• Calculating taxable value of expense payment fringe benefits

    The taxable value of expense payment fringe benefits is the amount of the reimbursement or payment, reduced by the component that the employee could claim as a once-only income tax deduction (the otherwise deductible component) and reduced by any contribution made by the employee. The otherwise deductible component does not relate to deductions that span several income years, such as depreciation.

    When calculating the taxable value of an expense payment fringe benefit, employees can help by completing an otherwise deductible declaration prior to an expense being reimbursed or paid. This enables the taxable value of the benefit to be calculated, and the RFBA to be recorded, at the time of reimbursement rather than requiring otherwise deductible declarations to be collected at year end.

    To further streamline the process, the financial management information system (FMIS) and the payroll system can be used to capture FBT data. An otherwise deductible declaration can be incorporated into an expense claim form (see Figure 6 below). The reimbursement can then be processed through the payroll system and coded to specifically created payroll codes that link to the FMIS, such as 'telephone expense - private use' and 'telephone expense - business use'.

    This means that for FBT return reporting purposes, the total expense payment amount, the otherwise deductible amount and the taxable value amount can be extracted from the FMIS, and the RFBA data (linked to the employee's name and employee AGS/ID number) can be extracted from the payroll system. For this option to be effective it requires all expenditure to be reimbursed through the payroll system, rather than be paid through the accounts payable system.

    To increase the efficiency of the process, whether through the payroll system or the accounts payable system, the area processing the claim should be requested to provide a copy of the expense claim reimbursement form to the work area that is responsible for collating FBT data. The FBT staff can then periodically reconcile the expense claim forms to the information contained in the FMIS.

    Figure 6: expense reimbursement claim form

    Expense reimbursement claim form

    [Employee name]

    [Employee AGS/ID number]

    [Cost centre/Project code]

    Reimbursement details

    Please provide an original tax invoice (for expenses subject to goods and services tax (GST)) or a receipt.

    Details of expenses

    Amount of
    reimbursement

    Was the expense
    subject to GST

     

    $ [000]

    Yes     No

    Otherwise deductible declaration

    I incurred the expenses for the following purpose(s):

    [Please give sufficient information to demonstrate the extent to which you used the item for the purpose of earning your assessable income.]

    I also declare that, had the expense not been reimbursed, I would have been entitled to an income tax deduction for [00]% of the expense.

    Expenses reimbursed may result in a reportable fringe benefit amount being reported on your payment summary. For details on reportable fringe benefit amounts, refer to [FBT manual/Reportable fringe benefit amount notification].

    Signed:               Date:

    I approve the spending of money in accordance with [for example, FMA Regulation 9].

    [Name]

    [Position number]

    Signed:               Date:

      Last modified: 17 Jul 2012QC 21998