The payment or reimbursement by M&PS of expenses incurred by an employee in respect of residential telephones, faxes and internet falls within the definition of an ‘expense payment fringe benefit’. An expense payment fringe benefit is where the employer:
- reimburses the employee for expenses incurred by the employee or an associate of the employee, or
- pays a third party in satisfaction for expenses incurred by an employee or an associate of the employee.
The taxable value of an expense payment fringe benefit is equal to the amount paid or reimbursed less any employee contributions made by the employee.
The taxable value of the benefit may be further reduced by the percentage declared by the employee as ‘otherwise deductible’. A benefit is otherwise deductible if the employee would have been entitled to claim an income tax deduction had the employee (rather than the employer) paid for the expense. If the benefit is provided jointly to an employee and an associate, the otherwise deductible rule will only apply to the employee's share of any deductible amount.
An expense payment fringe benefit may be either work related or private or a combination of the two. Where a residential telephone provided by M&PS was used solely for employment-related purposes, the benefit would be entirely otherwise deductible. As a result, the value of the benefit will be reduced to nil. If the benefit is used for both employment-related and private purposes, the private portion will not be otherwise deductible and will result in a taxable fringe benefit.
The employer must obtain a declaration from the employee stating the portion of the expense which is employment related (i.e. otherwise deductible). This is in the form of an Expense Payment Fringe Benefit Declaration. M&PS will send out the declaration after the end of the FBT year (31 March) for completion.
- Form 163: Expense Payment Benefit Declaration - Residential Phone Benefits and/or Dedicated Data Line Benefits