Living away from home allowance201042103850 by lindayy

VIEWS: 5 PAGES: 10

More Info
									                                                                                            GOVERNMENT OF
                                                                                           WESTERN AUSTRALIA




                                                                                              ABN 45 320 599 544
                                                                                              STATE
                                                                                             REVENUE
                                                                                            DEPARTMENT




      PAY-ROLL TAX
     FRINGE BENEFITS


                    Effective 1 July 1997
                    to 31 December 2001

1.      Introduction

With effect from l July 1997, the definition of wages in the Pay-roll Tax Assessment Act has been amended to
include "fringe benefits", as defined in the Fringe Benefits Tax Assessment Act 1986 (FBTA Act).
In summary, the amendment means that for pay-roll tax purposes:
·    From 1 July 1997, fringe benefits are liable to pay-roll tax;
·    From 1 July 1997, fringe benefits are to be largely determined and valued in accordance with the FBTA Act;
·    The liability and valuation of benefits as outlined in Revenue Rulings PT1 and PT2 ceases at 30 June 1997.
In light of the amendments to the Pay-roll Tax Assessment Act, employers are advised to review their position
in respect of fringe benefits from 1 July 1997, as some benefits that were not taxable for pay-roll tax purposes
prior to the amendments, may now be taxable and vice versa.


2.      Benefits before 1 July 1997

Prior to 1 July 1997, the definition of wages in the Pay-roll Tax Assessment Act included "other benefits". This
applied to all benefits provided to an employee, whether in cash or in kind. However, non cash benefits were
taxable only if a monetary value was ascribed to the benefit in a written record of a remuneration package.
Revenue Rulings PT1 and PT2 explain the position in detail for the period prior to 1 July 1997.
The definition and valuation of benefits outlined in the aforementioned Rulings are not applicable in respect of
benefits provided after 30 June 1997.
3.    Fringe Benefits Tax Assessment Act

A fringe benefit under the FBTA Act is a benefit which is provided by the employer, an associate of the
employer, or by a third party (under an arrangement), to supplement the employee’s regular remuneration. The
provision of a benefit can be made either to an employee or an associate of an employee.


Benefits covered by the FBT legislation are as follows:
·        Car fringe benefits
·        Loan fringe benefits
·        Debt waiver fringe benefits
·        Expense payment fringe benefits
·        Housing fringe benefits
·        Living away from home allowance fringe benefits
·        Airline transport fringe benefits
·        Board (meal) fringe benefits
·        Property fringe benefits
·        Meal entertainment fringe benefits
·        Car parking fringe benefits
·        Tax exempt body fringe benefits
·        Residual fringe benefits
Queries concerning the application of the FBTA Act to particular benefits should be addressed to the Australian
Taxation Office.


4.    Fringe benefits liable to pay-roll tax from 1 July 1997

In the main, a fringe benefit and the taxable value of that benefit under the FBTA Act will be liable to pay-roll
tax from 1 July 1997.
However, the fringe benefits tax base has not been adopted in total for pay-roll tax purposes and there are
several important differences which employers must take into account when preparing pay-roll tax returns.
These differences are outlined below:
Living away from home allowance
A living away from home allowance is defined as a fringe benefit for FBTA Act purposes, as can be seen by
referring to the categories of fringe benefits listed in Item 3 above.

However, a living away from home allowance is also assessable as an allowance under the definition of wages
in the Pay-roll Tax Assessment Act.
Under the FBTA Act a living away from home allowance receives concessional treatment, but under the Pay-
roll Tax Assessment Act, is taxable in full.
In order to remove this duplication and to clarify the extent of the liability of a living away from home
allowance, such an allowance has been prescribed under the Regulations of the Pay-roll Tax Assessment Act,
not to be a fringe benefit.
This has the effect of making it clear that a living away from home allowance is liable to pay-roll tax in full as
an allowance, in the same way as any other allowance paid by an employer.
Otherwise deductible rule
In the Commonwealth's fringe benefits tax regime, the otherwise deductible rule operates to reduce the taxable
value of a benefit provided to an employee by the amount of the income tax deduction that the employee would
have been entitled to claim, had the employee borne the cost of providing the benefit.
For example, an arrangement made by an employer to pay the interest on an employee's investment housing
loan is a fringe benefit. However, as the employee would be eligible for an income tax deduction had he borne
the cost of the interest payments, the otherwise deductible rule operates to reduce the taxable value of that fringe
benefit by the amount of the income tax deduction that would have otherwise been applicable.
In the above example, because the investment loan interest payment by the employer on behalf of the employee
is not work related, it was not considered appropriate for pay-roll tax purposes for the otherwise deductible rule
to reduce the taxable value of the fringe benefit.
Accordingly, for pay-roll tax purposes, the value of a fringe benefit that is not a "work related benefit", is the
taxable value of that benefit under the fringe benefits tax regime, disregarding the application of the otherwise
deductible rule i.e. the full value of the benefit.

Remote area fringe benefit exemptions
Remote areas are defined in the FBTA Act and that Act provides exemptions for "fly in fly out" transport and
accommodation, and concessional treatment for housing, residential fuel and holiday travel provided to
employees in these areas.
For pay-roll tax purposes, the "fly in fly out" exemptions continue, and additional full exemptions are provided
as follows:
            Residential fuel i.e. electricity and gas
            Housing assistance
            Domestic water
            Holiday transport *
            Education costs **
* Where the employee does not travel back to their home town or the capital city of their work place, the
  holiday transport exemption is limited to the cost of the return economy airfare to that capital city.
** Limited to the educational costs of the employee's dependant who is required to live away from home in
   order to attend, on a full-time basis, a primary, secondary or tertiary institution that is not within a reasonable
   distance of the remote place at which the employee performs services.


5.       Accounting for the difference in the tax base between FBT and pay-roll tax

Because of the differences in the FBT base and the pay-roll tax fringe benefits tax base, employers must make
the relevant adjustments before preparing pay-roll tax returns.
An example of the necessary adjustments is set out below:


                                                                                             $                  $
 Taxable value per FBT return                                                                                100,000
 Less:     living away from home allowances                                                10,000
           additional remote area exemption                                                 5,000            - 15,000
                                                                                         Sub total            85,000
 Plus:     otherwise deductible rule adjustment                                                              + 5,000
 Pay-roll tax taxable value                                                                                   90,000

This adjustment mechanism is incorporated in examples and worksheets later in this pamphlet.
Note also that the taxable value for pay-roll tax purposes does not include any grossed-up amount for FBTA Act
purposes.


6.      Return of fringe benefit amounts for pay-roll tax purposes

Employers are required to declare in their pay-roll tax returns, the actual taxable value of fringe benefits
provided in each return period.
However, the pay-roll tax scheme allows for an employer to elect, on the appropriate form, to return fringe
benefits on the estimated method.
This election must be lodged with the Commissioner no later than the due date of the first pay-roll tax return of
the first financial year in which the estimated basis is to be used.
It is important to note the following:
·    All returns for a financial year must be made on the same basis i.e. all estimates or all actuals.
·    Change from actuals to estimates requires lodgment of an election form.
·    Change from estimates to actuals, or vice versa, can only occur with effect from 1 July of each year.
·    Change from estimates to actuals requires notification to the Commissioner in writing.
·    Change from estimates to actuals requires completion of an adjustment calculation to account for the change,
     for inclusion in the final return under the estimated method - see Item 7 and Examples 2 and 3.
The estimated method allows for pay-roll tax to be paid on fringe benefits, based on the value of benefits
declared on the FBT return immediately preceding the current financial year (adjusted for the differences in the
tax bases explained in Items 4 and 5 above).
An election to return on the estimated method can only be made where the employer has been paying fringe
benefits tax on Western Australian benefits to the Australian Taxation Office, for at least fifteen months prior to
the commencement of the financial year.
Fringe benefits tax returns are based on a year ending 31 March. Therefore, employers who elect to use the
estimated method will be required to declare in each monthly pay-roll tax return from July to May, one twelfth
of the adjusted value of Western Australian fringe benefits provided in the FBT year ending 31 March
immediately preceding the commencement of a financial year. A fringe benefits reconciliation is required in the
June pay-roll tax return of each financial year. The June pay-roll tax return should include the difference
between the adjusted value of Western Australian fringe benefits provided in the FBT year ending 31 March
immediately preceding the June return, and the total amount of fringe benefits included in the pay-roll tax
returns for each of the eleven preceding months.
Example 1 below shows how to calculate the monthly amount to be declared in July to May returns as well as
the June return reconciliation amount.
In addition, a pay-roll tax fringe benefits reconciliation worksheet has been prepared to assist employers and is
reproduced at Appendix 1 of this pamphlet.
Employers registered for pay-roll tax on an annual basis simply declare the adjusted value of WA fringe benefits
for the FBT year immediately preceding their return for 30 June of each year.
A worksheet must be prepared and retained for each fringe benefits pay-roll tax reconciliation in order that it is
available for audit purposes.

Example 1 - Estimated method - Calculation of monthly declarations and June reconciliation adjustment

Gold Pty Ltd has elected to use the estimated method for calculating the fringe benefits amount to be declared in
pay-roll tax returns in Western Australia.
Gold Pty Ltd declared a total WA fringe benefits amount of $135,000 in the FBT year ending 31 March 1997,
and after adjustment for differences in the tax bases, determined that $120,000 was liable to pay-roll tax.
Gold Pty Ltd declared a total WA fringe benefits amount of $130,000 in the FBT year ending 31 March 1998,
and after adjusting for differences in the tax bases, determined that $125,000 was liable to pay-roll tax.
                                                     Gold Pty Ltd
                                          Calculation of Monthly Declarations
                                                                                               $                $
Fringe benefits taxable value per FBT return 31/3/97                                                        135,000
Less:      living away from home allowances                                                   15,000
           additional remote area exemption                                                     NIL         - 15 000
                                                                                          Sub total         120,000
Plus:     otherwise deductible rule adjustment                                                                + NIL
Pay-roll tax taxable value                                                                                  120.000
                                                                                                   1
Monthly amount for declaration in returns for July 1997 to May 1998 is $10,000 per month ( /12 x $120,000)

                                         June 1998 Reconciliation Adjustment
                                                                                               $               $
Fringe benefits taxable value per FBT return 31/3/98                                                        130,000
Less:      living away from home allowances                                                    5,000
           additional remote area exemption                                                     NIL          - 5,000
                                                                                          Sub total         125,000
Plus:      otherwise deductible rule adjustment                                                               + NIL
Pay-roll tax taxable value                                                                                  125,000
Less:
Amount declared in returns July 1997 to May 1998 ($10,000 x 11)                                            - 110,000
Amount to be declared in June 1998 return                                                                     15,000


7.      Estimated method – final return adjustment

Where an employer has been declaring fringe benefits under the estimated method and:
·    the liability to pay-roll tax is to cease; or
·    a change to the actual method is to occur;

an adjustment calculation must be undertaken to identity the amount to be included in the final return to account
for the difference between pay-roll tax paid under the estimated method, and the pay-roll tax that should have
been paid on the actual value of the fringe benefits provided.
The formula for this adjustment is contained in the Regulations to the Pay-roll Tax Assessment Act and is the
difference between:
(a) the total of
        (i)     WA fringe benefits for the FBT year that ends in the financial year in which the final pay-roll tax
                return falls; and
        (ii)    Actual WA fringe benefits for April, May and June of the financial year (if any);
                                                         and
(b) the total of
        (i)     1/4 of the WA fringe benefits for the FBT year that ends in the first financial year in which the
                estimated value method was last elected to be used; and
        (ii)    The total of WA fringe benefits included in returns for the financial year.
Examples demonstrating the application of this formula are set out below:

Example 2 - Estimated method - Final return - Where employer ceases between April and June

·   Employer ceased                                                                      30 June 1999
·   First year on estimated method                                                         1997/98
·   Adjusted WA fringe benefits for FBT year 31 March 1998                                 $24,000
·   Adjusted WA fringe benefits for FBT year 31 March 1999                                 $36,000
·   Actual WA fringe benefits April 1999 to June 1999                                      $10,000


                                                                                                $            $
WA fringe benefits for FBT year 31 March 1999                                               36,000
WA fringe benefits for April, May and June 1999                                             10,000         46,000
Less:
¼ WA fringe benefits for FBT year 31 March 1998 (¼ of $24,000)                               6,000
WA fringe benefits included in pay-roll tax returns July 1998 to May 1999
(11 x 1/12 x $24,000)                                                                       22,000        -28,000
Amount to be declared in final return i.e. June 1999 return                                                18,000


Example 3 - Estimated method - Final return - Where employer ceases between July and March
·   Employer ceased                                                                    31 August 1999
·   First year on estimated method                                                         1997/98
·   Adjusted WA fringe benefits for FBT year 31 March 1998                                 $24,000
·   Adjusted WA fringe benefits for FBT year 31 March 1999                                 $36,000
·   Actual WA fringe benefits April 1999 to August 1999                                    $20,000


                                                                                            $                $
WA fringe benefits for FBT year that ends in the financial year in which the
final pay-roll tax return falls (i.e. for the period 1 April 1999 to 31 August
1999)                                                                                     20,000

WA fringe benefits April, May and June of the financial year 1 July 1999 to 30
                                                                                             NIL           20,000
June 2000
Less:
¼ WA fringe benefits for FBT year 31 March 1998 (¼ of $24,000)                             6,000
                                                                1
WA fringe benefits included in pay-roll tax return July 1999 ( /12 x $36,000)              3,000           - 9,000
Amount to be declared in final return i.e. August 1999 return                                              11,000


A final return adjustment worksheet is reproduced at Appendix 2 of this pamphlet to assist employers with their
calculations.
Where a final return adjustment is required, employers must prepare and retain a worksheet in order that it is
available for audit purposes.
8.       Australian Taxation Office rulings

In order to follow as closely as possible the effect of the FBT legislation, the Commissioner of State Revenue
will generally adopt all rulings issued by the Australian Taxation Office (ATO) in respect of fringe benefits that
are in force as at 1 July 1997 and all subsequent FBT rulings issued by the ATO. The exception to this rule will
be in respect of the differences between the FBT and pay-roll tax bases outlined at Item 4.


9.       Australian Taxation Office assessments

Assessments or amended assessments issued by the ATO, in respect of FBT, are to be immediately
communicated to the State Revenue Department in order that the necessary adjustments to pay-roll tax
assessments can be undertaken.


10.      Record keeping

An employer is required to adhere to the following record keeping responsibilities:
·     make and retain records to support the calculation of the value of fringe benefits included or to be included
      in payroll tax returns;
·     retain other documents and records used for the purposes of that calculation;
·     retain a record of the adjusted value of WA fringe benefits for the FBT year that ends in the financial year in
      which the estimated method was first used, until 5 years after ceasing to declare pay-roll tax on fringe
      benefits under the estimated method; and
·     in all other cases records must be kept for 5 years.


11.      Fringe Benefits Tax Act queries

Queries concerning the application of the FBTA Act to particular benefits should be addressed to the Australian
Taxation Office.


12.      Other benefits liable to pay-roll tax (prescribed benefits)

A number of benefits, which are not fringe benefits under the FBTA Act, have been prescribed as liable to
pay-roll tax. Those benefits are contributions by an employer to:
·     an employee share acquisition scheme;
·     an industry redundancy fund; and
·     a portable long service leave fund.
The liability of prescribed benefits is outlined in the Pay-roll Tax General Information pamphlet.
However, it is important that employers understand that pay-roll tax declarations in respect of prescribed
benefits are required to be made on the basis of the actual benefit provided to, or in relation to, an employee
during a return period.
Accordingly, these benefits should not be included in calculations that determine the estimated amount to be
included in returns in respect of fringe benefits.
                                                APPENDIX 1
              PAY-ROLL TAX FRINGE BENEFITS RECONCILIATION WORKSHEET
                                          ESTIMATED METHOD
                                     Calculation of Monthly Declaration


                                                                          $                      $
WA fringe benefits taxable value per FBT return at 31 March
year 1

Less:    living away from home allowances
         additional remote area exemption                                                -
                                                                         Sub total
Plus:    otherwise deductible rule adjustment                                        +
Pay-roll tax taxable value
1
 /12 of pay-roll tax taxable value                                                                   ÷12
Amount to be declared in pay-roll tax monthly returns for July to
May year 2
                                                                                     A



                              JUNE RECONCILIATION AMOUNT YEAR 2

                                                                           $                     $
WA fringe benefits taxable value per FBT return at 31 March
year 2


Less:    living away from home allowances
         additional remote area exemption                                            -
                                                                         Sub total
Plus:    otherwise deductible rule adjustment                                        +
Pay-roll tax taxable value
Less:
Amount declared in returns July year 1 to May year 2
(11 x amount shown at A above)
                                                                                     -
Amount to be declared in June of year 2



                                             Important Note
             This worksheet or one in a similar format must be prepared and retained for audit
                                                 purposes.
                                                     APPENDIX 2
                           PAY-ROLL TAX FRINGE BENEFITS FINAL RETURN
                                           ADJUSTMENT WORKSHEET
                                               ESTIMATED METHOD


                                                      IMPORTANT

 An employer who has been declaring fringe benefits under the estimated method and:

 ·          the liability to pay-roll tax is to cease; or
 ·          a change to the actual method is to occur,

 must complete this worksheet and declare the resultant adjustment in their final return under the estimated
 method.

 Employers who cease on the estimated method in the months of April, May or June should refer to Example 2.
 Employers who cease on the estimated method in the months between July and March should refer to Example 3.


                                                                                  $                     $
i. Adjusted WA fringe benefits for the FBT year that ends in the
   financial year in which the final pay-roll tax return falls i.e. 31
   March ……….
ii. Actual adjusted WA fringe benefits for April, May & June
    immediately following the year specified in (i) above (if any)
                                                                                 Sub total
Less:
i. ¼ of adjusted WA fringe benefits for the FBT year that ends in the
   financial year in which the estimated method was used first i.e. 31
   March .……..
ii. Fringe benefits declared in pay-roll tax returns for the financial year
    of the final return
     Amount to be declared in final return




                                                       Important Note
                   This worksheet or one in a similar format must be prepared and retained for audit
                                                       purposes.
13.   Note

This pay-roll tax information should be used only as a guide and if you have any doubt as to your
liability or require more detailed information, please contact the State Revenue Department.

                                State Revenue Department
                                GPO Box T1600
                                Perth WA 6845
                                OR
                                Plaza Level, Mt Newman House
                                200 St Georges Tce, PERTH WA

                                Telephone:      (08) 9262 1300
                                Facsimile:      (08) 9262 1348
                                Email:          payroll@srd.wa.gov.au
                                Website:        www.wa.gov.au/srd
                                Ausdoc:         DX 227 PERTH


                     This information may be obtained in alternative format
                                        upon request




                                     WESTERN AUSTRALIA
                                 STATE REVENUE DEPARTMENT

								
To top