Fringe benefits tax - a guide for employers

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Chapter 5 - Reportable fringe 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).

You (the employer) have to record the value of fringe benefits provided to each of your employees. If the value of certain fringe benefits provided exceeds $2,000 in a fringe benefits tax (FBT) year (1   April to 31   March), you will be required to record the grossed-up taxable value of those benefits on your employee's payment summary for the corresponding income year (1   July to 30   June). You may also have to report the notional value of certain exempt benefits.

Before 1 April 2007, the fringe benefits reporting exclusion threshold was $1,000.

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 works in or for a public benevolent institution, a health promotion charity, a hospital, a public ambulance service and/or is a live-in residential care worker (refer to section   20.5 of Fringe benefits tax exempt benefits). These benefits are known as quasi fringe benefits . The exemption from the requirement to pay FBT in relation to such benefits continues to apply.

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 Fringe benefits tax exempt benefits ) 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 Fringe Benefits Tax Assessment Act 1986 (FBTAA).

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

• 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).
• Car parking fringe benefits (not including car parking expense payment benefits - refer to section   9.9 of Expense payment fringe benefits).
• Hiring or leasing entertainment facilities such as corporate boxes.
• Remote area residential fuel where the value of the benefit is reduced in accordance with the conditions in section   19.2 of Reductions in fringe benefit taxable value .
• Remote area housing assistance where the value of the benefit is reduced in accordance with the conditions in section   19.2 of Reductions in fringe benefit taxable value.
• Remote area home ownership schemes where the value of the benefit is reduced in accordance with the conditions in section   19.2 of Reductions in fringe benefit taxable value.
• Remote area home repurchase schemes where the value of the benefit is reduced in accordance with the conditions in section   19.2 of Reductions in fringe benefit taxable value.
• 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 regulation pursuant to paragraph 5E(3)(i) of the FBTAA:

• 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.

Pooled or shared cars

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, and
• 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 amounts on payment summaries

Where an employee's individual fringe benefits amount is $2,000 or less, you do not have to report an amount on the employee's payment summary.

Before 1 April 2007, the fringe benefits reporting exclusion threshold was $1,000.

If an employee's individual fringe benefits amount is more than $2,000, you must report the grossed-up value of that amount on the employee's payment summary. This amount is known as a reportable fringe benefits amount and is calculated using the following formula:

Individual fringe benefits amount (1 - FBT rate)

The FBT rate is 46.5%. This is the same as multiplying the individual fringe benefits amount by the lower gross-up rate of 1.8692.

Prior to the FBT year 1 April 2006 - 31 March 2007, the FBT rate was 48.5%. The lower gross-up rate was 1.9417. The lower gross-up rate of 1.9417 should be used for reporting on payment summaries for the income year ending 30   June 2006.

The higher gross-up rate formula is not used to calculate an employee's reportable fringe benefits amount (refer to section   2.11 of Calculating fringe benefits tax).

Example: grossing-up amount for payment summary reporting

The total value of benefits provided to an employee is $3,500. The rate of tax is 46.5%. The value of reportable fringe benefits is calculated as follows:

      $3,500        

(1 - 0.465)

= $3,500

        0.535 (or $3,500 x 1.8692)

= $6,542 (in whole dollars)

You show the reportable fringe benefits amount relating to benefits provided during the FBT year (1   April to 31   March) on the relevant employee's payment summary for the corresponding income year. For example, you would show the value relating to benefits provided during the FBT year 1   April 2008 to 31   March 2009 on the employee's payment summary for the income year 1   July 2008 to 30   June 2009.

Example: working out amounts for payment summaries

Between 1 April 2008 and 31 March 2009 (the 2008-09 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 their Higher Education Loan Program (HELP) debt as well as their spouse's ($550 each).

The total taxable value of fringe benefits for this employee is $3,140. The briefcase and mobile phone are exempt from FBT and the reimbursement of the spouse's HELP debt is allocated to the employee.

The reportable fringe benefits amount would appear on the employees' payment summary for the income year ending 30   June 2009.

Reportable fringe benefits amount	=	Individual fringe benefits amount     x     1.8692
	=	3,140     x     1.8692
	=	5,869

$5,869 would appear on the employee's payment summary for the income year ending 30   June 2009.

5.5 Consequences of having an amount included on a payment summary

Even though a reportable fringe benefits amount is included on a payment summary, it is not included in the employee's assessable income. It is, however, included in a number of income tests relating to the following government benefits and obligations.

• Medicare levy surcharge.
• Mature age worker tax offset.
• Deduction for personal superannuation contributions.
• Tax offset for eligible spouse superannuation contributions.
• Super co-contribution.
• Higher Education Loan Program (HELP) and Financial Supplement repayments.
• Child support obligations.
• Entitlement to certain income-tested government benefits.

Example: Medicare levy surcharge

An employee has a taxable income of $40,000 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 $160,000. They have three dependent children. No-one in the family is covered by private patient hospital insurance.

The couple's family threshold for the surcharge is $143,000 ($140,000 plus $1,500   x   2) for the 2008-09 income year. As their family income ($140,000) exceeds their family surcharge threshold and they are both liable to pay the Medicare levy, the surcharge would apply to both individuals. The amount of surcharge payable by the employee would be $800 (1% of $80,000) and the amount payable by the spouse would be $800 (1% of $80,000) for the 2008-09 income year.

Example: HELP debt

If an employee had a HELP debt of $10,000, a taxable income of $35,000 (including a net rental loss of $2,000) and a total reportable fringe benefits amount of $7,000, they would have to repay $1,760 (4% of $35,000   + $2,000   +   $7,000) for the 2008-09 income year.

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

= $4,500

              10

= $450.00

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 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 do not have to provide them with a payment summary before the standard date of issue (14   July) following the end of the income year covered by that payment summary.

Example:

An employee ceases employment with a particular employer on 15   May 2008. Between 1   April 2008 and 15   May 2008 the employee was provided with fringe benefits with a reportable value of $3,738. The reportable amount of $3,738 must be reported on a payment summary for the income year ended 30   June 2009. The employer would have until 14   July 2009 to issue the payment summary.

5.8 Who must be issued with payment summaries?

Normally, you have to issue payment summaries only to employees receiving salary or wages. For FBT purposes, the definition of 'employee' is 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 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 1996 and continues to occupy the company house. The market rental value of the house is $10,400 for the FBT year 1   April 2008 to 31   March 2009.

The reportable fringe benefit that must be shown on the payment summary for the income year 1   July 2008 to 30   June 2009 is $19,439, calculated as follows:

$10,400 X 1.8692 = $19,439

5.9 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 do not have to amend the employee's payment summary 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 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 of How fringe benefits tax works).

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   4.6 of Fringe benefits tax record keeping). 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 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:

• Law Administration Practice Statement PS   LA   2002/7 - Amendment of an employer's fringe benefits tax assessment which requires an adjustment to a previously advised reportable fringe benefits amount
• Reportable fringe benefits - facts for employees
• How to complete the PAYG payment summary - individual non-business form .

Changes and updates

The electronic version of the guide is reviewed on a quarterly basis. The following tables detail any major changes and updates made to this chapter at each review.

2010 calendar year

Quarter 1

Section	Changes and updates
Reportable fringe benefits	Updated the information above the heading '5.1   Benefits included in the reporting requirements' to reflect the change in the reporting exclusion threshold.
5.2 Excluded fringe benefits	Addition of information under 'Excluded by subsection   5E(3) of the FBTAA' regarding costs of occasional travel for clarity. Addition of information regarding reporting exclusion for pooled or shared cars.
5.4 Reporting amounts on payment summaries	Updated information to reflect change in reporting exclusion threshold. Updated examples.
5.5 Consequences of having an amount included on a payment summary	Included 'Financial supplement repayments' in the list of government benefits and obligations. Updated examples in line with other products.
5.6 Employee's share	Updated examples.
5.7 What happens when an employee ceases employment and has reportable benefits?	Updated example due to change in reporting exclusion threshold.
5.9 Correcting an amount on a payment summary already issued	Updated information for consistency with How to complete the PAYG payment summary - individual non-business form .
More information	Addition of How to complete the PAYG payment summary - individual non-business .

Quarter 2

Section	Changes and updates
	Nil.

Quarter 3

Section	Changes and updates
	Nil.

Last Modified: Monday, 21 February 2011

ATO references:
NO NAT 1054