Fringe Benefits Tax

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Fringe Benefits Tax by Mind Map: Fringe Benefits Tax

1. 1. Is there a fringe benefit

1.1. s136(1) - any right, privilege, service or facility that is provided. (Very broad definition).

1.2. s23L(1) fringe benefits are not assessable non-exempt income

1.3. s23L(1A) Income that constitutes exempt fringe benefits is exempt income.

2. 2. Is the benefit a 'fringe benefit" (ie. in respect of employment)?

2.1. s136(1)

2.1.1. Benefit provided to an employee or associate

2.1.2. By an employer or associate of the employer

2.1.3. Under an arrangement of employment

3. 3. Determine the category of the fringe benefit

3.1. Div 2 - Car benefits

3.1.1. s7(1) Car held by employer made available for private use by an employee or associate. 136(1) "car" defined as motor vehicle, station wagon, panel van, utility truck or any vehicle to carry a load <1 tonne but does not include a motor cycle. 7(2)(b) Available for private use if garaged or parked near place of residence.

3.1.2. Division 8 Exempt car benefits s8(2)(a) taxi, panel van, utility truck carrying a load < 1 tonne AND s8(2)(b) No private use during the year or it was minor, infrequent & irregular.

3.1.3. Calculation s9(1) Statutory formula method (ABC/D) - E S10(2) Operating cost (C x (100% - BP)) - R

3.2. Div 3 - Debt waiver fringe benefits

3.2.1. s14 Where an obligation to pay or repay an amount is waived.

3.2.2. s15 Taxable value is the amount of payment / repayment waived.

3.3. Div 4 - Loan fringe benefits

3.3.1. s16(1) where a person makes a loan to another person. This is a fring benefit for each year the recipient is under an obligation to re-pay the amount borrowed.

3.3.2. s17 exempts certain loans. Fixed and variable loans to employees of money lenders to the public on the same terms as the public. Short-term (6 month) advances to cover employment-related expenses and 12 month advances to cover security deposits.

3.3.3. s18 taxable value of a loan fringe benefit is the difference between the interest that would have accrued if the statutory interest rate had applied and the interest that actually accrued. TD 2011/6 Statutory interest rate is 7.8% s19 Taxable value of the loan fringe benefit is reduced to the extent it is 'otherwise deductible'.

3.4. Div 5 - Expense payment fringe benefits

3.4.1. two types s20 - Employer pays 3rd party for expenditure incurred by recipient s20 - Employer reimburses employee for the expenditure.

3.4.2. Exemptions 20A(1) - exempt if no private use. S21 - if employee is required to live away from home to perform duties, accommodation to family members is exempt. s22 - car expenditure where an employee travels for work and is reimbursed by the employer.

3.4.3. Taxable value In-house s22A - Where the expenditure was incurred to acquire a good or service produced by the employer. The taxable value is 75% of the amount sold to the public. External s23 Taxable value is the amount of the payment or reimbursement

3.5. Div 6 - Housing fringe benefit

3.6. Div 7 - Living-away-from home allowance fringe benefit

3.6.1. s30(1) where an employee is compensated for additional non-deductible expenses as a result of living away from their usual place of residence in order to do their job.

3.6.2. s31 - taxable value is the amount of the allowance less any exempt accommodation component or any exempt food component. Since 1 October 2012 - the arrangement is only applicable if the employee maintains a home in Australia (for which they are required to work away from) and the employee is away from their home for no more than 12 months. Commissioner releases guidance on 'exempt food & accommodation' every year.

3.7. Div 8 - Airline transport fringe benefit

3.8. Div 9 - Board fringe benefit

3.9. Div 9A - Meal entertainment

3.9.1. s37AA - can elect whether to apply this section or not. If elect for Div 9 not to apply the employer will pay FBT based on actual meals (and claim the deduction in s8-1 & s32-20 ITAA97). TD94/25 split can occur on 'per head' basis between employee and client as client's portion is not deductible. TR 97/17 - Commissioner's comprehensive view of what constitutes entertainment expense - eg. morning tea at work etc.

3.9.2. 37AD Benefit can occur as a result of: Food or drink Accommodation or travel facilitating entertainment Reimbursing expenses for entertainment. 37AE only arises if the employer is the provider

3.9.3. Taxable benefit 50/50 method s37BA - 50% of the expenses incurred by the employer in providing meal entertainment for the FBT year 12-week register method 37CB(1) total meal entertainment expenditure x register percentage s152B - 50% of benefits provided through use of entertainment facilities hired or leased constitutes all expenses but does not include food or drink.

3.10. Div 10 - Tax-exempt body entertainment fringe benefit

3.11. Div 10A - Car parking fringe benefits

3.11.1. s39A(1) Car parking benefit provided if the following conditions are satisfied in relation to a DAYLIGHT PERIOD: Car is parked at business premises where a commercial carparking station is located <1km Lowest fee charged by commercial carpark is > carparking threshold Total duration of the period exceeds 4 hours Car is owned / leased by an employee or associate. Car is used in connection with travelling to and/or from home / work

3.11.2. Exemptions Reg 3A FBT regulations 1992 - disabled people 58GA - small business employers with turnover $10million or less providing the carpark is not at a commercial parking station.

3.11.3. Taxable Value Statutory formula s39FA Employer must elect to use this method and must specify (if for more than one) which employee's carpark is subject to the method. s39FA(4) Daily rate amount x (number of days in period in relation to the space / 366) * 228 12 week record keeping method s39GA(1) Must make election to use this method s39GB Total value of car parking benefis (register s39GC) x (52/12) x (number of days of car parking benefits/366)

3.12. Div 11 - Property fringe benefits

3.12.1. s40 - any property provided (other than work premises) What is property? s136(1) includes buildings and shares / bonds. Anything 'tangible' or 'intangible'

3.12.2. taxable value in-house s42(1) 75% of the arm's length selling price of the lowest arm's length price external s43 cost price ss 42(1) 43 both are reduced by the recipient's contribution. s62 - general reduction per employee of $1,000 in respect of total taxable value for in-house property fringe benefits, residual fringe benefits and airline transport fringe benefits.

3.13. Div 12 - Residual fringe benefits

3.13.1. s45 - any benefit not covered by Divs 2-11

3.13.2. s47 - Exempt residual fringe benefits s47A need to make a 'no private use' declaration Employee transport by employer who provides transport to the public. Recreational or childcare facilities located on business premises Use of property (not motor vehicles) located on business premises. Living away from home accommodation Motor vehicles not for private use Unregistered motor vehicles Transport to and from work for employees in remote locations. Priority access to a childcare facility

3.13.3. Taxable values in ss 48, 49, 50 & 51.

4. 4. Does it fall within any of the exemptions/exclusions for this category or for benefits generally?

4.1. s136(1) Specific exclusions - 'fringe benefit' definition

4.1.1. Salary or wages

4.1.2. Employment termination payments

4.1.3. Deemed dividend benefits

4.1.4. Restraint of trade capital payments or capital compensation for injuries.

4.1.5. Employee share scheme

4.1.6. employer-provided superannuation fund contributions

4.2. Specific exclusions - taxing provision (ss 8, 17, 21, 22, 41, 47).

4.3. Div 13 & 14 'specific exemptions'

4.3.1. s58p Minor benefits <$300

4.3.2. s58X work-related items used >50% for work use such as laptops, protective clothing, briefcase, tools of trade etc.

4.3.3. s62 $1,000 reduction per employee per annum for aggregate taxable value of in-house airline transports.

4.3.4. s63A reduction in taxable value of entertainment provided to someone other than the recipient employee.

5. 5. Determine taxable value of benefit taking into account reductions.

5.1. Step 1: Calculate the taxable value of each benefit provided

5.2. Step 2: allocate taxable values to categories of benefits.

5.2.1. Type 1 benefits - entitled to a GST credit

5.2.2. Type 2 benefits - no entitlement to input tax credits

5.3. Step 3: Gross up taxable value

5.3.1. Type 1 benefits by 2.0647

5.3.2. Type 2 benefits by 1.8692

5.4. Step 4: Add these 2 amounts together and multiply the sum by the FBT rate of 46.5%

6. 6. Any reportable fringe benefits?

6.1. 136(1) where total taxable value of employee's fringe benefits grossed up using the type 2 rate exceeds $2,000 they have reportable fringe benefits.

6.1.1. Exclusions to this rule are: Car parking fringe benefits Meal entertainment Exempt benefits Otherwise deductible benefits