Legislation and regulations
Fringe benefits tax
Reform of Living-away-from-home benefits
Tax Laws Amendment (2012 Measures No. 4) Act 2012 received Royal Assent on 28 September 2012.
The revised explanatory memorandum for Tax Laws Amendment (2012 Measures No.4) Bill 2012 provides background to these significant changes.
Schedule 1 to this Bill amends the FBTAA to limit the concessional tax treatment of living-away-from-home (LAFH) allowances and benefits to those provided to employees (other than those working on a 'fly-in fly-out' or 'drive-in drive-out' basis) for a maximum period of 12 months who:
- maintain a home in Australia (at which they usually reside) for their immediate use and enjoyment at all times while living away from that home for their work; and
- have provided their employer with a declaration about living away from home.
Special rules apply to employees who are working on a fly-in fly-out or drive-in drive-out basis. Certain conditions must be satisfied to be one of these employees, and to receive the concessional tax treatment, the employee must provide their employer with a declaration about living away from home. These employees do not have to maintain a home in Australia and the 12-month limit on concessional tax treatment does not apply.
Date of effect: The reforms apply from 1 October 2012.
Transitional rules apply to permanent residents who have employment arrangements for LAFH allowances and benefits in place prior to 7.30 pm (AEST) on 8 May 2012. These employees are not required to maintain a home in Australia for their immediate use and enjoyment at all times for the concessional treatment to apply and the concession is not limited to a maximum period of 12 months until the earlier of 1 July 2014 or the date a new employment contract is entered into, or the existing contract is varied in a material way.
Transitional rules also apply to temporary residents who maintain a home in Australia for their immediate use and enjoyment at all times, and have employment arrangements for LAFH allowances and benefits in place prior to 7.30 pm (AEST) on 8 May 2012. These employees will have until the earlier of 1 July 2014 or the date a new employment contract is entered into or the existing contract is varied in a material way before the concessional treatment is limited to a maximum period of 12 months.
Reform of in-house fringe benefits
On 22 October 2012, the Treasurer, Wayne Swan, released the Mid-Year Economic and Fiscal Outlook 2012-13.
Appendix A: Policy decisions taken since the 2012-13 Budget states that:
The Government will remove the concessional fringe benefits tax (FBT) treatment for in-house fringe benefits if they are accessed by way of a salary sacrifice arrangement. This measure will apply from 22 October 2012 for salary sacrifice arrangements entered into from its announcement on 22 October 2012, and from 1 April 2014 for salary sacrifice arrangements entered into prior to its announcement on 22 October 2012. This measure is estimated to have a gain to revenue of $445.0 million, and an increase in GST payments to the States and Territories of $85.0 million, over the forward estimates period.
In-house fringe benefits arise when employees receive goods or services from their employer or an associate of their employer that are identical or similar to those provided to customers by the employer or an associate of the employer in the ordinary course of business. Under the existing FBT concession, the taxable value of in-house fringe benefits is 75 per cent of either the lowest price at which an identical benefit is sold to the public or under an arm's length transaction, depending on the nature of the benefit, reduced by a further $1,000.
The existing FBT concession was introduced before the widespread use of salary sacrifice arrangements. This measure will return the use of this FBT concession to its original intent. Under this measure, the taxable value of in-house fringe benefits provided through a salary sacrifice arrangement will be either the lowest price at which an identical benefit is sold to the public or under an arm's length transaction, depending on the nature of the benefit.
Tax Laws Amendment (2012 Measures No.6) Bill 2012
Tax Laws Amendment (2012 Measures No.6) Bill 2012 was introduced to Parliament on 29 November 2012.
The Bill contains several tax measures. Schedule 7 of the Bill contains reforms to in-house fringe benefits under salary packaging arrangements.
In-house fringe benefits under salary packaging arrangements are addressed in pages 79 to 91 of the Explanatory Memorandum.
Treasury has published information about the transitional arrangements for the measure on their website, entitled In-House Fringe Benefits - transitional arrangements. It details how
On 22 October 2012, the Government announced as part of the 2012-13 Mid-Year Economic and Fiscal Outlook that the concessional tax treatment of in-house fringe benefits would be removed if they are accessed through a salary sacrifice arrangement.
This announcement included generous transitional arrangements for salary sacrifice arrangements that were entered into prior to 22 October 2012. These salary sacrifice arrangements will be able to continue to access the concessional tax treatment for a further 17 months, until 31 March 2014.
Salary sacrifice arrangements that were entered into on or after 22 October 2012 will not be able to access the transitional arrangements. The new rules will apply to these salary sacrifice arrangements from 22 October 2012.
The transitional rules are intended to cover binding arrangements that were agreed to prior to 22 October 2012. This will be satisfied if both the offer by the employer and the acceptance by the employee occurred prior to 22 October 2012. There is no requirement for the actual reduction of salary and wages, or the provision of goods and services, to occur prior to 22 October 2012.
The Bill was referred to the House Standing Committee on Economics for inquiry and report. The Committee recommended the Bill be passed unamended.
Reform of airline transport fringe benefits
Tax and Superannuation Laws Amendment (2013 Measures No. 1) Bill 2013 was introduced into Parliament on 13 February 2013.
Schedule 2 of this Bill amends the Fringe Benefits Tax Assessment Act 1986 to align the special rules for calculating airline transport fringe benefits with the general provisions dealing with in-house property fringe benefits and in-house residual fringe benefits.
The method for determining the taxable value of airline transport fringe benefits is also updated to simplify the practical operation of the law and to better reflect the economic value of the benefit.
This measure which applies from 8 May 2012 was announced in the 2012-13 Budget and in the Treasurer and Assistant Treasurer's Joint Media Release No. 34 of 8 May 2012.
Income Tax Assessment Amendment Regulation 2013 (No. 1)
The purpose of the Regulation is to insert the 'cents per kilometre' rates for calculating income tax deductions for car expenses for the 2012-13 income year in Part 2 of Schedule 1 to the Income Tax Assessment Regulations 1997.
The rates for the 2012-13 income year do not change from the 2011-12 rates.
The Regulation is also relevant for the purposes of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). The definition of 'basic car rate' in subsection 136(1) of the FBTAA provides that the rate is the same as that prescribed for the purposes of section 28-25 of the Income Tax Assessment Act 1997. The 'basic car rate' is used in the calculation of the taxable value of a number of fringe benefits.
Australian Charities and Not-for-profits Commission Act 2012
Introduced on 23 August 2012, the Bill charged the Australian Charities and Not-for-profits Commission (ACNC) with registering not-for-profit entities (initially charities) and maintaining a register, provides for the powers of the ACNC Commissioner in relation to the regulation of registered entities and sets out the obligations and responsibilities of registered entities.
This Bill received Royal Assent on 3 December 2012.
Australian Charities and Not-for-profits Commission (Consequential and Transitional) Act 2012
Introduced with the Australian Charities and Not-for-profits Commission Bill 2012 on 23 August 2012.
The Bill included amendments to the Fringe Benefits Tax Assessment Act 1986.
This Bill received Royal Assent on 3 December 2012.
The Act made changes to the FBT rebate provisions for charities. Charities must now seek registration with the Australian Charities and Not-for-profits Commission as well as endorsement with the ATO.
Tax Laws Amendment (Special Conditions for Not-for-profit Concessions) Bill 2012
Also introduced on 23 August 2012 however no further progress; the Bill amends taxation legislation to: restate the 'in Australia' special conditions for income tax exempt entities, ensuring that they generally must be operated principally in Australia and for the broad benefit of the Australian community; standardise the other special conditions entities must meet to be income tax exempt; standardise the term 'not-for-profit'; and codify the 'in Australia' special conditions for deductible gift recipients ensuring that they must generally operate solely in Australia, and pursue their purposes solely in Australia (with some exceptions, such as overseas aid funds and some environmental organisations).
This Bill includes amendments to the Fringe Benefits Tax Assessment Act 1986.
Better Targeting of NFP Tax Concessions changes delayed
The Government announced on 31 January 2013 that the 2011-12 Budget measure "Better Targeting of NFP Tax Concessions" will now commence from 1 July 2014. The Assistant Treasurer said the extension would enable "further consultation and engagement with the NFP sector on this measure and ensure there is an opportunity for detailed stakeholder input to be provided".
The start date of 1 July 2014 is proposed to apply to activities that commenced after 7:30 pm (AEST) on 10 May 2011. The changes will not impact tax concessions that were used for these activities prior to 1 July 2014. As part of transitional arrangements, relevant activities that commenced prior to 7:30 pm (AEST) on 10 May 2011 will not become subject to the changes until 1 July 2015. The measure will not impact on tax concessions that were used for these activities prior to 1 July 2015.
Source: Assistant Treasurer's media release No 003, 31 January 2013
Not-for-profit Sector Tax Concession Working Group
On 12 February 2012 the Minister for Social Inclusion Mark Butler and the then Assistant Treasurer Mark Arbib announced the membership and terms of reference of the Not-for-Profit Sector Tax Concession working group that will consider ideas for better delivering the support currently provided through tax concessions to the not-for-profit (NFP) sector.
The Not-for-profit Sector Tax Concession Working Group consultation paper was released on 2 November 2012.
The Working Group's final report to the Government is due in March 2013.