• Communicating with employees

    Given that RFBAs are recorded on employees' payment summaries and the effect that RFBAs may have on the financial position of employees, it is particularly important that employees are fully informed of the RFBA implications of receiving fringe benefits.

    Attention

    Where the taxable value of non-excluded fringe benefits provided to an employee or their associate is more than $2,000 for an FBT year (1 April to 31 March) the grossed-up taxable value of the benefits should be recorded on the employee's payment summary for the corresponding income year (1 July to 30 June).

    End of attention

    Where an entity provides fringe benefits to its employees, FBT and RFBA information should be made available to relevant employees. The nature and extent of the information will vary depending on the types of benefits provided and whether salary packaging is provided in-house or by an external provider. FBT information could be provided through such means as newsletters, the intranet or other communication methods generally used by the entity.

    The FBT Manager or staff responsible for administering FBT should work with the human resources work area so that the FBT implications of any remuneration issues are included in human resource publications.

    In providing advice on FBT issues, care needs to be taken that the entity is not inadvertently providing financial advice. However, where an entity provides salary packaging to employees, it is better practice to provide a policy that can be used by employees to gain a general understanding of the impact of salary packaging on their after-tax position.

    Better practice entities will recommend that employees seek financial advice before entering into a salary packaging arrangement, particularly in situations where the amounts involved are significant in the context of the employees overall remuneration. A common approach is to require employees to certify that they are aware of this recommendation.

    Allocation of shared benefits

    Where a benefit is provided to more than one employee, there should be a documented policy on the allocation of the taxable value of the benefit. This policy should be communicated to the employees before they receive the benefit.

    Induction training

    New employees should be made aware of the FBT and RFBA implications of receiving fringe benefits because, in some cases, it may influence their decision whether or not to accept a benefit. The most common situation where this is likely to occur is where an executive employee is provided with a fully maintained car.

    Notification could be made as part of induction training or included in an induction pack. The notification shown at Figure 1 below could be provided to employees as part of an induction process.

    Notification to employees who are home-garaging a car

    As indicated above, employees should be made aware of the FBT and RFBA implications of home-garaging a car. This can be done by providing a notification to employees who may home-garage a car and including a notification in the front of a log-book or running sheet as a reminder.

    An example employee notification is shown at Figure 2 below.

    Notification for employees who are required to live away from home

    If employees are required to live away from home in order to perform employment duties, an entity will generally pay a LAFHA or pay/reimburse certain costs incurred by the employee because they are required to live away from home. The FBT and RFBA implications of receiving such an allowance or expense payment/reimbursement should be clearly communicated to employees before they move to the alternate locality.

    Employee exit form

    A risk arising in relation to FBT reporting is collecting data from employees who have left the entity.

    It is important that, as far as possible, all benefit information is collected, reconciliations performed and adjustments made before the employee leaves the entity. This includes collecting closing odometer readings of a salary packaged car on the date that the employee is taken to have ceased employment to enable the taxable value of car fringe benefits to be calculated for the period that the employee was employed by the entity.

    In the event that information and monies are not collected from an employee before they cease employment, the entity should make a reasonable effort to obtain the information and/or money after the employee has left. Employees should be requested to provide forwarding address details when they cease employment so that they can be contacted. Entities should document efforts made to contact former employees to help ensure the entity has an adequate audit trail to support its approach in the event of a dispute.

    An example employee exit form is shown at Figure 3 below. Using such a form will assist in ensuring that FBT data relevant to an employee that is leaving is collected in a timely manner.

    FBT issues database/help desk

    Larger entities and entities that provide a large number and/or various types of fringe benefits should consider establishing an FBT issues database and/or an FBT help desk to provide staff with detailed information relating to FBT.

    Details of questions and responses of general application could be documented either in a database or similar form that is readily accessible by staff. This will help raise the awareness and understanding of FBT in the entity and provide consistent advice to staff. Such a database is also useful to train new staff that will be responsible for administering FBT.

    It is useful to have the database ordered by benefit type and, if possible, allow keyword searches to help staff find the information they require.

    The FBT issues database should be subject to a periodic review to ensure that the responses are in line with current FBT legislation and entity practices.

    If an FBT help desk is established, it is important that the information provided through the help desk is documented and indexed to help provide consistent advice and to avoid the need to cover the same material several times.

    Notification of RFBAs

    Entities should establish arrangements for notifying employees of their RFBA as early as possible, so that once RFBAs are finalised, employees can be notified promptly. This enables employees to review the amount and, if necessary, seek clarification prior to it being included on payment summaries. It also acts as an additional review of the FBT data.

    RFBAs should be finalised before lodging the FBT return and no later than the time for payment summary reporting. Notifications to employees should include details of each fringe benefit provided, along with the taxable value of each fringe benefit. An example RFBA notification is shown at Figure 4 below.

    FBT staff will generally coordinate the RFBA notification process, but may rely on the resources of the payroll work area or payroll services provider.

    There should be a documented process on how employee questions are to be resolved. It will generally be appropriate that a central contact point is nominated for initial questions. The FBT Manager should liaise with the salary packaging provider and establish a process for resolving questions relating to salary packaged benefits.

    The notification method will differ depending on a number of factors, including the size of the entity, the location of employees and whether employees are on leave.

    A number of the common notification methods include:

    • email
    • secure intranet log-on
    • payslip
    • post.

    The method entities adopt will depend on a number of factors such as the cost of implementation and administration, security of the information, and timeliness.

    Figure 1: RFBA notification to be included in the induction process

    REPORTABLE FRINGE BENEFIT AMOUNTS

    While you are working for [entity name], you may be given the opportunity to:

    • home garage a vehicle owned or leased by the entity
    • receive a living-away-from-home allowance
    • receive staff awards or other employment related benefits
    • choose to salary package benefits
    • receive an item that is considered to be a fringe benefit.

    The receipt of fringe benefits may result in a reportable fringe benefit amount being reported on your payment summary. Reportable fringe benefit amounts arise where the total taxable value of all non-excluded fringe benefits received by an employee for the period 1 April to 31 March each year exceeds $2,000.

    Reportable fringe benefit amounts are not included in your assessable income and are not subject to income tax. However, reportable fringe benefit amounts are taken into account in a number of income tests, including:

    • Medicare levy surcharge. A higher reportable fringe benefit amount will result in a higher Medicare levy surcharge.
    • Deduction for personal superannuation contributions. A reportable fringe benefit amount will be included in the calculation of employer remuneration and a higher reportable fringe benefit amount may reduce your eligibility to claim a deduction for personal superannuation contributions.
    • Tax offset for eligible spouse superannuation contributions. A reportable fringe benefit amount will be included in the calculation of your remuneration and may reduce your spouse's eligibility for the tax offset for spouse superannuation contributions.
    • Mature age worker tax offset. A higher reportable fringe benefit amount may reduce your eligibility for the mature age worker tax offset.
    • Super co-contribution. A reportable fringe benefit amount will be included in the calculation of employer remuneration and a higher reportable fringe benefit amount may reduce your eligibility for the super co-contribution.
    • Higher Education Loan Programme and Financial Supplement repayments. A higher reportable fringe benefit amount will result in a higher liability for Higher Education Loan Programme and Financial Supplement repayments.
    • Child support obligations. A higher reportable fringe benefit amount will generally result in an increase in child support obligations or a decrease in child support entitlements if you are in receipt of child support payments.
    • Entitlement to certain income-tested government benefits. A higher reportable fringe benefit amount will generally reduce your entitlement to income-tested government benefits.

    Should you have any questions in relation to reportable fringe benefit amounts, please contact [FBT Manager], refer to the [FBT policy or salary packaging policy] or visit the ATO website at ato.gov.au/fbt

    Signed:               Date:

    [FBT Manager]

    Figure 2: notification to employees who are home-garaging a car

    ATTENTION EMPLOYEES

    You will receive a car fringe benefit when you garage a car at or near your home. Depending on how often you home garage a car and whether you have received other fringe benefits during the year, you may have a reportable fringe benefit amount recorded on your payment summary. Reportable fringe benefit amounts arise when the total taxable value of all non-excluded fringe benefits received by an employee for the period 1 April to 31 March each year exceeds $2,000.

    The taxable value of the car fringe benefit that is allocated to you will be calculated based on [insert the allocation method used by the entity]. This data will be collated from the [vehicle running sheets/vehicle log-book].

    Reportable fringe benefit amounts are not included in your assessable income and are not subject to income tax. However, reportable fringe benefit amounts are taken into account in a number of income tests, including:

    • Medicare levy surcharge. A higher reportable fringe benefit amount will result in a higher Medicare levy surcharge.
    • Deduction for personal superannuation contributions. A reportable fringe benefit amount will be included in the calculation of employer remuneration and a higher reportable fringe benefit amount may reduce your eligibility to claim a deduction for personal superannuation contributions.
    • Tax offset for eligible spouse superannuation contributions. A reportable fringe benefit amount will be included in the calculation of your remuneration and may reduce your spouse's eligibility for the tax offset for spouse superannuation contributions.
    • Mature age worker tax offset. A higher reportable fringe benefit amount may reduce your eligibility for the mature age worker tax offset.
    • Super co-contribution. A reportable fringe benefit amount will be included in the calculation of employer remuneration and a higher reportable fringe benefit amount may reduce your eligibility for the super co-contribution.
    • Higher Education Loan Programme and Financial Supplement repayments. A higher reportable fringe benefit amount will result in a higher liability for Higher Education Loan Programme and Financial Supplement repayments.
    • Child support obligations. A higher reportable fringe benefit amount will generally result in an increase in child support obligations or a decrease in child support entitlements if you are in receipt of child support payments.
    • Entitlement to certain income-tested government benefits. A higher reportable fringe benefit amount will generally reduce your entitlement to income-tested government benefits.

    Should you have any questions in relation to reportable fringe benefit amounts, please contact [FBT Manager], refer to the [FBT policy or salary packaging policy] or refer to the ATO website at ato.gov.au/fbt

    Signed:               Date:

    [FBT Manager]

    Figure 3: employee exit form

    EMPLOYEE EXIT FORM

    [Employee name]

    [Employee AGS/ID number]

    1. Since 1 April [yyyy], did you salary package a car, home garage a car or have a car provided to you through the executive vehicle scheme?

    No (go to question 2)

    Yes

    Please provide the following details to the human resources work area/salary packaging provider at the earlier of when you return the car or when you have ceased employment with this entity:

    • vehicle registration
    • employee AGS/ID number
    • odometer reading on the date of ceasing employment with this employer (this may include a period where you have taken leave). If you are unsure of the date that you ceased employment with this entity, please contact [human resources contact].

     

    2. Was [entity name] paying/reimbursing any study leave or Higher Education Loan Programme payments such as HECS-HELP or FEE-HELP?

    No (go to question 3)

    Yes

    Does the human resources work area/salary packaging provider have all paperwork in relation to reimbursement study expenses? If not, please provide all paperwork to [contact] as soon as possible.

    3. Did you salary package any other benefits?

    No

    Yes

    4. Since 1 April [yyyy], did you receive a living-away-from-home allowance or any other payments/reimbursements relating to living-away-from-home or relocating?

    No

    Yes

    5. Since 1 April [yyyy], have you received any other expense reimbursements, the private use of any entity property such as a home-based desktop computer, or any other staff awards?

    No (go to question 6)

    Yes (provide details)

     

    6. For those fringe benefits received, have you provided the relevant documentation - for example a living-away-from-home allowance and/or otherwise deductible declaration?

    No

    Yes

    7. Have you advised the human resources work area/salary packaging provider of your exit date?

    No

    Yes

    Should you require assistance in completing this form, please contact [FBT Manager].

    Figure 4: example RFBA notification

    REPORTABLE FRINGE BENEFIT AMOUNT NOTIFICATION

    [Employee name]

    [Employee AGS/ID number]

    Where the taxable value of all non-excluded fringe benefits provided to you during the fringe benefits tax year exceeds $2,000, [entity name] is legally required to record a reportable fringe benefit amount on your payment summary.

    Your reportable fringe benefit amount for the fringe benefits tax year ended 31 March [yyyy] is $[000].

    Our records indicate that this amount is based on the following fringe benefits being provided to you during the fringe benefits tax year:

    Benefit type

    Taxable value $

    Car fringe benefit

    [000]

    Expense payment fringe benefits

    [000]

    The reportable fringe benefit amount shown on your payment summary is the grossed-up amount, which equals the total of the taxable values multiplied by the gross-up rate 1.8692 (Total $0000)

    If you believe that there is an error in your reportable fringe benefit amount, or have any questions in relation to reportable fringe benefit amounts, please phone [contact name].

    It is important that any issues relating to this advice are resolved to enable lodgment of the fringe benefits tax return by 21 May [yyyy]. Therefore, any questions you have must be received by 15 May [yyyy]. If you do not contact us regarding the reportable fringe benefit amount shown above, it will be included on your 30 June [yyyy] payment summary.

    Reportable fringe benefit amounts are not included in your assessable income and are not subject to income tax. However, reportable fringe benefit amounts are taken into account in a number of income tests, including:

    • Medicare levy surcharge. A higher reportable fringe benefit amount will result in a higher Medicare levy surcharge.
    • Deduction for personal superannuation contributions. A reportable fringe benefit amount will be included in the calculation of employer remuneration and a higher reportable fringe benefit amount may reduce your eligibility to claim a deduction for personal superannuation contributions.
    • Tax offset for eligible spouse superannuation contributions. A reportable fringe benefit amount will be included in the calculation of your remuneration and may reduce your spouse's eligibility for the tax offset for spouse superannuation contributions.
    • Mature age worker tax offset. A higher reportable fringe benefit amount may reduce your eligibility for the mature age worker tax offset.
    • Super co-contribution. A reportable fringe benefit amount will be included in the calculation of employer remuneration and a higher reportable fringe benefit amount may reduce your eligibility for the super co-contribution.
    • Higher Education Loan Programme and Financial Supplement repayments. A higher reportable fringe benefit amount will result in a higher liability for Higher Education Loan Programme and Financial Supplement repayments.
    • Child support obligations. A higher reportable fringe benefit amount will generally result in an increase in child support obligations or a decrease in child support entitlements if you are in receipt of child support payments.
    • Entitlement to certain income-tested government benefits. A higher reportable fringe benefit amount will generally reduce your entitlement to income-tested government benefits.

    Should you have any questions in relation to reportable fringe benefit amounts, please contact [FBT Manager], refer to the [FBT policy or salary packaging policy] or refer to the ATO website at ato.gov.au/fbt

    Signed:               Date:

      Last modified: 23 Jul 2015QC 18627