House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer,the Hon Peter Costello, MP)

Chapter 9 - Fringe benefits tax - minor benefits exemption

Overview

9.1 The amendment in Schedule 5 of the Bill will amend section 58P of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to ensure that benefits with a value less than $100 can qualify for the exemption from fringe benefits tax (FBT) for minor benefits.

Summary of the amendment

Purpose of the amendment

9.2 The purpose of this amendment is to remove the present uncertainty as to what is the upper limit of the value of a benefit that can qualify for the exemption for minor benefits. This will result in a small reduction in compliance costs for employers who provide minor benefits to employees.

Date of effect

9.3 This amendment will apply to benefits provided on or after the day that this Bill receives Royal Assent. [Subclause 2(1)]

Background to the legislation

9.4 Certain benefits can qualify for exemption from FBT as minor benefits if the value of the benefit is small and, having regard to several factors described in paragraph 58P(1)(f), such as the frequency and total value of identical and similar benefits, it would be unreasonable to tax the benefit.

9.5 The Australian Taxation Office has issued advice that a benefit with a notional taxable value in excess of $50 in most circumstances is unlikely to be considered small for the purposes of section 58P (Taxation Determination 93/197). The practical effect of the amendment, therefore, will be to increase the upper monetary limit for minor benefits that can qualify for exemption.

Explanation of the amendment

9.6 Item 1 will amend paragraph 58P(1)(e) so that a minor benefit will qualify for exemption if the notional taxable value of the benefit is less than $100 where the other conditions set out in section 58P are satisfied. This condition will replace the existing requirement that the notional taxable value of a minor benefit must be 'small'.