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  • FBT reporting exclusion – personal security measures

    This information outlines the conditions that must apply before a fringe benefit provided by an employer – for security reasons – can be excluded from the reporting requirements.

    Security reasons specifically relates to security concerns about the personal security of an employee or an associate of the employee (for example, a relative).

    Exclusions

    Providing personal security measures to protect an employee and their family at their home will generally be a fringe benefit subject to fringe benefits tax (FBT). Security measures can include:

    • residential burglar alarms
    • drive-by security patrols
    • body guards
    • personal protective equipment
    • protective modifications to a motor vehicle.

    If the total taxable value of certain fringe benefits provided to an individual employee in an FBT year (1 April to 31 March) exceeds $2,000, you must record the grossed-up taxable value of those benefits on your employee's payment summary for the corresponding income year (1 July to 30 June).

    However, subject to certain conditions, a fringe benefit provided to address security concerns relating to the personal safety of an employee or an associate of the employee (for example, a relative) may be an excluded fringe benefit. This means that:

    • you do not have to report these fringe benefits on your employee's payment summaries, but
    • you do have to pay fringe benefits tax on the taxable value of the fringe benefits provided.

    Conditions for the reporting exclusion to apply

    For the reporting exclusion to apply:

    • the benefit must address a security concern that relates to the personal safety of an employee or an associate of the employee (for example, a relative)
    • that security concern must arise in respect of the employee’s employment
    • the benefit provided is consistent with a threat assessment made by a person recognised as competent to make threat assessments.

    Security concern relating to personal safety

    A security concern exists where there is a risk to the personal safety of an employee, or an associate of the employee.

    Examples of concerns for the personal security of an employee or associate may arise from (but are not restricted to) threats of:

    • death
    • kidnapping
    • assault, or
    • serious bodily harm.

    Concerns that relate more to the property of the employee or associate will not satisfy the requirements for claiming a reporting exclusion.

    Example 1:

    Catherine, an employee of a business, has received threats of personal harm from an identified source because of work duties done by her on behalf of the business.

    On the basis of these threats, Catherine's employer has sought advice from a security expert. The security expert, having given consideration to the facts and circumstances surrounding these threats and following a security assessment, advises there is a significant risk to Catherine's personal safety.

    These threats to Catherine would form the basis for a security concern.

    End of example

    Security concerns may also arise in the absence of demonstrated threats by identified individuals or parties. For example, they may arise from:

    • the nature of an employee's responsibilities
    • the contacts employees make in the course of their duties, or
    • because of the employee's operational duties.

    Example 2:

    Charles is a senior public official responsible for law enforcement. There is some history of personal security risks associated with this position. While he has not been subject to a direct threat to his life, his personal safety may be at risk due to his responsibility for the management of operational matters within his jurisdiction.

    Subject to a threat assessment, this could form the basis for a security concern that is subject to the reporting exclusion because of the nature of Charles' employment.

    End of example

    Where the security concern relating to an employee or associate has ended, any fringe benefits provided to them would no longer be excluded fringe benefits.

    Example 3:
    The security concern relating to Catherine, from example 1 above, has subsequently ended as the identified source of the security risk has been arrested and incarcerated. The security expert, in reviewing the threat assessment, is of the view that a security concern no longer exists. The employer continues to provide benefits to protect Catherine at her home after the security concern has ended. The amounts relating to these fringe benefits would no longer be excluded fringe benefits and may need to be reported on her payment summary.

    End of example

    Security concern arising in respect of employment

    For the purposes of the reporting exclusion, a security concern relating to the personal safety of the employee or associate must arise in respect of the employee's employment. This is irrespective of whether the security concern arises in respect of the employment of a former, current or a future employee.

    Example 4:
    Amanda, an employee of a business, receives threats of personal harm because of duties she performs in the course of her employment.

    On the basis of these threats, Amanda's employer consults with a security expert who, after considering the facts and circumstances surrounding the threats, conducts a security assessment and advises a security concern exists in relation to Amanda's personal safety.

    Amanda subsequently ceases working for the business and is considered to be a former employee for the purposes of FBT.

    Given her operational knowledge of the business, the security expert concludes that a security concern still exists in relation to Amanda's personal safety.

    This security concern arises in relation to Amanda's employment for the purposes of the reporting exclusion.

    End of example

    Threat assessments

    A fringe benefit provided to address a personal security concern of an employee will only be an excluded fringe benefit where:

    • its provision is consistent with a threat assessment, and
    • the threat assessment is made by a person who is recognised as being competent to make threat assessments by the relevant industry body, government body or the Commissioner.

    For the purposes of the reporting exclusion, threat assessments must:

    • be made in relation to the relevant employee or associate
    • identify and analyse the facts and circumstances relating to the security concern
    • provide advice on measures to treat the security concern, and
    • be based on (or consistent with) the relevant Australian or New Zealand Standard or equivalent industry standard practices.

    Consequences of providing fringe benefits prior to the completion of a threat assessment

    Where you provide a fringe benefit to an employee or associate to address a security concern in the absence of a threat assessment, you may need to report the fringe benefit amount on the employee's payment summary. However, once a threat assessment has been made, you may correct the amount reported on the employee's payment summary if the fringe benefits provided are consistent with the threat assessment.

    Example 5:

    Benjamin is an employee of a business that provided him with fringe benefits to address a perceived security risk to his personal safety in the 2016 FBT year. The reportable amounts arising from those fringe benefits were reported on his payment summary for the corresponding income tax year.

    Benjamin's employer subsequently became aware of the reporting exclusion for fringe benefits that address personal safety concerns. The employer is required to seek a threat assessment in relation to Benjamin so that the amounts on the payment summary can be corrected if necessary.

    End of example

    Who can make threat assessments?

    Threat assessments must be made by a person who is recognised to be competent to make threat assessments by the relevant industry body, government body or the Commissioner of Taxation.

    Relevant industry bodies include organisations or associations that are capable of accrediting or recognising the competency of persons to carry out threat assessments as part of their business operations.

    Relevant government bodies are those that carry out threat assessments as part of their operations or which recognise or accredit the competency of a person to carry out threat assessments as part of their operations.

    In the absence of a relevant industry or government body, the Commissioner of Taxation has the discretion to recognise a person as capable of carrying out threat assessments. Employers seeking to have the Commissioner exercise his discretion must make the request in writing and should include the full name, qualifications and experience of the person seeking to make the threat assessment.

    In exercising this discretion, we will take into account the qualifications and experience of the person seeking to make the threat assessment and whether those qualifications and that experience would be equivalent to a person recognised by the relevant industry or government body as being competent to make the threat assessment.

    It is expected that the person, in demonstrating their competence to make a threat assessment, would have completed tertiary or vocational qualifications in security risk management. The experience and qualifications of a competent person may have been acquired internationally.

    See also:

    Next steps:

    • phone 13 28 66, or
    • speak to your tax adviser.
    • To obtain paper copies of our publications
      • refer to the online publications page, or
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      Last modified: 31 Jan 2017QC 18936