|Each FBT year runs from 1 April to the following 31 March.|
Reportable Fringe Benefits are certain fringe benefits provided by your employer to you and your associates, where the ‘grossed up’ taxable value of the fringe benefits exceeds $2,000 in value in an FBT year. The Reportable Fringe Benefit must be shown on the employee's Annual Payment Summary and is taken into account for a number of government income tests. However, the amount reported on the Annual Payment Summary will not be included in assessable (or taxable income), nor will it affect the amount of standard Medicare levy paid.
Employers are required to ‘gross up’ the value of the benefit provided as income tax is not paid on fringe benefits. The ‘grossed up value’ of the benefit is the amount that you would have received in your gross salary (taxed at the highest marginal rate of income tax plus the Medicare levy and temporary budget repair levy) in order to pay for the benefit yourself in after tax dollars.
Example – grossed up value
As an example, say you were provided a benefit valued at $2,500. The highest marginal tax rate plus the Medicare levy for the year ending 31 March 2018 is 47 per cent. The grossed up amount that would appear on your payment summary would be $4,717. This is calculated as follows:
|Total Taxable Value /
1 – tax rate applied
1 – 0.47
You would have received $4,717 in your gross salary to pay for the benefit in after tax dollars i.e. $4,707 less tax of $2,217 is $2,500.
The Reportable Fringe Benefits amount is not included in your assessable income and is therefore not subject to income tax. However, the amount is used to determine entitlement to, or liability for, a number of benefits and obligations including: Medicare Levy Surcharge, Superannuation Co-contributions and Higher Education Loan Program (HELP) and Financial Supplement repayments.
That is correct, Senators and Members of Parliament are not ‘employees’ of the Commonwealth for common law purposes. However, for tax purposes, a Member of Parliament (including a former Member of Parliament) is deemed to be an ‘employee’ under the Income Tax Assessment Act 1997, the Fringe Benefits Tax Assessment Act 1986 and the Fringe Benefits Tax (Application to the Commonwealth) Act 1986. A Member of Parliament for tax purposes includes Members of the Commonwealth House of Representatives and of the Senate, Members of State Legislative Assemblies and Legislative Councils, Members of the Northern Territory and Ministers of the Crown (Ministers). The intention and effect of such legislation is to ensure salaries and benefits received by Members of Parliament are subject to the Income Tax and Fringe Benefits Tax provisions.
The taxable value of an expense payment benefit may be reduced by the ‘Otherwise Deductible’ rule. A benefit is ‘Otherwise Deductible’ if the employee would have been entitled to claim an income tax deduction if the employer had not paid for the expense. Generally, to determine if the employee would have been entitled to claim an income tax deduction, the expense must be incurred in the course of gaining or producing assessable income. In the event of an audit by the Australian Taxation Office, substantiation may be required, such as receipts, diary records and itemised bills. Further guidance on deductibility of expenses can be found at the ATO website: Deduction essentials.
- View claiming deductions
In accordance with the Fringe Benefits Tax Assessment Act 1986 the value of a car benefit can be calculated by using either the operating cost (log book) method or statutory formula method. In the absence of a log book, the statutory method must be used.
The statutory formula method calculates the taxable value of the motor vehicle benefit as a percentage of the car's value based on the number of days during the FBT year on which the car was available for private use. A car is considered by the Australian Taxation Office to be available for your private use if it is garaged at or near your private residence and/or in your custody or control. Therefore, although the vehicle may be used for work related purposes during the day, under the statutory formula method, garaging the car at your private residence results in the car being deemed to be available for private use.
The operating cost method calculates the taxable value of the motor vehicle benefit as a percentage of the total operating costs of the car during the FBT year in which the car was used for actual private use. It is considered actual private use when driving your car from home to work.
Under the statutory formula method, a flat statutory rate of 20% applies, regardless of the distance travelled, to all car fringe benefits provided after 7:30pm AEST on 10 May 2011 (except where there is a pre-existing commitment in place to provide a car).
Car fringe benefits provided before 7:30pm AEST on 10 May 2011, or where you have a pre-existing commitment in place to provide the car after this time, you can continue to use the previous statutory rates unless there is a change to that commitment. Examples of such changes include:
- Refinancing the car
- Alterations to existing lease contracts
- Where accessories are fitted to a leased car after the lease started, the lease is altered and lease payments are increased to reflect this change.
Commitments after 10 May 2011
The statutory rate of 20% applied to any new commitments entered into from 10 May 2011 and was phased in over 4 years, as below:
|Total kms travelled during FBT year||Existing Contracts||From 10 May 2011||From 1 April 2012||From 1 April 2013||From 1 April 2014|
|Less than 15,000||0.26||0.20||0.20||0.20||0.20|
|15,000 to 25,000||0.20||0.20||0.20||0.20||0.20|
|25,000 to 40,000||0.11||0.14||0.17||0.20||0.20|
A log book is required to be maintained in the first year the operating cost (log book) method is used and then every five years, provided there is no major change in the pattern of use of the car. The log book must be kept for a continuous period of 12 weeks. The period may overlap 2 tax years.
The log book must record all business travel. The following information must be recorded for each business trip:
- the date the trip began and ended
- odometer readings at the start and end of the trip
- kilometres travelled
- the purpose of the trip.
The record must be made at the end of each trip or as soon as reasonably possible after the trip.
If the car is replaced, the log book may apply to the replacement car.
As circumstances differ for each car, it is difficult to determine whether the statutory formula method or operating cost (log book) method will result in a lower value for FBT purposes. If you wish to discuss the methods and your particular circumstances, please contact the FBT Help Desk.
A pooled car is a car that is genuinely provided to two or more employees for private use. For example, if you have nominated another employee as a person who may drive your motor vehicle and if that person has driven your motor vehicle for private purposes on one or more occasions during the FBT year, that car will be a pooled car. Where pooled cars are subject to FBT, the benefit will not count towards your RFBA, as pooled vehicles are excluded from being reported on an employee’s payment summary.
The Fringe Benefits Tax Assessment Act 1986 requires the employer to obtain an Expense Payment Benefit Declaration to reduce the taxable value of a benefit by the work related portion. The percentage specified by the employee can be based on a reasonable estimate of the work related component of the account. For example, the employee could determine the work related portion by reviewing an itemised monthly phone bill (that is representative of a typical month) line-by-line to determine the percentage of calls that were work related.
Where your employer pays for HECS - HELP, the benefit falls within the definition of an ‘expense payment’ fringe benefit. The taxable value of such a benefit is the amount of the payment or reimbursement made by the employer reduced by the ‘otherwise deductible’ rule. This means the taxable value of the benefit may be reduced if you would have been entitled to claim an income tax deduction if your employer had not paid for the expense. HECS - HELP is not an income tax deductible expense – a deduction is specifically denied under the Income Tax Assessment Act 1997. Therefore the payment is not ‘otherwise deductible’. The taxable value for FBT purposes is the full amount of the reimbursement. This is shown on your payment summary and M&PS pays fringe benefits tax on the full amount.