Fringe benefits tax some recent changes

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Fringe benefits taxsome recent changes

Presented byJames Dickson Technical
Advisor Interpretative Advice Assistance Small
Medium Enterprises Australian Taxation
Office IAG conference 22 November 2007
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Some recent changes

• Tax Laws Amendment (TLA)(Personal Tax Reduction
  And Improved Depreciation Arrangements) Act 2006
• Tax Laws Amendment (TLA)(2006 Measures No.5) Act
  2006
• Fringe Benefits Tax Amendment Regulations 2007
  (No. 1)

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TLA (Personal tax reduction and improved
depreciation arrangements) Act 2006

• FBT rate reduced from 48.5 to 46.5
• Aligns with new top marginal tax rate,including
  Medicare levy
• Gross-up rate for type 1 aggregate fringe
  benefits changed from 2.1291 to 2.0647
• Gross-up rate for type 2 aggregate fringe
  benefits changed from 1.9417 to 1.8692
• Applies FBT year beginning 1 April 2006

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TLA (Personal tax reduction and improved
depreciation arrangements) Act 2006 (cont)
Examples

• Period 1 April 2005 to 31 March 2006
• Type 1 8,800 x 2.1291 18,736
• Type 2 9,000 x 1.9417 17,475
• 36,211 x 48.5 17,563
• Period 1 April 2006 to 31 March 2007
• Type 1 8,800 x 2.0647 18,169
• Type 2 9,000 x 1.8692 16,823
• 34,992 x 46.5 16,271

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TLA (2006 Measures No.5) Act 2006

• Reportable fringe benefits amount threshold
  increased frommore than 1,000 to more than
  2,000
• Minor benefits exemption threshold increased
  fromless than 100 to less than 300
• Taxable value reduction of certain in-house
  fringe benefits increased from 500 to 1,000
• Definition of remote extended where shortest
  practicable surface route by water
• Applies FBT year beginning 1 April 2007

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Reportable fringe benefits threshold
Increased from more than 1,000 to more than
2,000

• Record on employee's payment summaries
• Grossed-up taxable value of certain fringe
  benefits(other than excluded fringe benefits)
• Fringe benefits amounts exceeding 2,000in FBT
  year beginning 1 April 2007 and later years
• Use Type 2 gross-up rate

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Reportable fringe benefits threshold (cont)
Type 1 fringe benefit provided to employee1 Feb
2008 value 2,000
Not recorded onemployee payment summary year
ending 30 Jun 08
Not gt 2,000
Grossed-up amount recorded on employee payment
summary year ending 30 Jun 08
Type 1 fringe benefitprovided to employee 1 Feb
2008 value 2,002
Is gt 2,000
2,002 x 1.8692 3,742
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Minor benefits threshold
Increased from less than 100 to less than 300

• Exemptions for minor benefits that meet certain
  conditions
• Notional taxable value lt 300
• Criteria to determine if unreasonable to
  treatminor benefit as fringe benefit
• Draft taxation ruling TR 2007/D6 Fringe benefits
  tax minor benefits

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Minor benefits threshold (cont)
Employer provideschristmas gift value lt300
lt300
Determine if unreasonable to treat minor
benefit as fringe benefit
Infrequent but on a regular basis
Value of gifts not substantial
No associated benefits
Not provided to deal with unexpected event nor a
reward for services
Unreasonable to treat the benefit as a fringe
benefit
Exempt minor benefit
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Minor benefits threshold (cont)
Employer provides store vouchers withface value
less than 300 as reward
lt300
Determine if unreasonable to treat minor
benefit as fringe benefit
Frequent and regular basis
Value of associated benefits considered
substantial
Not provided to deal with unexpected event and is
a reward for services
Not unreasonable to treat the benefit as a fringe
benefit
Not exempt minor benefit
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Taxable value reduction of in-housefringe
benefits
Increased from 500 to 1,000

• Reductions of aggregate taxable value of
  eligible fringe benefits
• in-house
• airline transport
• Reduction of taxable value for one or more such
  fringe benefits
• amount taxable value, or sum of taxable values
  not exceeding 1,000, or
• 1,000
• Miscellaneous tax ruling MT 2044 Fringe benefits
  tax reduction of aggregate taxable value of
  fringe benefits application to associates

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Taxable value reduction of in-house fringe
benefits (cont)
Example

• FBT year beginning 1 April 07, employee receives
• in-house property fringe benefit, taxable value
  400
• in-house expense payment fringe benefit, taxable
  value 300
• in-house residual fringe benefit, taxable value
  200
• spouse receives in-house expense payment benefit,
  taxable value 100
• Aggregate value is 400300200100 1,000
• Taxable value is 1,000 less 1,000 reduction
  0

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Shortest practicable surface route by water
Definition of remote extended

• Route by water - kilometres (klms) of the surface
  route
• doubled where the shortest practicable route is
  entirely by water
• doubled for water distance and added to total
  number of klms by land

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Shortest practicable surface route by water (cont)
Example

• Island - 80 klms from eligible urban area, pop
  140,000 - 45 klms from eligible urban area, pop
  20,000
• Shortest practicable surface route - 40 klms by
  road - 40 klms by sea
• Previously not remote - lt 100 klms from
  eligible urban area - pop at least 130,000
• Now remote 120 klms from eligible urban area
• calculated as 40 klms by land (2 x 40) klms by
  water

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Fringe benefits tax amendment regulations 2007
(No. 1)
Regulation to make pooled cars an excluded fringe
benefit

• Not a reportable fringe benefit amount to be
  included on employee's payment summary
• Pooled cars are
• held by provider, used or available for use by
  more than one employee for private purposes, and
• private use of pooled cars gives rise to a car
  (fringe) benefit for more than one employee
• Applies FBT year beginning 1 April 07
• Employers calculate and pay FBT on any such car
  fringe benefits

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