As described in section 9.4, the 'otherwise deductible' rule only applies if the recipient of a benefit is the employee. The FBT law also contains a design feature so that expense payment fringe benefits provided jointly to an employee and an associate are deemed to be provided solely to the employee. In cases where the otherwise deductible rule also applies, it will only apply to the employee's share of any deductible amount and specifically excludes the associate's share of any deductible amount.
the expense payment fringe benefit was provided, or a salary sacrifice arrangement relating to the benefit was entered into, before 7.30pm AEST on 13 May 2008
the previous law will continue to apply until 1 April 2009.
the expense payment fringe benefit was provided, or the salary sacrifice arrangement relating to the benefit was entered into, from 7.30pm (AEST) on 13 May 2008
the amended law applies.
An employer could reduce the taxable value of an expense payment fringe benefit provided jointly to an employee and their associate in relation to an income producing asset owned by both the employee and their associate, to the extent that the asset is applied to produce assessable income by both persons (unadjusted notional deduction).
You must adjust the taxable value of a fringe benefit determined under the previous law (unadjusted notional deduction) by only allowing the employee's share of the deduction.
That is, the otherwise deductible amount is calculated as:
Unadjusted notional deduction x employee's percentage of interest, where:
- the unadjusted notional deduction is the deduction calculated as if the amended law did not apply
- the employee's percentage of interest is the employee's (not the associate's) interest in the asset
- which relates to the expense payment fringe benefit, and
- is applied or used for the purpose of producing assessable income of the employee.
Example: previous law applies
An employee and his wife jointly own a rental property, each with a 50% interest. The rental income from the property is $20,000 and the associated deductible expenses are $10,000. The property is available for rent during all of the FBT year.
The employer reimburses the employee and his wife for the rental expenses ($10,000) on the 31 March 2008. There are no employee contributions made by the employee. The otherwise deductible rule applies and that taxable value can be reduced to nil (that is, by both the employee's and their spouse's interest in the deductible rental expenses).
Example: amended law applies
If the expenses are reimbursed on 1 June 2008, the otherwise deductible rule would still apply, but the taxable value could only be reduced by the employee's share of the deductible rental expenses - that is, $10,000 x 50% = $5,000.