FBT+instruction+RMIT

http://www1.rmit.edu.au/browse/Staff%2FWorkplace%20essentials%2FPolicies%20and%20procedures%2FFinance%20and%20procurement%2FExpenditure%2FFringe%20benefits%20tax%20instruction/


 * [|Staff]
 * [|Workplace essentials]
 * [|Policies and procedures]
 * [|Finance and procurement]
 * [|Expenditure]
 * [|Fringe benefits tax instruction]


 * Instruction
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Intent
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 is calculated.

Scope
University-wide

Exclusions
None.

Background
A fringe benefit is considered to be employee remuneration other than salary and wages or other payments that are subject to income tax (eg. termination payments, superannuation). FBT is generally payable where: 1. A benefit is provided; 2. The benefit is provided in respect of the employment of the employee; 3. The benefit is provided to the (past or future) employee or an associate/relative of the past/future employee of the University or a third party under an arrangement. **The FBT year runs 1st April to the following 31st March** with instalment payments made quarterly. RMIT accrues FBT to orders/WBS elements on a monthly basis.

Individual fringe benefits amount
The taxable value of all the fringe benefits, except for excluded fringe benefits, that relate to the year of tax must be allocated to the relevant employee(s). This will represent the employee’s individual fringe benefits amount. Any benefits provided to an associate of an employee, in respect of that employee’s employment, the taxable value is allocated to the employee in question and not the associate. Fringe Benefits are identifiable by different categories, which have their own specific rules for calculating the taxable value. <span style="background-color: rgba(255,255,255,0);">Note that if an employee makes a contribution to the cost of the fringe benefit provided, the taxable value of that fringe benefit is reduced by that particular payment. It is also important to note that an employee contribution may be made only from an employee's after-tax income, and employee contributions in respect of a particular fringe benefit may only be applied to reduce the taxable value of that particular benefit, and no other fringe benefit.

<span style="background-color: rgba(255,255,255,0);">The fringe benefits taxable amount
<span style="background-color: rgba(255,255,255,0);">To calculate the fringe benefits taxable amount RMIT must consider whether it was entitled to claim a GST input tax credit at the time the benefit was provided. <span style="background-color: rgba(255,255,255,0);"> ===<span style="background-color: rgba(255,255,255,0);">Higher gross-up formula (Type 1) === <span style="background-color: rgba(255,255,255,0);">You use the following formula to calculate the higher gross-up rate: <span style="background-color: rgba(255,255,255,0);"> <span style="background-color: rgba(255,255,255,0);">RMIT’s “Type 1 aggregate fringe benefits amount” means the sum of the taxable value of all fringe benefits provided to employees in respect of which RMIT was entitled to an input tax credit at the time when the benefit was provided. <span style="background-color: rgba(255,255,255,0);">Fringe benefits and excluded fringe benefits that are not type 1 benefits are called type 2 benefits. The lower gross-up rate is used for type 2 benefits. You use the following formula to calculate the rate: <span style="background-color: rgba(255,255,255,0);"> <span style="background-color: rgba(255,255,255,0);">The type 2 aggregate fringe benefits amount represents the total taxable values of all other fringe benefits (including any excluded fringe benefits) that are not type 1 benefits. <span style="background-color: rgba(255,255,255,0);">You calculate your fringe benefits taxable amount as follows: <span style="background-color: rgba(255,255,255,0);"> <span style="background-color: rgba(255,255,255,0);">
 * <span style="background-color: rgba(255,255,255,0);">Lower gross-up formula (Type 2) **
 * <span style="background-color: rgba(255,255,255,0);">Formula for calculating the fringe benefits taxable amount **
 * <span style="background-color: rgba(255,255,255,0);">plus **

<span style="background-color: rgba(255,255,255,0);">Benefit categories
<span style="background-color: rgba(255,255,255,0);">In order to calculate the grossed-up value of a benefit it is necessary to determine which category the benefit belongs to. <span style="background-color: rgba(255,255,255,0);">A fringe benefit is defined as any right, privilege, service or facility provided to an employee or an associate in respect or employment. <span style="background-color: rgba(255,255,255,0);">Fringe Benefits can be grouped into four main categories: <span style="background-color: rgba(255,255,255,0);">The major benefits items in each category are listed below.
 * <span style="background-color: rgba(255,255,255,0);">benefits exempt from FBT
 * <span style="background-color: rgba(255,255,255,0);">benefits subject to full FBT
 * <span style="background-color: rgba(255,255,255,0);">benefits subject to concessional FBT
 * <span style="background-color: rgba(255,255,255,0);">benefits which are otherwise deductible
 * <span style="background-color: rgba(255,255,255,0);">excluded benefits.

<span style="background-color: rgba(255,255,255,0);">Exempt benefits
<span style="background-color: rgba(255,255,255,0);">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: <span style="background-color: rgba(255,255,255,0);">The grossed up value of any benefits only need to be reported on payment summaries if the aggregate taxable value of the benefits exceeds $2,000 before being grossed up. <span style="background-color: rgba(255,255,255,0);">The following business items have been excluded from FBT provided they are used primarily for business purposes:
 * <span style="background-color: rgba(255,255,255,0);">Cash salary
 * <span style="background-color: rgba(255,255,255,0);">Superannuation
 * <span style="background-color: rgba(255,255,255,0);">Tools of trade
 * <span style="background-color: rgba(255,255,255,0);">Mobile phones
 * <span style="background-color: rgba(255,255,255,0);">RMIT provided car parking
 * <span style="background-color: rgba(255,255,255,0);">Relocation expenses (other than cash incentives)
 * <span style="background-color: rgba(255,255,255,0);">Workers compensation benefits
 * <span style="background-color: rgba(255,255,255,0);">Medical treatment/examination, i.e. travel, meals and accommodation en route to obtain medical treatment where the employee is performing duties at an overseas University
 * <span style="background-color: rgba(255,255,255,0);">Compassionate travel benefits to visit or attend the funeral of a close relative (generally spouse, parent, parent –in-law, child)
 * <span style="background-color: rgba(255,255,255,0);">Counselling, i.e. costs related to the performance of the employees duties of the preparation of the employee for retirement
 * <span style="background-color: rgba(255,255,255,0);">Education costs of employees whose usual place of residence is in a particular country but who is required to live outside that country to perform their employment duties
 * <span style="background-color: rgba(255,255,255,0);">Childcare facilities provided to employee’s children on the premises of the University
 * <span style="background-color: rgba(255,255,255,0);">Briefcases, trade and professional subscriptions, electronic diaries/ calculators, corporate credit card fees
 * <span style="background-color: rgba(255,255,255,0);">Protective work clothing
 * <span style="background-color: rgba(255,255,255,0);">Airport lounge memberships
 * <span style="background-color: rgba(255,255,255,0);">Laptop / portable computers, business software

<span style="background-color: rgba(255,255,255,0);">The exemption for laptop / portable computers is limited to one computer per employee per year where the employee gains ownership of the computer (or is reimbursed). The computer must be primarily used for business purposes. <span style="background-color: rgba(255,255,255,0);">Car and mobile phones are not subject to FBT if it is primarily used for business purposes. <span style="background-color: rgba(255,255,255,0);">Taxi travel is exempt from FBT for single trips beginning or ending at the employee’s place of work, regardless of the time the trip commenced, the departure point or destination of the trip and whether or not the trip was direct; except for travel to social functions which equates to meal entertainment. Taxi travel for sick employees for travel home or to any other place necessary or appropriate for the employee to go i.e. doctor, hospital, relative.

<span style="background-color: rgba(255,255,255,0);">Full FBT benefits
<span style="background-color: rgba(255,255,255,0);">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: <span style="background-color: rgba(255,255,255,0);">Cost of Benefit – Amount of benefit x Gross Up Value = Reportable Value <span style="background-color: rgba(255,255,255,0);">Generally the type of benefits included are:
 * <span style="background-color: rgba(255,255,255,0);">Health insurance
 * <span style="background-color: rgba(255,255,255,0);">Mortgage repayments
 * <span style="background-color: rgba(255,255,255,0);">Household costs, e.g. rates, private expenses
 * <span style="background-color: rgba(255,255,255,0);">Entertainment (private)
 * <span style="background-color: rgba(255,255,255,0);">Private travel
 * <span style="background-color: rgba(255,255,255,0);">Club/gym subscriptions
 * <span style="background-color: rgba(255,255,255,0);">Accompanying relative travel

<span style="background-color: rgba(255,255,255,0);">Concessional FBT
<span style="background-color: rgba(255,255,255,0);">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:
 * <span style="background-color: rgba(255,255,255,0);">Discounts on in house products
 * <span style="background-color: rgba(255,255,255,0);">Living away from home allowance
 * <span style="background-color: rgba(255,255,255,0);">Entertainment (business related)
 * <span style="background-color: rgba(255,255,255,0);">Motor vehicles (refer below for calculation of benefit value)
 * <span style="background-color: rgba(255,255,255,0);">Employee share option plans
 * <span style="background-color: rgba(255,255,255,0);">Off-site child care

<span style="background-color: rgba(255,255,255,0);">Otherwise deductible
<span style="background-color: rgba(255,255,255,0);">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:
 * <span style="background-color: rgba(255,255,255,0);">Telephone reimbursements (business use portion only)
 * <span style="background-color: rgba(255,255,255,0);">Professional memberships
 * <span style="background-color: rgba(255,255,255,0);">Other Business related expenses
 * <span style="background-color: rgba(255,255,255,0);">Work related

<span style="background-color: rgba(255,255,255,0);">Excluded benefits
<span style="background-color: rgba(255,255,255,0);">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:
 * <span style="background-color: rgba(255,255,255,0);">Meals provided for the purpose of entertainment
 * <span style="background-color: rgba(255,255,255,0);">Remote area housing
 * <span style="background-color: rgba(255,255,255,0);">Occasional travel to a major population centre provided to employee and their families.

<span style="background-color: rgba(255,255,255,0);">Categories of benefits provided
<span style="background-color: rgba(255,255,255,0);">The following are the various types (categories) of fringe benefits that RMIT generally provides. In relation to salary packaging and your individual circumstances please contact Human Resources.
 * 1) <span style="background-color: rgba(255,255,255,0);">Car Fringe Benefits
 * 2) <span style="background-color: rgba(255,255,255,0);">Expense payments
 * 3) <span style="background-color: rgba(255,255,255,0);">Property benefits
 * 4) <span style="background-color: rgba(255,255,255,0);">Meal entertainment
 * 5) <span style="background-color: rgba(255,255,255,0);">Entertainment
 * 6) <span style="background-color: rgba(255,255,255,0);">Other benefits (residual)

<span style="background-color: rgba(255,255,255,0);">Each fringe benefits type applies to a specific situation, and are applicable to a broad range of industries (but not all). A number of types of benefits that are common to RMIT will be examined:

<span style="background-color: rgba(255,255,255,0);">Car fringe benefits
<span style="background-color: rgba(255,255,255,0);">A car fringe benefit will arise on any day where a University car is used by an employee for private purposes or is taken to be available for private purposes. <span style="background-color: rgba(255,255,255,0);">A car is available for private use when: <span style="background-color: rgba(255,255,255,0);">a) the car is garaged by the employee; and <span style="background-color: rgba(255,255,255,0);">b) the car is in the employee’s custody or control. <span style="background-color: rgba(255,255,255,0);">The University applies the ‘statutory formula’ method for calculating the taxable value of car fringe benefits. An odometer reading is taken on 31 March for each car, each year, and whenever a car is acquired or disposed (Financial Services undertake this process, full and timely cooperation is expected). <span style="background-color: rgba(255,255,255,0);">The taxable value of a car fringe benefit under the statutory formula method is basically determined by applying the statutory percentage (which varies according to the distance travelled within an FBT year) to the base value of the car, as per the following formula under s.9(1) of the FBT Act:

<span style="background-color: rgba(255,255,255,0);">Taxable Value: A x B x C/D - E
<span style="background-color: rgba(255,255,255,0);">Where: <span style="background-color: rgba(255,255,255,0);">A = base value of the motor vehicle <span style="background-color: rgba(255,255,255,0);">B = the statutory fraction <span style="background-color: rgba(255,255,255,0);">C = number of days during the FBT Year the benefit was provided <span style="background-color: rgba(255,255,255,0);">D = number of days in the FBT year <span style="background-color: rgba(255,255,255,0);">E = the amount of the recipient’s payment (ie employee contributions) <span style="background-color: rgba(255,255,255,0);">A flat statutory rate of 20% applies, regardless of the distance travelled, to all car fringe benefits you provide from 1 April 2014 (except where there is a pre-existing commitment in place before 7.30pm AEST on 10 May 2011 to provide a car). <span style="background-color: rgba(255,255,255,0);">Unless a car is garaged on University premises or used for employment duties, it will be regarded as available for private use. Unless records support otherwise, the University assumes that the car was available for the full year. <span style="background-color: rgba(255,255,255,0);">A reduction in the taxable value is available if the employee has not been reimbursed for any related car expenses (registration, insurance, repairs and maintenance or petrol). Documentary evidence is required by the University i.e. a receipt, invoice, but in the case of fuel and oil a declaration of the expense is sufficient.

<span style="background-color: rgba(255,255,255,0);">Debt waiver fringe benefits
<span style="background-color: rgba(255,255,255,0);">If an employee owes a debt to the University, and the University releases the employee from the obligation to repay the amount outstanding, the unpaid amount will constitute a debt waiver fringe benefit.

<span style="background-color: rgba(255,255,255,0);">Expense payment fringe benefits
<span style="background-color: rgba(255,255,255,0);">An expense payment fringe benefit arises where the University pays or reimburses expenses incurred by an employee where the expense cannot be reduced under the otherwise deductible rule. <span style="background-color: rgba(255,255,255,0);">For example: An employee is reimbursed by the University for study that is deductible to them as an individual. The amount of the reimbursement can be deducted from the taxable value of the FBT liability of the University under the otherwise deductible rule. However, if the study was not deductible to the employee as an individual, then this amount is an expense payment fringe benefit.

<span style="background-color: rgba(255,255,255,0);">Property benefits
<span style="background-color: rgba(255,255,255,0);">A property fringe benefit may arise when the University provides an employee with goods (i.e. property), either free or at a discounted price. <span style="background-color: rgba(255,255,255,0);">E.g. Travel <span style="background-color: rgba(255,255,255,0);">When the University pays the expenses of a spouse or children who accompany an employee on work related travel, this will give rise to an FBT liability.

<span style="background-color: rgba(255,255,255,0);">Meal entertainment benefits
<span style="background-color: rgba(255,255,255,0);">Please refer to Entertainment Guide

<span style="background-color: rgba(255,255,255,0);">Other (residual) benefits
<span style="background-color: rgba(255,255,255,0);">A residual benefit may arise when the University provides an employee with any right, privilege, service or facility, or any other benefit that is not one of the specific types of fringe benefits included in items 1 to 8.

<span style="background-color: rgba(255,255,255,0);">GST and fringe benefits
<span style="background-color: rgba(255,255,255,0);">The main interaction between FBT and GST is through the FBT gross-up calculation. Fringe Benefits are grossed-up at either of two different rates according to whether GST input tax credits are available. <span style="background-color: rgba(255,255,255,0);">Where there is a benefit and GST is paid, (and RMIT is entitled to claim an input tax credit), a new gross-up rate applies. The new gross-up rate recovers the input tax credit that the provider is entitled to. This is referred to as being a Type 1 benefit. <span style="background-color: rgba(255,255,255,0);">Where there is a benefit and no GST is paid, (i.e. no entitlement to claim an input tax credit), the former gross-up rate applies. This is referred to as being a Type 2 benefit. <span style="background-color: rgba(255,255,255,0);">The FBT rate is as below and it does not vary between Type 1 and Type 2 benefits.
 * **<span style="background-color: rgba(255,255,255,0);">FBT Year ** || **<span style="background-color: rgba(255,255,255,0);">FBT rate ** ||
 * <span style="background-color: rgba(255,255,255,0);">Ending 31 March 2016 and 2017 || <span style="background-color: rgba(255,255,255,0);">49% ||
 * <span style="background-color: rgba(255,255,255,0);">Ending 31 March 2018 onwards || <span style="background-color: rgba(255,255,255,0);">47% ||

<span style="background-color: rgba(255,255,255,0);">Employee contributions
<span style="background-color: rgba(255,255,255,0);">Where an employee pays an amount to an employer that is treated as an employee contribution this reduces the taxable value of the benefit provided. Generally RMIT will return the contribution as assessable income. Where applicable, the GST component will need to be accounted for (1/11th).

<span style="background-color: rgba(255,255,255,0);">Otherwise deductible rule
<span style="background-color: rgba(255,255,255,0);">The otherwise deductible rule can only be used to reduce the taxable value of the benefit to nil when the expenditure would have been 100% deductible to the employee, otherwise the taxable value can only be reduced by the business use percentage.

<span style="background-color: rgba(255,255,255,0);">Reportable fringe benefits - Reporting benefit values on payment summaries
<span style="background-color: rgba(255,255,255,0);">Where an employee's individual fringe benefits amount, in relation to an employer, is $2,000 or less the employer is not required to report an amount on the employee's payment summary. <span style="background-color: rgba(255,255,255,0);">Where the total fringe benefits amount for an employee, from the employer, is greater than $2,000, then the grossed-up (Type 2) value of that amount must be shown on the employee's payment summary. This amount is known as a reportable fringe benefits amount. <span style="background-color: rgba(255,255,255,0);">The Type 1 gross-up formulae will not be used to calculate the employee’s reportable fringe benefits amount. <span style="background-color: rgba(255,255,255,0);">Example <span style="background-color: rgba(255,255,255,0);">The total value of benefits provided to the employee is $2,000. If the rate of tax is 49%, then <span style="background-color: rgba(255,255,255,0);">The value of reportable fringe benefits is calculated as follows: <span style="background-color: rgba(255,255,255,0);">$2,000 divided by (1 – 0.49) = $2,000 divided by 0.51 = $3,922 (in whole dollars) <span style="background-color: rgba(255,255,255,0);">The reportable fringe benefit amount appearing on an employee’s payment summary will reflect the benefits provided in the FBT period that would have passed. For example, the value relating to benefits provided during the period 1 April 2015 to 31 March 2016 shall be shown on the employee's payment summary for the financial year 1 July 2015 to 30 June 2016.

<span style="background-color: rgba(255,255,255,0);">Reportable fringe benefits - consequences
<span style="background-color: rgba(255,255,255,0);">The amount appearing as a reportable fringe benefit is not included in the employee’s assessable income. Reportable Fringe Benefits are included in a number of income tests relating to a number of government benefits and obligations. <span style="background-color: rgba(255,255,255,0);">[|[Next: Supporting documents and information]]


 * [|Expenditure]
 * <span style="background-color: rgba(255,255,255,0);">Fringe benefits tax instruction
 * <span style="background-color: rgba(255,255,255,0);">Fringe benefits tax instruction
 * <span style="background-color: rgba(255,255,255,0);">Fringe benefits tax instruction