Fringe benefits tax reporting procedure

Procedure

Intent and objectives

A fringe benefit is defined as any right, privilege, service or facility provided to an employee or an associate in respect or employment. The following details provide examples of what fringe benefits are required to be reported on group certificates and how the value of the benefits are calculated.

Procedure

The federal government has introduced legislation designed to enhance the fairness of the taxation and security systems by taking into account the value of most fringe benefits provided to employees when determining income tests for entitlements to government benefits and liability in relation to tax surcharges. The legislation does not increase the amount of income tax payable and is not related to any effect of GST may have on salary sacrificing for fringe benefits.

The following details provide examples of what fringe benefits are required to be reported on group certificates and how the value of the benefits are calculated.

How will the change impact on staff?

If you are salary sacrificing for, or receiving a fringe benefit which is either FBT exempt, otherwise deductible or in the category that is not to be reported there will be no impact.

All benefits offered through the RMIT flexible remuneration packaging, with the exclusion of motor vehicles fall into the exempt, otherwise deductible or excluded category and will not need to be reported.

However, if you are salary sacrificing or receiving a benefit which is to be included (such as motor vehicle) the grossed up taxable value of the benefit will be included on your group certificate. This will be included as income when you are being assessed for a range of government charges and allowances. It is possible that you may have an increased cost surcharges and a potential loss or lowering of government benefit levels.

As a result of the new legislation some staff may wish to review their salary packaging arrangements.

Benefit categories

In order to calculate the grossed-up value of a benefit it is necessary to determine which category the benefit belongs to.

A fringe benefit is defined as any right, privilege, service or facility provided to an employee or an associate in respect or employment.

Fringe Benefits can be grouped in four main categories:

• benefits exempt form FBT
• benefits subject to full FBT
• benefits subject to concessional FBT
• benefits which are otherwise deductible

In addition there is now a further category under the FBT Reporting Act –Excluded Benefits. The major benefits items in each category are listed below.

Excluded benefits

Excluded benefits may be subject to fringe benefits tax and therefore have a taxable value greater than zero, but they have been designated excluded benefits for reporting on group certificates. Examples of these benefits are:

• Meals provided for the purpose of entertainment
• Remote area housing
• Occasional travel to a major population centre provided to employee and their families.

Exempt benefits

Benefits that are exempt from FBT have a taxable value of zero and therefore a reportable fringe benefit of zero. Exempt benefits include the following:

• Cash salary
• Superannuation
• Protective clothing
• Brief case
• Tools of trade
• Laptop and portable computer computers
• Car and mobile phones
• Subscriptions to trade and professional journals
• Airport lounge memberships
• Business related software
• Electronic diaries and calculators
• RMIT provided car provided parking
• Minor taxable benefits where taxable value is less than $100
• Finance

The grossed up value of any benefits only need to be reported on group certificates if the aggregate taxable value of the benefits exceeds $1,000 before being grossed up.

Full FBT benefits

Benefits that are subject to full FBT include all benefits of a private nature. For this category, the reportable value of a benefit is the taxable value or grossed up value of the benefit. An example of how these benefits are calculated is shown below:

Cost of Benefit - $2,000 X 2.0647 (Gross Up Value) = $4,129 (Reportable Value)

The type of benefits included are:

• Health insurance,
• Mortgage repayments,
• Household costs, e.g. rates, private expenses,
• Entertainment (private),
• Private travel,
• Club/gym subscriptions.
• Accompanying relative travel

Otherwise deductible

Otherwise deductible benefits are those for which employees would have been able to claim an income tax deduction if they had paid for the item out of after tax dollars. These benefits have a taxable value of zero and therefore a fringe benefit value zero. They include:

• Telephone reimbursements (business use potion only)
• Professional memberships
• Other Business related expenses
• Work related

Concessional FBT

Some benefits receive special treatment under FBT legislation, but the nature of the concession differs for each benefit. Examples of concessional benefits are listed below:

• Discounts on in house products
• Living away from home allowance
• Entertainment (business related)
• Motor vehicles (refer below for calculation of benefit value)
• Employee share option plans
• Off-site child care

The major concessional benefit effecting staff at RMIT is a motor vehicle and the calculation of the taxable value is described below.

Motor vehicle

A "special" statutory formula applies to calculating the taxable value of a motor vehicle. The formula values employer provided vehicles for FBT purposes at a percentage of their initial cost. The actual percentage for discounting the vehicle’s value varies according to the total kilometres travelled each FBT year based on the following table:

Total kilometres travelled per year	Statutory fraction
Less Than 15,000	26%
15,000 to 24,999	20%
25,000 to 40,000	11%
Over 40,000	7%

The table below is an example of the reportable value of a vehicle with a purchase price of $26,000 and travelling 20,000 kilometres.

Purchase Price	Statutory Fraction	Taxable Value	Gross Up Factor	Reportable Value
$26,000	20%	$5,200	2.0647	$10,736

Executive staff should note that the reportable value is based on actual kilometres travelled and the FBT value for remuneration purposes is based on average kilometre range of 15,000 to 24,999 kilometres.

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