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									Fringe benefits tax glossary


Introduction

Fringe benefits tax (FBT) items in FBT tables

Other items

List of useful publications
Introduction – fringe benefits tax
Fringe benefits tax (FBT) applies to a range of benefits provided by employers (or on their behalf) to
employees (or to people associated with those employees, such as family members). The tax is
based on the value of the fringe benefits provided and is payable by employers. The normal FBT
year begins on 1 April each year and concludes on 31 March of the following year. FBT legislation is
contained in a separate Commonwealth Act known as the Fringe Benefits Tax Assessment Act 1986,
which establishes the rules for assessing and collecting the tax. Tax on the taxable value of fringe
benefits as determined under that Act is imposed by the Fringe Benefits Tax Act 1986.

The statistics reported in the FBT tables (detailed tables and tables in the FBT chapter) cover the
period for the 2002-03 FBT year (1 April 2002 to 31 March 2003). The statistics have been compiled
from the 2003 annual FBT return forms processed by 31 October 2003.

FBT returns can be lodged either electronically or in paper form. A copy of the return is in the
appendix of Taxation statistics 2001-02. It can also be downloaded or can be downloaded from
Taxation statistics 2001–02: Glossaries on the Tax Office website.

Statistics for selected FBT items from the FBT annual return are included in the FBT detailed and
chapter tables. The items are described in this glossary. Descriptions for the FBT items were sourced
from these Tax Office publications: Fringe benefits tax: A guide for employers, Fringe benefits tax: A
guide for employers (addendum) and Fringe benefits tax: A guide to completing your 2003 FBT
return. These publications contain directions on what to include at each item on the return, including
how to calculate amounts for some items. For the purposes of this glossary, the directions are set
out in an edited form to describe the FBT items in the detailed tables and chapter tables. Please see
these publications for a complete description of the FBT items included in this glossary.

Information on FBT items can also be found in the FBT chapter of Taxation Statistics 2001-02. More
information on the items described can be found in other Tax Office publications, tax legislation or
taxation rulings. Some may be downloaded from Taxations statistics 2001–02: Glossaries on the Tax
Office website. Alternatively they may be viewed and downloaded from different locations on the Tax
Office website at www.ato.gov.au or the Tax Office legal database at
law.ato.gov.au/atolaw/index.htm

A list of useful Tax Office publications is provided within the glossaries, a full list of documents
referred to within this entity is listed at the back. The documents available to be downloaded can be
found within the Return forms and other publications section of Taxations statistics 2001–02:
Glossaries. Some of the Tax Office publications are included in the Taxation statistics 2001–02 CD-
ROM. (To order a copy of the book and CD-ROM please send an e-mail to taxstats@ato.gov.au)

Please note that this glossary only presents general descriptions of terms/items. It does not provide
full technical or legal definitions. In addition, the publications mentioned in this glossary (or included
in the Taxation statistics 2001-02 CD-ROM) refer to the publication edition available during the
2002-03 FBT year (that is, the edition taxpayers were using to help them complete their 2003 FBT
return).

Note: The FBT statistics reported in the FBT tables (both chapter and detailed tables) exclude
Australian Government department FBT payers, the FBT payable and FBT rebates claimed by
Australian Government departments and the employee contributions made by employees of
Australian Government departments.
Fringe benefits tax (FBT) items in FBT tables

Number (no.)

Refer mainly to the number of FBT payers or the number of FBT returns. For example, in FBT
detailed table 3, the ‘no.’ under the FBT payable column refer to the number of FBT payers (or FBT
returns) classified under a broad industry who (which) reported a FBT payable amount.


Broad industry and business activity/industry coding

The names of the broad industry groups used in the FBT tables are based on the Australian and New
Zealand Standard Industrial Classification (ANZSIC) system. The numerical codes corresponding to
these industry names are referred to as ‘business industry (or business activity) codes’. They are an
extension of the 4-digit ANZSIC code to 5 digits made by the Tax Office.

A complete list of the industries and the corresponding industry codes for these industries for the
2001-02 income year are found in the Tax Office publication, Business industry codes 2002. A copy
of this publication can be downloaded from Taxations statistics 2001–02: Glossaries on the Tax
Office website.

Some industries have been aggregated, in order to meet privacy regulations.

Taxpayers who may derive income from more than one industry classify themselves under the
business activity/industry code from which the greatest proportion of their gross income was
derived.


FBT payable (or Amount of tax payable or Gross tax) (item 16)

This is the fringe benefits taxable amount × FBT rate, that is, 48.5% of the fringe benefits taxable
amount (item 15).

The fringe benefits taxable amount (item 15) is the total of the type 1 aggregate amount (item 14,
label A), type 2 aggregate amount (item 14, label B) and aggregate non-exempt amount (item 14,
label C).


Type 1 aggregate amount (item 14, label A)

This amount is the sum of each employee’s individual fringe benefits amount calculated in respect of
those fringe benefits that are GST-creditable benefits (that is, where the provider was entitled to
input tax credits for the GST paid). Any excluded fringe benefits that are GST-creditable benefits are
added to this total amount.

The actual formula used to calculate the amount is:

Type 1 aggregate fringe benefits amount x             FBT rate + GST rate
                                            (1 – FBT rate) x (1 + GST rate) x FBT rate

The higher FBT gross-up formula for the type 1 aggregate fringe benefits amount results in a gross-
up rate of 2.1292 where the FBT rate is 48.5% and the GST rate is 10%. If there is no type 1
aggregate fringe benefits amount, $0 is shown at this label.
Type 2 aggregate amount (item 14, label B)

This amount is the sum of each employee’s individual fringe benefits amount for those benefits that
are not GST-creditable benefits (that is, where the provider did not pay GST or input tax credits
were not allowed when the benefits were acquired). Any excluded fringe benefits that are not GST-
creditable benefits are added to this total amount.

The actual formula used to calculate this amount is:

      Type 2 aggregate fringe benefits amount x         1
                                                  (1 – FBT rate)

The FBT gross-up formula for the type 2 aggregate fringe benefits amount results in a gross-up rate
of 1.9417 where the FBT rate is 48.5%. If there is no type 2 aggregate fringe benefits amount, $0
is shown at this label.


Aggregate non-exempt amount – hospitals and PBIs only (item 14, label C)

This label applies only to employers that are public benevolent institutions (PBIs), public hospitals or
not-for-profit hospitals. If the employer does not fall into this category, their aggregate non-exempt
amount should be equal to $0.

The aggregate non-exempt amount is the employer's fringe benefits taxable amount less $17,000
for each employee of certain public and non-profit hospitals or less $30,000 for each employee of
non-hospital public benevolent institutions and charities concerned with the prevention or control of
human diseases.

From 1 April 2000, public hospitals that are PBIs have had a capping threshold placed on the
amount of FBT-free fringe benefits they may provide to employees. The concessional FBT treatment
to these hospitals has been capped at $30,000 of the grossed-up taxable value of fringe benefits
provided to each employee.

Where employees have been provided with benefits above the $30,000 threshold, the employer will
be subject to FBT on its aggregate non-exempt amount.
FBT rebate (or Amount of rebate) (item 18)

This is the amount of rebate to which a rebatable employer is entitled. The rebate is calculated
according to the following formula:

    0.48 x (gross tax – aggregate non-rebatable amount) x rebatable days in year
                                                             total days in year


where:

     gross tax (or amount of tax payable or FBT payable) (item 16) is the total amount of tax
      calculated on the fringe benefits taxable amount

     aggregate non-rebatable amount (item 17) is the portion of the taxable value of fringe
      benefits for which the employer cannot obtain a rebate. This applies only to rebatable
      employers. Rebatable employers are certain non-profit, non-government organisations that are
      eligible for a rebate of 48% of the amount of FBT that would otherwise be payable. From 1 April
      2001 the total grossed-up value of benefits that can be provided to each employee of a rebatable
      employer, without losing the existing concessions, is capped at $30,000. If the total grossed-up
      value of the fringe benefits provided to an individual employee exceeds $30,000, a rebate cannot
      be claimed for the FBT liability on the excess amount. The aggregate non-rebatable amount is
      the portion of the taxable value of fringe benefits for which the employer cannot obtain a rebate,
      that is, the portion above $30,000.

     rebatable days in the year means the number of days during the FBT year that the employer
      qualified as a rebatable employer

     total days in the year means the number of days in the year the claimant was an employer.


Types of benefits provided (item 23)

In general, a fringe benefit is a benefit provided in respect of employment. It includes any right,
privilege, service or facility. Fringe benefits are provided to employees (or associates of the
employees) in place of or in addition to salary or wages, for example, the use of a car for private
purposes.

FBT is payable on the following types of benefits described below.

Note: Statistics on the taxable value of the different benefits are not reported (not available) in any
of the FBT chapter and detailed tables. Only the number of FBT payers who provided the different
types of benefits are reported in FBT detailed table 3. For information on how to calculate the
taxable value of these benefits please refer to Tax Office publication, Fringe benefits tax: A guide for
employers.

Car fringe benefits

A car fringe benefit commonly arises when a car which is owned or leased by an employer is made
available for the private use of an employee.

A car is taken to be made available for private use by an employee on any day that:

     it is actually used for private purposes by the employee, or

     the car is not at the employer's premises, and the employee is allowed to use it for private
      purposes, or

     the car is garaged at an employee's home, regardless of whether or not the employee has
      permission to use it privately.
As a general rule travel to and from work is private use of a vehicle.

Private use of a motor vehicle which is not a car may give rise to a residual fringe benefit.

The following types of vehicles (including four-wheel-drive vehicles) are cars:

   motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed
    to carry a load of one tonne or more)

   any other goods-carrying vehicles with a designed carrying capacity of less than one tonne, and

   any other passenger-carrying vehicles with a designed carrying capacity of fewer than nine
    occupants.

The taxable value of a car fringe benefit may be calculated by two methods:

   The statutory formula (S/F) method: The taxable value of the car fringe benefit is a
    percentage of the car's value. This percentage varies with the total distance travelled by the car
    during the FBT year (regardless of whether or not it is private travel). The greater the distance
    travelled, the lower will be the taxable value.

   The operating cost (O/C) method: the taxable value of the car fringe benefit is a percentage
    of the total costs of operating the car during the FBT year. The percentage varies with the extent
    of actual private use. The lower the incidence of actual private use, the lower will be the taxable
    value.

Note: Statistics on the taxable value of the different benefits are not reported (not available) in any
of the FBT chapter and detailed tables. However, the number of FBT payers who provided car fringe
benefits and used either the statutory formula (S/F) method or operation cost (O/C) method to work
out the taxable value of the car fringe benefits are reported in FBT detailed table 3.

Loans granted (or Loans fringe benefit)

A loan fringe benefit arises from a loan to an employee on which a low rate of interest (or no
interest) has been charged during the FBT year. A low rate of interest is one that is less than the
statutory rate of interest. This rate is publicised each year, usually in April. The statutory interest
rate for the 2003 FBT year (1 April 2002 to 31 March 2003) is 6.05%.

The use of the term ‘loan’ is quite broad. For example, if an employee owes a debt to an employer
but the employer does not enforce payment after the debt becomes due, then the unpaid amount is
treated as a loan to the employee. Such a loan commences immediately after the due date at the
rate of interest, if any, that accrues on the unpaid amount.

Where a loan is made to an employee under terms that allow for interest payments to be made less
frequently than every six months, the lender is treated at the end of each six-month period as
having separately loaned, at a nil rate of interest, any unpaid amount of interest. The period of the
deemed loan is from the end of the six-month period until the interest is paid or becomes payable.

If an employee owes money to an employer or to the business then the employer may be providing
a loan fringe benefit. This does not apply if the employee owes the money as an ordinary customer
and under the same terms and conditions as an ordinary customer.

When an employer releases an employee from the obligation to repay the loan, a debt waiver fringe
benefit may arise.
Debt waiver fringe benefit

A debt waiver fringe benefit is the waiving or forgiving of an employee's debt. For example, if an
employer who has sold goods to an employee later tells the employee not to bother about paying
the amount invoiced for them, then the employer has provided a debt waiver fringe benefit.

A debt owed by an employee that is written off as a genuine bad debt is not a debt waiver fringe
benefit.

Expense payment fringe benefit

An expense payment fringe benefit may arise in either of two ways. The first is where an employer
reimburses an employee for expenses incurred by the employee. The second is where an employer
pays a third party in satisfaction of expenses incurred by an employee. In either case, the expenses
may be ‘business’ expenses, private expenses or a combination of the two.

It is important to note that this type of fringe benefit applies only to expenses incurred by an
employee that are paid or reimbursed by the employer. It does not apply to cases where goods or
services are purchased by the employer and provided to the employee. Nor does it apply to goods or
services purchased through the use of the employer's credit card. Goods or services acquired in
these ways are subject to valuation under the property or residual benefit rules, respectively.

Housing fringe benefit

If an employee is provided with the right to use a unit of accommodation and if that unit of
accommodation is the usual place of residence of the employee, then the right to use the unit of
accommodation is a housing fringe benefit.

A unit of accommodation includes:

   a house, flat or apartment

   accommodation in a hotel, motel, guesthouse, bunkhouse or other living quarters

   a caravan or mobile home, or

   accommodation in a ship or other floating structure.

The employee's use of the unit of accommodation need not be exclusive, that is, the use of shared
accommodation as a usual place of residence is nonetheless a housing fringe benefit.

Living-away-from-home allowance fringe benefit

The payment of a living-away-from-home allowance is a living-away-from-home allowance fringe
benefit.

For FBT purposes a living-away-from-home allowance is an allowance paid by an employer to an
employee. It is intended to compensate for additional expenses incurred and disadvantages (if any)
suffered because the employee is required to live away from home in order to perform his or her
duties of employment. The term ‘additional expenses’ does not include expenses that the employee
would be entitled to claim as an income tax deduction.

Airline transport fringe benefit (airline and travel agents only)

An airline transport fringe benefit arises where employees of airlines or travel agents are provided
with free or discounted air travel on a stand-by basis.
Board fringe benefit

The provision of a meal to an employee is a board fringe benefit if the employee is entitled to the
provision of accommodation and the following conditions are satisfied:

   there is an entitlement under an industrial award to be provided with at least two meals a day,
    or under an employment arrangement at least two meals a day are ordinarily provided

   the meal is supplied by the employee's employer (if the employer is a company, the meal may
    be supplied by a related company in a wholly-owned group)

   the meal is cooked or prepared on the employer's (or related company's) premises or on a work
    site or place adjacent to a work site, and

   the meal is supplied on the employer's premises (or the work site) or on the premises of a
    related company.

Some common examples of meals which may be board fringe benefits are:

   meals provided in a dining facility located on a remote construction site, oil rig or ship, and

   meals provided to a live-in housekeeper or to resident teachers in a boarding school.

Meals supplied to family members living with an employee who is entitled to meals under the
employment agreement or award are also treated as board meals which are subject to valuation
under these rules.

Property fringe benefit

A property fringe benefit arises when an employee is provided with property, free or at a discount,
by an employer.

For FBT purposes, property includes:

   all goods, including gas and electricity (unless provided through a reticulation system) and
    animals,

   real property such as land and buildings, and

   choices in action such as shares or bonds.

Income tax exempt body – entertainment fringe benefit

A tax-exempt body entertainment fringe benefit may arise from entertainment expenses incurred by
an employer who is wholly or partially exempt from income tax or who does not derive assessable
income from the activities to which the entertainment relates.

Entertainment expenses are expenses incurred on the provision of entertainment by way of food,
drink or recreation. Accommodation or travel expenses are also entertainment expenses if they are
incurred in connection with or to facilitate entertainment by way of food, drink or recreation.

It is only entertainment expenditure of the kind that is non-deductible for income tax purposes
which can give rise to a tax-exempt body entertainment fringe benefit.

An employer is a tax-exempt body if the employer's income is either:

   wholly exempt from income tax (for example, a local government body, or a club which earns
    income from members only), or

   partially exempt from income tax (for example, a club which earns income from both members
    and non-members).
Meal entertainment

Meal entertainment fringe benefits are fringe benefits provided by way of (or in connection with)
food or drink. Note that this category does not include entertainment provided by way of recreation.

The provision of meal entertainment may give rise to a number of different types of fringe benefit
(for example, expense payment fringe benefits, airline transport fringe benefits, property fringe
benefits, residual fringe benefits or tax-exempt body entertainment fringe benefits) depending on
the circumstances under which the meal entertainment is provided.

Where expense payment fringe benefits, airline transport fringe benefits, property fringe benefits,
residual fringe benefits or tax-exempt body entertainment fringe benefits arise from the provision of
meal entertainment the employer may elect to classify these fringe benefits as meal entertainment
fringe benefits.

The provision of meal entertainment means the provision of:

   entertainment by way of food or drink

   accommodation or travel in connection with, or to facilitate the provision of, such entertainment,
    or

   the payment or reimbursement of expenses incurred in obtaining something covered by the
    points above.

If the employer elects to classify the fringe benefits as meal entertainment fringe benefits, then the
expense payment fringe benefits, airline transport fringe benefits, property fringe benefits, residual
fringe benefits or tax-exempt body entertainment fringe benefits are deemed not to arise from the
meal entertainment.

If the employer elects to classify the fringe benefits as meal entertainment fringe benefits, then all
of the fringe benefits arising from the provision of meal entertainment by the employer during the
FBT year are included in the election.

Meal entertainment provided by someone who is not the employer cannot be included in the
election.

This means that if a fringe benefit arises from the provision of meal entertainment and if the
employer is not the provider of the meal entertainment then the fringe benefit must be valued
according to the rules for that type of fringe benefit, for example, an expense payment fringe
benefit, an airline transport fringe benefit, a property fringe benefit, a residual fringe benefit or a
tax-exempt body entertainment fringe benefit.
Car parking fringe benefit

Broadly, a car parking fringe benefit may arise when an employer provides car parking facilities for
an employee at or near his or her place of employment and there is a commercial parking station
available for all-day parking within a one-kilometre radius of the premises on which the car is
parked.

Specifically, a car parking fringe benefit arises only if all of the following conditions are satisfied:

   a car is parked at premises that are owned by, leased by or otherwise under the control of the
    provider (usually the employer)

   within a one-kilometre radius of the premises on which the car is parked there is a commercial
    parking station that charged a fee for all day parking, which is more than the car parking
    threshold.

   the car is parked for a total of more than four hours between the hours of 7.00 a.m. and 7.00
    p.m. on the day

   the car is owned, leased or otherwise under the control of an employee, or it is provided by the
    employer

   the parking is provided in respect of the employee's employment

   the car is parked at or near the employee’s primary place of employment on that day

   the car is used by the employee to travel between home and work (or work and home) at least
    once on that day, and

   the commercial parking station referred to above must also, at the beginning of the FBT year,
    charge a fee for all-day parking that is more than the car parking threshold and which is a
    representative fee.

The car parking threshold is $5.96 for the FBT year beginning on 1 April 2002. Future CPI
movements may cause increases in the threshold amount.

A commercial car parking station is one that charges a fee for all-day parking, is permanent and is
commercial (that is, operates with a view to making a profit or to recover the costs of running the
facility).

All-day parking means parking for a continuous period of at least six hours. The six-hour period
must be between the hours of 7.00 a.m. and 7.00 p.m.

The one-kilometre distance is measured not by radius but by the shortest practicable direct route
(however this route is travelled, for example, by foot, car, boat).

A fee charged on any particular day is not representative if it is substantially greater or less than the
average of the lowest fee charged by the parking station operator in the ordinary course of business
to members of the public for all-day parking during either of the following periods (as chosen by the
employer):

   the four-week period beginning on that particular day, or

   the four-week period ending on that particular day.

The employee's primary place of employment is, broadly, the employer's premises at which the
employee performs the majority of his or her employment duties on a particular day.
Other benefits (or residual fringe benefits)

Any fringe benefit that is not subject to any of the other rules is called a residual fringe benefit (that
is, those fringe benefits which are the remainder or are left over because they are not one of the
more specific categories of fringe benefit).

A residual fringe benefit could include, for example, the provision of services (fro example, travel, or
the performance of professional or manual work) and the use of property. It would also include the
provision of insurance coverage, for example, health insurance coverage under a group policy taken
out by an employer for the benefit of employees.

Generally where a benefit consists of the supply of both goods and services it is subject to separate
valuations for the goods component (property fringe benefit) and the services component (residual
fringe benefit). However, in certain circumstances the benefit is valued solely as a residual fringe
benefit. These circumstances arise when the person providing the benefit is in a business where
goods and services are supplied together, for example, carrying out repairs that entail the supply of
spare parts, and the benefit is of that kind. Where such a benefit is treated as a residual fringe
benefit it is excluded from the property fringe benefit rules.


Employee contribution (Item 23, (b))

This is the total of employee contributions made in respect of a benefit type.

An employee contribution is where an employee or associate of an employee is a recipient of a
fringe benefit and makes a contribution or payment (other than a contribution of services as an
employee) to the employer for the supply of the benefit.

Any excess employee contribution for one benefit cannot be used to offset the taxable value of other
benefits provided to that employee or other employees. Employee contributions received by an
entity are generally assessable for income tax purposes and should be included on the entity’s
income tax return. If an entity lodges a company, trust or partnership return, the entity (or the
employers) should also enter the amount of employee contributions received at the appropriate
label on their income tax return.

An employee contribution (other than a contribution of services as an employee) is treated as
consideration for a taxable supply for GST purposes and, accordingly, GST is payable by the
employer on the supply. The GST-inclusive employee contribution will reduce the taxable value of
the fringe benefit. GST will not form part of an employee’s contribution where the benefit is either
GST-free or input taxed, the GST was paid to a third party (for example, for fuel), the provider of
the benefit is not required to be registered for GST, or the benefit is not a taxable supply.
Other items – fringe benefits tax

Taxable value of fringe benefits

Generally the value of the fringe benefit after deducting any employee contributions or other
relevant reductions. The Fringe Benefits Tax Assessment Act 1986 contains a number of different
valuation rules for calculating the taxable value of different categories of fringe benefit. (Information
on how to calculate the taxable value of fringe benefits is available in the Tax Office publication,
Fringe benefits tax: A guide for employers)


Public benevolent institution

This is an entity that:

   is established and carried on for the relief of poverty, sickness, suffering, distress, misfortune,
    destitution or helplessness

   makes its services available without discrimination to every member of the public the
    organisation aims to benefit

   is administered for the public good without purpose of private gain, and

   provides direct relief for the benefit of a disadvantaged section of the public (for example, the
    provision of food and/or shelter for homeless people).


Goods and services tax (GST) related items

The following GST related items are described and explained in the ‘GST and other taxes’ chapter
(chapter 12) of Taxation Statistics 2001-02.

   GST

   taxable supply

   input taxed supply

   GST-free supply

   consideration (for GST purposes)

   input tax credit

Further details relating to GST and FBT are contained in Chapter 22 of Fringe benefits tax: A guide
for employers and FBT reform: the interaction between FBT and GST — Fact sheet.
List of useful publications – fringe benefits tax
The below list outlines all of the publications that have been referred to within Fringe benefits tax
Glossary 2001–02.

To download these documents, please refer to the Taxation statistics 2001–02: Glossaries on the tax
office website.



Fringe benefits tax return 2003

2003 Fringe benefits tax return guide

Fringe benefits tax – a guide for employers

Fringe benefits tax – employers guide addendum

Fringe benefits tax reform – the interaction between FBT and GST – Fact sheet

								
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