tax Bill 1986

This Bill will declare the rate of fringe benefits tax and formally impose the tax on an employer in respect of fringe benefits within the meaning of the proposed Fringe Benefits Assessment Act 1986.

The rate of tax is 46% for the 9 months period from 1 July 1986 to 31 March 1987 and 49% for each subsequent year ending on 31 March.

Fringe Benefits Tax (Application to the Commonwealth) Bill 1986

This Bill will ensure that departments and authorities of the Commonwealth are subject to tax liability in respect of fringe benefits provided to their employees as if they were employer corporations subject to the operation of the proposed Fringe Benefits Tax Assessment Act 1986.

Departments and authorities will broadly be under the same obligations as other employers to lodge annual fringe benefits tax returns with the Commissioner of Taxation, and to remit annual amounts of fringe benefits tax, including quarterly instalments.

Fringe Benefits Tax (Miscellaneous Provisions) Bill 1986

This Bill will amend various laws, principally the Income Tax Assessment Act 1936, consequent upon the enactment of the proposed Fringe Benefits Tax Assessment Act 1986. The principal consequential amendments will:

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ensure that a fringe benefit the value of which gives rise to a fringe benefits tax liability to an employer (or that is specifically exempted from such a liability) is not subject to income tax in the hands of the employee who is provided with the benefit;

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repeal existing income tax measures for the concessional valuation of remuneration in the form of residential accommodation provided to employees in designated remote locations;

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deny a deduction under the income tax law for fringe benefits tax paid by an employer;

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ensure that the cost of food and drink provided to an employee either as board or a living-away-from-home fringe benefit is not treated as non-deductible entertainment expenses;

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ensure that income tax deductions are not allowable to employees against expenditure of (non-taxable) living-away-from-home allowances;

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include in the assessable income of an employee the amount of any reimbursement of car expenses by an employer calculated on a per kilometre basis - such "reimbursements" being outside of the scope of the proposed new fringe benefits tax;

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preclude any income tax deduction for an expense incurred by an employee that is reimbursed by an employer where the reimbursement constitutes a taxable fringe benefit;

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extend the operation of the Crimes (Taxation Offences) Act 1980 to schemes for the evasion of fringe benefits tax.