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  • Arrangements when a new body is created

    When a new body is created, the state or territory may need to undertake the three steps listed below.

    Step 1 Determine the date on which the body was created

    Was the body created between 1 April and 21 May?

    • YES – The state or territory will be able to nominate the body as an employer in the year it is created.
    • NO – The state or territory cannot nominate the body as an employer the year in which it was created. As the state or territory will be the employer – from the date the employees were transferred to the newly created body until the new body is nominated – it will need to complete steps 2 and 3 listed below.

    Step 2 Undertake specific checks

    • If fringe benefits were provided to the employees in the period between 1 April and the date on which the new body was created  
      • ensure these fringe benefits are included in the FBT return of the body that was the employer prior to the change occurring
      • determine whether the employees had a reportable fringe benefits amount for the period prior to the change.
       
    • Determine whether the change will affect the calculation of the taxable value of any fringe benefits provided to employees. For example  
      • Will the provider of the car fringe benefits change with the transfer of the employees? If the provider will change, it may be necessary to obtain odometer readings when the change occurs, or ensure operating costs can be allocated between the two periods.
      • Will a different method be used to calculate the taxable value of benefits such as meal entertainment, car parking or housing? If a different method will be used ensure affected staff are aware of the change.
       
    • Determine whether it is necessary to enter into a section 135X agreement.

    Step 3 Allocate the notional tax to the state or territory

    The state or territory will need to lodge a FBT return for any fringe benefits provided during the period it is the employer and it will be liable to pay any instalments that relate to the transferred employees for the period after it became the employer.

    To enable the state or territory to pay the instalments, the notional tax will need to be allocated to the state or territory. The arrangements for doing this depend on whether the state or territory was paying instalments prior to the creation of the state or territory body.

    Arrangements where the state or territory was paying instalments

    If the state or territory was paying instalments prior to the creation of the state or territory body, the state or territory will need to vary the FBT instalments shown on their next activity statement to include the notional tax that relates to the transferred employees.

    To do this complete labels F2, F3 and F4 on the activity statement.

    The revised notional tax of the state or territory body, which is shown at label F2, is calculated using the following formula:

    Notional tax of the state or territory

    +

    Notional tax of the ceased body

    (

    Instalments paid by the ceased body

    Previous credits claimed by the ceased body

    )

    The amount of the varied instalment for the quarter is shown at label F3. This is calculated using the following formula:

    F2 amount x Relevant percentage - (Instalments paid - Previous credits claimed)

    The relevant percentage depends upon the FBT quarter in which the changes occur. The percentages are:

    • 25% for the quarter ending 30 June
    • 50% for the quarter ending 30 September
    • 75% for the quarter ending 31 December
    • 100% for the quarter ending 31 March.

    The reason for the variation is inserted at label F4. The relevant code to use is 22.

    Example: Variation of state or territory instalments following creation of body

    On 1 October 2015, the state or territory government abolished two departments and created New Department. The functions and employees of the abolished departments were transferred to New Department.

    As it was after 21 May 2015, New Department cannot be nominated as an employer for the year ended 31 March 2016. Instead, the state or territory will be the employer of the employees undertaking their duties in New Department for the period from 1 October 2015 to 31 March 2016.

    The state or territory had lodged an FBT return for the year ended 31 March 2015 for the fringe benefits provided to employees who did not undertake duties for a nominated body. Based on this return the notional tax of the state or territory for the year ended 31 March 2016 was $800,000.

    The total notional tax of the two abolished departments is $600,000. Prior to being abolished, the former departments had paid two instalments totalling $300,000.

    To reflect the changes, the state or territory body will vary its final two instalments by completing labels F2, F3 and F4 on its activity statement for the quarter ending 31 December 2015.

    The amounts to be inserted are calculated as follows:

    F2    1,100,000 = (Amount actually assessed) + (Notional tax of the abolished departments) - (Instalments paid by the abolished departments)

    1,100,000 = (800,000) + (600,000) - (300,000)

    F3    425,000 = F2 amount x Relevant percentage - (Instalments paid - Previous credits claimed)

    425,000 = 1,100,000 x 75% - (400,000 - 0)

    F4    22

    In varying the instalments, the state or territory needs to consider whether there has been a change in the amount of fringe benefits being provided to employees.

    End of example

    Arrangements where the state or territory did not have a notional tax amount

    If the state or territory had devolved all of its FBT responsibilities to nominated bodies, it will not have a notional tax amount at the time the body is created.

    Where the state or territory does not have a notional tax amount at the time it becomes an employer, it will need to advise the Tax Office of the allocation of the notional tax to the state or territory by completing parts B, C and D of Fringe benefits tax: Nominate or revoke an eligible state or territory body.

    Part B requests details of the bodies that are ceasing to be an employer.

    Part C requests details of:

    • the total amount of instalments the ceased body was required to pay during the FBT year (column (c))
    • the amount of instalments paid by the ceased body during the FBT year (column (d)).

    The state or territory will become liable to pay the remaining instalments calculated in column (e).

    Part D requests details of the amount of tax that is to be allocated to the state or territory.

    When allocating the notional tax as a result of a body ceasing to exist the total of column (e) in part C (the amount of unpaid instalments) must equal the total notional tax of part D (the total instalments to be paid for the remainder of the year by the state or territory).

    Example: Allocation of notional tax to state or territory following creation of body
    Using the facts from the previous example, if the state or territory did not have a notional tax amount it will advise the Tax Office of the transfer of instalments to the state or territory by completing parts B, C and D of the form Fringe benefits tax: Nominate or revoke an eligible state or territory body as follows:

    Part B: Nominated bodies ceasing to be an employer

    Name

    Tax file number

    Date on which nomination ceased

    Old Department

    981 125 422

    1 October 2015

    Ex Department

    123 654 789

    1 October 2015

     
    Part C: Tax paid by the state or territory and/
    or the bodies that have ceased to be an employer

    (a) Name

    (b) Tax file number

    (c) Notional tax

    (d) Instalments paid

    (e) Balance

    Old Department

    981 125 422

    400,000

    200,000

    200,000

    Ex Department

    123 654 789

    200,000

    100,000

    100,000

     

    Total notional tax

    600,000

    Total balance

    300,000

     
    Part D: Allocation of notional tax

    Name

    Tax file number

    Notional tax

    State or territory

     

    300,000

     

    Total notional tax

    300,000

     

    End of example

    Arrangements when a nominated state or territory body ceases to exist

    The four steps listed below need to be undertaken when a nominated state or territory body ceases to exist and the employees are transferred to another body.

    Step 1 – Lodge a final FBT return for the nominated state or territory body and pay the amount of tax that is due

    The nominated state or territory body that is ceasing to exist will need to lodge a final FBT return and pay the amount of tax that is due. This return must be lodged by 21 May following the date it ceased.

    When lodging the final FBT return, print N for 'no' in response to the question about future FBT returns.

    Step 2 – Determine whether the employees have a reportable fringe benefits amount

    To determine whether the employees have a reportable fringe benefits amount, calculate each employee's share of the reportable fringe benefits for the period from 1 April to the date on which the nominated body ceased to exist. If the value exceeds the reporting threshold, the grossed-up taxable value of those benefits will need to be recorded on the employee's payment summary for the corresponding income year (1 July to 30 June).

    Where an employee has more than one employer during an FBT year as a result of a nominated body ceasing to exist, each of the employers will separately apply the reporting threshold.

    Example: Application of the reporting threshold
    An employee of a nominated body that ceases to exist on 31 January 2016 received benefits with a reportable value of $4,000 from the ceased body. In addition, the employee received benefits with a reportable value of $800 while undertaking duties for a second department during the period from 1 February to 31 March 2016.

    As the value of the benefits provided by the ceased body exceeds the reporting threshold the value of reportable benefits ($4,000) will be reported on the payment summary provided by the ceased body for the year ended 30 June 2016.

    The benefits received from the second employer ($800) will not be reported as the amount received is less than the reporting threshold.

    Note: Care should be taken where an employee has a reportable fringe benefits amount for fringe benefits provided by a nominated body that ceases to exist in the period from 1 April to 30 June to ensure the amount is reported on a payment summary for the following income year.

    End of example

    Step 3 – Determine whether it is necessary to enter into a section 135X agreement

    Determine whether it is necessary to enter into a section 135X agreement provides details regarding entering into a section 135X agreement.

    Step 4 – Determine the requirements that will apply to the new employer

    The requirements that will apply to the new employer will depend upon whether the employees are transferred to – a:

    • body that is eligible for nomination but has not been nominated
    • body that has been nominated as an employer, or
    • separate government body that is an employer in its own right.

    Transfer of employees to a body that is eligible for nomination but has not been nominated

    If the employees are transferred to a body that is eligible for nomination but has not been nominated (for example a new body that is created on the date the previous body ceased to exist) the state or territory will either:

    Transfer of employees to a body previously nominated as an employer

    If the employees are transferred to a body previously nominated as an employer the nominated body will need to vary the FBT instalment shown on its next activity statement to include the notional tax that relates to the transferred employees.

    See also:

    Transfer of employees to a separate government body that is an employer in its own right

    If the new employer is a separate government body that does not come within the nomination provisions it will not become liable to pay instalments in relation to the transferred employees until it lodges an FBT return for the relevant FBT year.

    See also:

      Last modified: 29 Nov 2016QC 20311