FRINGE BENEFITS TAX SEMINAR

1. FRINGE BENEFITS TAX SEMINAR 19 March 2001

2. FBT SEMINARS Introduction to Fringe Benefits Tax GST/FBT Interaction Reportable Fringe Benefits Reimbursement vs Allowance

3. INTRODUCTION TO FRINGE BENEFITS TAX

4. IMPACT WHEN WRONG Penalties - up to 200% Government body - only per annum component Real cost to budget Roll back - number of years If late - general interest charge

5. FRINGE BENEFITS TAX Is a … tax on employers on fringe benefits provided to employees

6. WHAT IS A BENEFIT? “Benefit” broadly defined: includes any right … privilege, service or facility e.g. company car home phone reimbursement employee awards

7. WHAT ISN’T A FRINGE BENEFIT? Salary or wages, all allowances (except LAFHA) Eligible termination payments Certain capital payments Most superannuation contributions

8. WHEN IS IT ASSESSED? A fringe benefit is assessable in the year when the benefit is provided to the employee and/or their associate

9. WHO IS AN EMPLOYEE? Employee current former future person who receives or is entitled to receive salary or wages

10. SALARY AND WAGES Where amount must be withheld Under Schedule 1-Tax Admin Act To the extent payment is assessable

11. EMPLOYEE VS CONTRACTOR Why is it relevant? PAYG FBT SGC PRT Workers compensation

12. EMPLOYEE Payments made for: the labour of the person labour content > 50% of contract value contract does not require a result no power to delegate not working for himself / herself

13. EMPLOYEE’S ASSOCIATE - S136/S26AAB Immediate family Relative De facto spouse

14. EMPLOYER Current Former Future Pays salary and wages Liable for FBT

15. ASSOCIATE OF EMPLOYER Section 159 State is associate of each authority of the state Authority of state is associate of each other authority of the state

16. DEFINITION OF AN ARRANGEMENT Definition: any agreement, understanding, promise or undertaking, whether expressed or implied, enforceable or not … any scheme, plan, proposal, action, etc …

17. WHAT IS AN ARRANGEMENT? Agreement between employer and third party For provision of benefit to employee Employer knowingly participated in, or Facilitated provision of the benefit

18. IN RESPECT OF EMPLOYMENT Must be provided in respect of employment

19. HOW IS EACH DIVISION STRUCTURED? Framework Definition Exemptions Calculation of taxable value Reductions in taxable value Section 136 definitions

20. ADDITIONAL DIVISIONS Division 13 - exempt benefits e.g. lap-top computers, certain taxi travel Division 14 - reductions e.g. home leave travel certain remote area benefits

21. WHAT IS AN EXEMPT MINOR BENEFIT? Defined section 58P < $100 Difficult to record or value Infrequent and irregular Consider associated benefits Not for tax-exempt entertainment

22. CAN A FRINGE BENEFIT BE INCOME? Section 23L ITAA fringe benefits and exempt benefits exempt from income tax

23. HOW DO YOU CALCULATE FBT PAYABLE Aggregate Fringe Benefits Amount GST inclusive value of benefit Less employee contribution Less otherwise deductible

24. HOW DO YOU CALCULATE FBT PAYABLE Identify Type 1 individual fringe benefits amounts Identify Type 1 excluded fringe benefits Add together - Type 1 Aggregate Fringe Benefits Amount Gross-up by new gross-up rate

25. HOW DO YOU CALCULATE FBT PAYABLE Identify Type 2 individual fringe benefits amounts Identify Type 2 excluded fringe benefits Add together - Type 2 Aggregate Fringe Benefits amount Gross-up by old gross-up rate Add Type 1 and 2 Aggregate Fringe Benefits amounts Apply FBT rate of 48.5%

26. WHAT ARE TYPE 1 BENEFITS? Benefits provided to employees (or associate) in respect of which the provider (e.g. employer) was entitled to (partial or full) input tax credit at the time the benefit was acquired. GST - creditable benefit FBT rate + GST rate (1 - FBT rate) x (1 + GST rate) x FBT rate 2.1292 approximately

27. WHAT ARE TYPE 2 BENEFITS? Those that are not type 1 Benefits provided prior to 1 July 2000 GST free benefits Goods and services not acquired by employer Provided by certain employers whose activities are input taxed

28. WHAT IS THE TYPE 2 GROSS-UP RATE? 1 1-FBT rate = 1.9417 approximately

29. EXAMPLE OF CALCULATION Type 1 Aggregate Fringe Benefits Amount x 2.1292 $470,000 x 2.1292 = $1,000,724 Type 2 Aggregate Fringe Benefits Amount x 1.9417 $200,000 x 1.9417 = $388,340 ? ($1,000,724 + $388,340) x 48.5% = $673,696

30. WHAT IS AN EMPLOYEE CONTRIBUTION? After tax contribution by employee Total contribution reduces taxable value If input tax credit claimed - 1/11 of cash contribution to provider is GST

31. WHAT IS THE OTHERWISE DEDUCTIBLE RULE? An expense the employee would have been entitled to claim in their own income tax return if it had not been paid or reimbursed by the employer Only employee not associate Jointly deemed to be to employee Declaration in certain circumstances

32. WHAT ARE THE GST IMPLICATIONS OF AN EMPLOYEE CONTRIBUTION? If cash payment to employer - 1/11 GST e.g. after tax contribution by employee If paid expense themselves GST already paid e.g. employee pays for petrol and not reimbursed Total employee contribution used to reduce taxable value

33. HOW DO YOU CALCULATE SALARY SACRIFICE AMOUNTS? Cost of item + FBT - input tax credit e.g. home telephone $550 $550 Cost$(50) input tax credit$568 FBT $1068 salary sacrifice

34. SALARY SACRIFICE post 1.7.00 Salary 70,000 70,000 Sacrifice - 1068 70,000 68,932 Tax 21,330 20,812 48,670 48,120 Telephone bill 550 - Net Disposal Income $ 48,120 $ 48,120

35. SALARY SACRIFICE TR 1999/D7 Prospective arrangements effective Retrospective arrangements ineffective Final has not been issued as yet

36. REPORTABLE FRINGE BENEFITS

37. FRINGE BENEFITS ON PAYMENT SUMMARIES Effective from 1 April 1999 Where taxable value > $1,000 On P/S from year 30 June following FBT year Affects everyone

38. FRINGE BENEFITS ON PAYMENT SUMMARIES All taxable fringe benefits Except excluded fringe benefits car parking entertainment by way of food and drink hiring or leasing entertainment facilities certain remote area benefits

39. FRINGE BENEFITS ON PAYMENT SUMMARIES Grossed-up value reported Old gross-up rate used 1.9417 Not reported: exempt benefits otherwise deductible portion

40. FRINGE BENEFITS ON PAYMENT SUMMARIES Effects: Superannuation Contributions Surcharge Medicare levy surcharge income tested government benefits HECS child support payments termination payments surcharge family allowance?

41. FRINGE BENEFITS ON PAYMENT SUMMARIES Problems pro-rata some benefits what is taxable value? non-packaging items if someone leaves

42. REBATEABLE EMPLOYERS Includes non-profit, non-government employers e.g. non-profit schools, clubs Eligible for 48% rebate of tax payable From 1 April 2001 - Rebatable limit $30,000 grossed-up taxable value per employee

43. EXEMPT EMPLOYERS Includes PBI’s, public and not for profit hospitals Exempt from FBT on fringe benefits provided From 1/04/2000 - exempt limit $17,000 grossed-up taxable value for employees in public and not for profit hospitals From 1/04/2001 - exempt limit $30,000 grossed-up taxable value for other employers

44. HOW DO YOU IDENTIFY A FRINGE BENEFIT? Review salary packages expense reimbursements entity’s policy on benefits last year’s FBT return

45. REIMBURSEMENT VS ALLOWANCE FBT reimbursement of actual expenditure Income Tax payment of allowance for anticipated expenditure (except LAFHA)

46. CAR FRINGE BENEFITS

47. WHEN IS A CAR SUBJECT TO FBT? Car held by employer or associate provided to employee or associate at any time on a day in respect of employment

48. WHEN IS A CAR SUBJECT TO FBT? When it is: applied for private use, or available for private use unless exempt

49. WHAT IS A CAR? Car road vehicle designed to carry < 1 tonne; or < 9 passengers motor car (4 wheel drive), station wagon, panel van, utility truck does not include a motor cycle

50. WHAT CARS ARE EXEMPT? Taxi, panel van, utility truck carrying < 1 tonne; or Road vehicle carrying < 1 tonne and not principally to carry passengers; and Private use nil, minor or infrequent Work related travel - to/from work or incidental to employment

51. WHAT CARS ARE EXEMPT? Emergency service vehicles ambulance, fire fighting and police marked fitted with sirens

52. HAS THE ATO ISSUED ANY GUIDANCE ON EXEMPT CARS? MT 2024 dual cabs - exempt only if: utility truck and private use, minor, irregular and  infrequent; or if it is designed to carry load > 1 tonne; or > 8 passengers consider whether residual benefit

53. HAS THE ATO ISSUED ANY GUIDANCE ON EXEMPT CARS? MT 2024 4 wheel drives not principally designed to carry passengers MT 2033 modified cars

54. WHAT DOES ANY TIME OF DAY MEAN? Day of acquisition/disposal One car benefit Pool cars actual private use parked at home: statutory formula available for private use

55. PRIVATE USE The car is: applied for private use available for private use

56. CALCULATING THE TAXABLE VALUE Statutory formula days available for private use Cost basis (operating costs) private vs business kilometres

57. CALCULATING THE TAXABLE VALUE Statutory formula administration easier Cost basis (operating costs) log books required administration harder lower FBT cost - sometimes

58. STATUTORY FORMULA

59. WHAT IS THE STATUTORY FORMULA? T.V. = ABC - E D Where: A - Base value D - Days in year B - Statutory fraction E - Employee contribution C - Private use days (not salary sacrifice)

60. WHAT IS THE BASE VALUE? At the time the car was first held by the provider, was it: owned; or leased

61. BASE VALUE - OWNED Cost price less stamp duty government charges registration plus non-business accessories (including acquisition and fitting costs) GST or sales tax and delivery costs less GST inclusive employee contributions

62. BASE VALUE - LEASED Leased car value (GST inclusive): market value cost price to lessor Plus non-business accessories Less employee contributions MT 2021 ATO concession for employee trade-in ATO reconsidering view

63. HOW IS SALES TAX EXEMPTION CALCULATED? To 30 June 2000 Sales tax in invoice Tax inclusive recommended retail price x applicable % Non-luxury cars: actual cost x sales tax rate applicable to non-luxury cars

64. CAN THE BASE VALUE BE REDUCED? Section 9(2) and TD 94/28 1/3 reduction - held more than 4 years at 1 April accessories not reduced

65. WHAT IS STATUTORY FRACTION? Annualised kilometres < 15,000 26% 15,000 - 24,999 20% 25,000 - 40,000 11% > 40,000 7% Remember: must annualise

66. HOW DO YOU ANNUALISE KILOMETRES?  A x B C A - Kilometres travelled in year B - Days in year C - Days in holding period

67. HOW DO YOU VERIFY ODOMETER READINGS? Closing reading declaration by employee petrol card reading Alternatives per TD 94/26 repair invoices service records

68. HOLDING PERIOD Period in the year of tax that car is held by the provider

69. PRIVATE USE DAYS Includes: days the vehicle is actually driven for private use; and days the vehicle is available for private use

70. WHAT IS PRIVATE USE? Use not exclusively in course of producing assessable income of employee travel to/from home travel to shops travel for personal purposes

71. WHAT IS AVAILABLE FOR PRIVATE USE? Not at business premises of employer Parked at employee’s residence Parked at airport Not available for private use TD 94/16 safe storage prohibition on private use (MT 2021) at repair shop and undriveable

72. EXAMPLE OF STATUTORY FORMULA Cost (inc GST) $ 27,900 Accessories: Non-business $ 2,500 Kilometres (annualised) 24,500 Unavailable days 5

73. EXAMPLE OF STATUTORY FORMULA 30,400 x 20% x 360 365 T.V. = $5,997

74. WHAT DOCUMENTATION IS REQUIRED? Cost price Days unavailable and reason Odometer reading Alternatives to above Employee contribution not salary sacrifice

75. ARE CAR EXPENSES SUBJECT TO FBT? Car running expenses exempt from FBT if statutory formula used registration and insurance fuel and repair RACV roadside assistance

76. OPERATING COST METHOD

77. WHAT IS THE OPERATING COST METHOD? [C x ?100% - BP?] - R C - Operating costs BP - Business use % R - Recipients contribution

78. WHAT ARE OPERATING COSTS? Rego and insurance Fuel, repairs, service, car wash Notional depreciation Notional interest x WDV 7.3% - 31 March 2001 Lease charges

79. OPERATING COSTS Include all such expenses incurred by any person (whether the provider of not)

80. APPORTIONMENT OF OPERATING COSTS Holding period Days unavailable

81. BUSINESS PERCENTAGE Is the percentage of the total distance travelled by the car that relates to business use

82. CALCULATING BUSINESS PERCENTAGE Employer makes a reasonable estimate of the business kilometres travelled in the holding period; Divided by the total kilometres travelled

83. ESTIMATE OF BUSINESS KILOMETRES Employer must take into account all relevant matters log books odometer records variations in pattern of use

84. WHAT IS A LOG BOOK? Kept for 12 weeks - section 162H Requirements for each business trip date trip began and ended odometer reading at start and end of trip number of kilometres travelled purpose of journey made ASAP at end of journey

85. WHEN IS A NEW LOG BOOK REQUIRED? New log book every five years Employer elects to treat as log book year Commissioner advises in writing the year is to be a log book year Business usage changes by 10% or more

86. ODOMETER RECORDS Beginning and end of the holding period In a log book year - beginning and end of the applicable log book period

87. EXAMPLE OF OPERATING COST METHOD Operating costs $15,000 Business % 70% = 15,000 x (100% - 70%) = 15,000 x 30% = $4,500

88. WHAT ARE THE DOCUMENTATION REQUIREMENTS? Election: Section 10(4) Car expenses Cars WDV at 31 March 2000 and 31 March 2001 Log book Employee contributions

89. WHAT ARE THE DOCUMENTATION REQUIREMENTS? Odometer records Employer’s estimate of business kilometres Employer’s specified business use percentage

90. CAR FRINGE BENEFITSGST Transitional Rules Denial of Input tax credits on new car purchases No entitlement to credits in 2000/2001 50% entitlement to credits 1/7/01 - 30/6/02 Full entitlement 1/7/02 onwards Previously WST exempt entities can claim

91. CAR FRINGE BENEFITSEntity owned vehicles GST on acquisition partial/full ITC entitlement: FBT@ 2.1292 I.e. cars purchased 1/7/01 onwards No ITC entitlement I.e. cars purchased prior to 1/7/01

92. CAR FRINGE BENEFITS GST on lease payments ITC entitlement FBT @ 2.1292 No ITC entitlement FBT @ 1.9417 Transitional period Pre 2/12/98 and 8/7/99 leases Residual value post 30/6/00 subject to GST

93. CAR FRINGE BENEFITSTR 2000/D8 Gross-up rate dependant on ITC entitlement on acquisition or lease costs Up to 30/6/00 Type 2 From 1/7/00 Type 1? Entitlement to ITC on running costs immaterial

94. WHAT HAPPENS WITH REPLACEMENT CARS? Statutory formula separate calculation Operating cost elect - replacement car same business %, or separate car new log book

95. WHAT HAPPENS WITH SHORT TERM HIRE? ATO view: < 12 weeks not a car fringe benefit, e.g.: extensive repairs awaiting new car still a benefit

96. WHAT IS A NOVATED LEASE? Tripartite agreement between lessor, employer and employee Employer liable for expenses whilst employs employee Liability moves with employee

97. NOVATED LEASES Taxation Ruling TR 1999/15 Only full novations tax effective under partial novation, original not rescinded per ATO under a partial novation, the employee is assessable on sub-rental, but no deduction for rental (section 51AF)

98. IS A LEASED VEHICLE SOLD TO EMPLOYEE SUBJECT TO FBT? Sold to employee at residual Current ATO view - TD 95/63 Granby v FC of T Profit assessable to employee?

99. ATO - COMMON ERRORS Cars - travel to and from work only Private use of exempt vehicles Base value delivery costs registration and stamp duty Incorrect annualisation of kilometres Log books

100. PAYMENT SUMMARIES AND CARS Cost base $ 30,000 Taxable value using Statutory Formula (7%) $ 2,100 Payment summary amount $ 4,077

101. PAYMENT SUMMARIES AND CARS Operating costs $ 12,760  Business use 90% $ 11,484 Private use 10% $ 1,276 Payment summary amount $ 2,477

102. TAX EXEMPT ENTERTAINMENT FRINGE BENEFIT

103. WHAT ISSUES NEED TO BE CONSIDERED? Entertainment Meal entertainment Entertainment facility leasing expenses Valuation method actual 50/50 split 12 week register Arrangements

104. ENTERTAINMENT

105. WHAT IS ENTERTAINMENT? Provision of entertainment by way of: food, drink or recreation accommodation or travel for whether of not business discussions occur

106. WHAT IS MEAL ENTERTAINMENT? Provision of entertainment by way of: food or drink accommodation or travel for payment, reimbursement of expense whether or not business discussions occur

107. WHAT ABOUT FOOD/DRINK AND ENTERTAINMENT? TR 97/17 “ … only when the food and drink confers entertainment on the recipient”

108. WHAT NEEDS TO BE CONSIDERED? What type of food and drink When provided Where provided Why provided

109. COMMON EXAMPLES OF MEAL ENTERTAINMENT? Restaurants Dining rooms On-premises functions At seminar

110. WHAT IS NOT SUBJECT TO FBT? Sustenance Light meals Working lunch, dinner Meals while travelling

111. WHAT ARE EXAMPLES OF ENTERTAINMENT RECREATION? Golf days Theatre tickets Football, cricket matches Holiday travel Conference “day trips” Sponsorship tickets

112. IS IN-HOUSE ENTERTAINMENT EXEMPT? Subject to FBT Section 41 exemption does not apply to Division 10 benefits

113. WHAT IS ENTERTAINMENT FACILITY LEASING EXPENSE? Hiring or leasing of corporate box boats, planes for entertainment other premises, facilities for entertainment excluding cost of food or drink

114. WHAT IS TAXABLE VALUE OF EFLE? Employee share or 50/50 split * Exclude advertising component

115. ENTERTAINMENT FBT  Entertainment - Employee Yes off premises - Third parties No Entertainment - Employee Yes in-house - Third parties No - Associate Yes Sustenance - Employee/ third parties No

116. MEAL ENTERTAINMENT- WHAT IS ACTUAL EMPLOYEE COST? Unless election made Cost attributable to employee entertainment Subtract employee contributions

117. WHEN DO YOU USE ACTUAL COST METHOD? All costs and data available Employee meals < 50%

118. WHAT IS 50/50 SPLIT METHOD? Must elect to apply 50% of all meal entertainment employees and associates non-employees

119. WHAT IS 50/50 SPLIT METHOD? Deduct employee contributions No “otherwise deductible” reduction No minor benefits exemption

120. WHEN SHOULD 50/50 SPLIT METHOD BE USED? To save administration time and costs When employee meals > 50% When no detail of actual cost When no 12 week register

121. WHAT IS 12 WEEK REGISTER METHOD? Must elect to use Continuous 12 week period Representative period Deduct employee contributions No “otherwise deductible” reduction Valid for current year and next 4 New register if 20% increase in expenditure

122. WHAT IS ENTERTAINMENT UNDER ARRANGEMENT? Entertainment provided by third party to employee, or associate … is a fringe benefit if it is provided under an arrangement

123. ENTERTAINMENT Accounts required No FBT FBT Allows for choice of method

124. EXPENSE PAYMENT, PROPERTY & RESIDUAL FRINGE BENEFITS

125. GENERAL OVERVIEW Definition Exempt benefits Taxable value Otherwise deductible rule declarations documentation

126. WHAT IS AN EXPENSE PAYMENT FRINGE BENEFIT? Employer pays employee’s expense reimburses employee’s expense e.g. home phone, mortgage repayments

127. ARE THERE ANY EXEMPTIONS? Exempt accommodation - LAFH declaration Exempt car expense cents per kilometre reimbursement No-private-use declaration

128. WHAT IS A NO-PRIVATE-USE DECLARATION? Employer reimburses business expenses only Annual declaration by employer all employees; particular class; or particular employees

129. HOW IS TAXABLE VALUE CALCULATED? In-house External - GST inclusive amount paid or reimbursed Less: employee’s contributions otherwise deductible portion

130. WHAT IS AN IN-HOUSE BENEFIT? Provider is employer or associate Provider supplies identical or similar property to outsiders $500 reduction per employee per year

131. WHAT IS OTHERWISE DEDUCTIBLE RULE? Employee only Once-off deduction Wholly or partly Documentary evidence Declaration - showing % deductible

132. WHAT DOCUMENTARY EVIDENCE IS REQUIRED? Must satisfy Subdivision 900-E of ITAA 1997 invoice, etc showing: dates expenditure incurred name and address of provider/supplier nature of goods or services date of document amount of the expense credit cards?

133. WHAT IS A RECURRING FRINGE BENEFIT DECLARATION? Employee receives series of fringe benefits essentially the same but for differences in value or proportion of business use Declaration valid for 5 years unless 10% variation

134. WHEN IS A TRAVEL DIARY REQUIRED? Domestic > 5 nights; and not exclusively business Overseas > 5 nights

135. WHAT INFO IS REQUIRED IN A TRAVEL DIARY? FBTAA requires: place where activity undertaken duration of activity date and time activity commenced nature of activity

136. ARE THERE ANY VARIATIONS? MT 2038 adds: within 2-3 days of activity itinerary may satisfy requirements

137. WHEN DOES A PROPERTY FRINGE BENEFIT ARISE? Property provided by employer, or Associate, or Third party arranger To employee or associate Ownership passes or will pass

138. WHAT IS PROPERTY? Broadly defined and includes: tangible - goods, etc animals, gas, electricity intangible - real property chose in action other property

139. WHAT ARE THE TWO TYPES? In-house External

140. HOW DO YOU CALCULATE TAXABLE VALUE? External benefits Provider is employer or associate Property purchased by provider Taxable value is cost price

141. TAXABLE VALUE : EXTERNAL Other cases - notional value All cases - less employee contribution

142. DOES OTHERWISE DEDUCTIBLE RULE APPLY? Yes, provided: once and only deduction declaration provided documentary evidence

143. WHAT ARE RESIDUAL FRINGE BENEFITS? Catch all provision Benefit is residual if not caught under other provisions

144. WHEN IS THE BENEFIT TAXABLE? In the year: it is provided, or where provided over a number of billing periods when it is due and payable e.g. electricity

145. ARE THERE ANY EXEMPTIONS? Employee transport provided to public Recreational/childcare facilities on business premises Property used in and on employer’s business premises LAFH accommodation

146. ARE THERE ANY EXEMPTIONS? Motor vehicle not for private use Unregistered motor vehicle Transport for oil rig and remote area employees Priority of access to childcare facilities No private use declaration

147. HOW IS TAXABLE VALUE CALCULATED? In-house External non-period - ALP paid External period - ALP paid

148. WHAT ABOUT OTHERWISE DEDUCTIBLE RULE? Employee only Once only deduction Declaration required except: exclusive employee residual benefit extended travel residual benefit Declaration includes recurring benefit

149. WHAT ARE BUSINESS PREMISES? TR 2000/4  premises or part are of the person used for business operations neither ownership nor exclusive possession necessaryneed control over and right to possession of premises

150. IS PROVISION OF CLOTHING AND UNIFORMS TAXABLE? Amount paid by employer Less employee’s contribution otherwise deductible amount

151. ANY ATO GUIDANCE ON OTHERWISE DEDUCTIBLE? TR 97/12 + TD 1999/62 protective clothing occupation specific clothing compulsory and distinctive clothing which identifies the employer non-compulsory occupational clothing registered with DIST

152. WHEN ARE CLOTHING & UNIFORMS NOT OTHERWISE DEDUCTIBLE? TR 97/12 conventional clothing non-protective clothing heavy duty conventional clothing

153. COMPULSORY CORPORATE UNIFORMS GUIDELINES TD 1999/62 If not registered, need to be distinctive and compulsory Prescribed in express policy Commitment from employees

154. FLOWCHART

155. TEST CASE Currently being heard Funded by ATO Are work related sun protection products deductible?

156. WHAT ABOUT TEAM AWARDS? FBT payable Otherwise deductible? Minor benefit - < $100

157. WHAT ARE ELIGIBLE WORK RELATED ITEMS? All exempt: briefcase protective clothing calculator tools of trade mobile phone or car phone (provided) notebook or laptop computer

158. WHAT ARE REQUIREMENTS? Provided as expense payment, property or residual No work use pre-requisite No dollar limit No substantiation or declaration

159. WHAT ABOUT A MOBILE OR CAR PHONE? Only a work-related item if primarily for use in employees employment No substantiation requirements Consider practical evidence

160. WHAT ABOUT ELIGIBLE MEMBERSHIP OR SUBSCRIPTION? Exempt trade or professional journals corporate credit card airport lounge membership No declarations required

161. WHAT ABOUT TAXI TRAVEL? The travel is a single taxi trip The travel begins or ends at employee’s place of work No time restrictions

162. HOW TO VALUE PRIVATE USE MOTOR VEHICLES NOT CARS MT 2034 methods to value benefits operating cost cents per km TD 2000/20 cents per km for year commencing 1 April 2000

163. CAR PARKING FRINGE BENEFITS

164. WHEN DOES A CAR PARKING FRINGE BENEFIT ARISE? Section 39A: employer controlled premises commercial car park - 1 km 4 hours between 7.00am - 7.00pm employee or associate used car primary place of employment

165. WHEN DOES A CAR PARKING FRINGE BENEFIT ARISE? Section 39A (cont’d) car space near primary place of employment car travel between work and home commercial car park > $5.46/day at 1 April 2000

166. WHAT ARE EMPLOYER CONTROLLED PREMISES? Within employer’s premises Controlled by employer

167. WHAT IS A COMMERCIAL CAR PARK? Section 136 - definition Spaces available to public All day for a fee i.e. > 6 hours during daylight hours - 7.00am - 7.00pm TR 96/26 Run with a view of profit Anti-avoidance provisions

168. WHAT IS NOT A COMMERCIAL CAR PARK? Penalty rates short term shoppers hotel guests Car park for special functions Kerb side parking meters

169. HOW DO YOU CALCULATE THE 4 HOURS? 7.00am - 7.00pm Total duration exceeds 4 hours Times in that day are cumulative

170. WHAT IS PRIMARY PLACE OF EMPLOYMENT? Business premises or associated premises Employee performed duties of employment Place is sole or primary place On that day

171. WHAT IS NEAR PRIMARY PLACE OF EMPLOYMENT? Not defined Within walking distance?

172. WHAT IS TRAVEL BETWEEN WORK AND HOME? Car is used to commute between employee’s residence and employee’s place of employment - at least one way directly

173. HOW DO YOU CALCULATE 1KM RADIUS? From car park entrance to car entrance of those premises Within 1km by shortest practicable route By foot, car, train, boat Measurement - your choice e.g. odometer reading, street directory

174. HOW DO YOU CALCULATE TAXABLE VALUE? Number of benefits: actual statutory formula method 12 week register combination of above

175. HOW DOES THE 12 WEEK REGISTER WORK? Election required Specify cover: all employees particular class particular employees New register - if 10% increase

176. WHAT ABOUT THE STATUTORY FORMULA? 228 days Election required To cover all employees particular class of employees particular employees

177. WHEN WOULD YOU USE STATUTORY FORMULA? Multiple use of spaces No records Save administration Weekend use

178. CAR PARKING

179. WHAT VALUATION METHODS MAY BE USED? Lowest car park cost Market value Average lowest cost Mixture of above

180. WHAT IS LOWEST COST METHOD? Lowest fee charged for all day parking (inc GST) To members of the public All day - 6 hour period TR 96/26 Within 1km of where vehicle parked Corporate rate not acceptable

181. HOW DO YOU CALCULATE THE ALL DAY FEE? If weekly, monthly or yearly fee: total fee (inc GST) business days in period

182. WHAT IS MARKET VALUE? TR 96/26 Valuation by suitably qualified valuer Election required Valuer’s report by declaration date

183. WHAT IS AVERAGE LOWEST COST? Average of lowest fee on First and last days in the FBT year Must be representative Must include GST post 30/06/00

184. WHAT ARE RECORDKEEPING REQUIREMENTS? Actuals method: declaration by lodgment date stating: number of available car spaces daily value of those spaces number of business days valuation method chosen

185. WHAT ARE THE COMMON ERRORS? Actual amount paid used FBT paid for each space each day Benefit not returned

186. LAFHA

187. WHAT IS A LAFHA? Paid by employer to employee As compensation for additional expenses incurred by employee, or Other additional disadvantages to which employee is subject Employee required to LAFH to perform employment duties

188. HOW DO WE CALCULATE TAXABLE VALUE? Amount of allowance Less: exempt accommodation and/or exempt food components LAFH declaration required

189. WHAT IS EXEMPT ACCOMMODATION? Additional accommodation expenses for: employee eligible family members amount employee could reasonably be expected to incur

190. WHAT IS EXEMPT FOOD COMPONENT? Reasonable food expenditure above Statutory food amount of: $42 - adults $21 - children under 12 TD 2000/21 reasonable food component

191. STRUCTURE OF FOOD COMPONENT

192. WHO IS CONSIDERED TO BE LIVING AWAY FROM HOME? ATO approach no set time case by case analysis MT 2030 Expatriates - four years? Domestic - one to two years?

193. TREATMENT OF CERTAIN BENEFITS Leasing furniture - exempt Education expenses Home Leave Relocation transport

194. ARE YOU STILL “LIVING AWAY FROM HOME”? Tax Office guidance to date - MT 2030: living away from usual place of residence in order to perform duties of employment expectation to return to old locality appointment of fixed duration Working holiday visas TD 2000/D5

195. WHAT ARE THE DIFFERENCES BETWEEN LAFHA AND TRAVEL? LAFHA change in job location change in residence generally for longer periods of time family move with employee Tax treatment LAFHA - FBT travel allowance - income tax

196. LOAN FRINGE BENEFIT

197. WHAT IS A LOAN FRINGE BENEFIT? Loan with obligation to repay Principal unpaid at due date Deferred interest loan - new loan

198. WHAT DOES A LOAN INCLUDE? Advance of money Provision of credit Payment of amounts on behalf of another with obligation to repay Any transaction which could be categorised as a loan

199. ARE THERE ANY EXEMPT LOANS? Employer’s business Arm’s length rate Advance for employment related expenses

200. ARE THERE ANY EXEMPT LOANS? Advance for: rental bond security deposit relates to LAFH 12 months maximum TD 95/17 and 95/18

201. HOW DO YOU CALCULATE THE TAXABLE VALUE? Loan x statutory interest rate (7.3%) LESS Loan x actual interest rate

202. CAN TAXABLE VALUE BE REDUCED? Otherwise deductible rule Loan to employee only, but see National Australia Bank case joint loans deemed to be to employee

203. WHAT ARE THE DOCUMENTATION REQUIREMENTS? Declaration for any reductions

204. HOUSING FRINGE BENEFITS

205. WHEN DOES A HOUSING FRINGE BENEFIT ARISE? Lease or licence For employee to Occupy or use Unit of accommodation as Usual place of residence

206. WHAT IS A UNIT OF ACCOMMODATION? House, flat or home unit Hotel, hostel, motel or guesthouse Bunkhouse or living quarters Ship or floating structure Caravan or mobile home

207. WHAT IS USUAL PLACE OF RESIDENCE? Place at which a person resides Sleeping accommodation whether: permanent temporary shared basis

208. HOW DO YOU CALCULATE THE TAXABLE VALUE? Accommodation outside Australia Accommodation in non-remote areas Accommodation in remote areas (now exempt)

209. ACCOMMODATION OUTSIDE AUSTRALIA Market value Less Any employee contribution

210. NON-REMOTE AREA ACCOMMODATION Market valuation In-house - 75% market valuation “Statutory annual value” Less employee contribution

211. WHAT IS STATUTORY ANNUAL VALUE? 1st year market value Later years - previous year’s value indexed Revised every ten years Elect to use market value Index factor TD 2000/30

212. WHAT IS MARKET VALUE? Guide - MT 2025 Onerous conditions ignored, e.g.: employees “on-call” caretaker’s residence

213. WHAT IS REMOTE AREA ACCOMMODATION? Usual place of employment in remote area Customary for employers to provide free or subsidised accommodation (TD 93/200) Provided because of nature of work New exemption from 1 April 2000

214. WHAT IS A REMOTE AREA? Not adjacent to an eligible urban area (s.140): 40kms from a census population centre of 14,000 or more (28,000 for Zone A&B) AND 100kms from a census population centre of 130,000 or more Note changes for hospitals charitable institutions and police

215. Completing & Reviewing the FBT Return

216. The End of the Process Identification of all benefits Identify all applicable concessions Documentary support Pre-lodgement review Considerations for next year

217. Common Errors “Exempt” but taxable cars Phone, rates, school fees, etc Taxable LAFHAs Expatriates’ tax, insurance payments Non-exempt relocation payments Taxable housing benefits

218. What Can You Do To Manage FBT Costs? Assess your organisation’s level of risk Adequate Systems in place Identify all concessions available Remuneration planning Ongoing management

219. Any Further Questions Karen Kirkham 8603 4119 Drew Ashton 8603 4174