Log book year
A year is a log book year if either:
- none of the previous four years was a log book year for that car
- you elect to treat the year as a log book year (for example, to increase the nominated percentage of business travel)
- the Commissioner of Taxation, by written advice, requires you to treat the year as a log book year.
The arm's length price payable by the general public in a normal commercial transaction.
The provision of meal entertainment means the provision of either:
- entertainment by way of food or drink
- accommodation or travel in connection with, or to facilitate the provision of, such entertainment
- the payment or reimbursement of expenses incurred in obtaining something covered by the above.
Notional tax amount
The amount on which FBT instalments are based. Generally, this is the amount of tax assessed for the last return lodged.
For purposes of a car parking fringe benefit, the one-kilometre distance is measured not by radius but by the shortest practicable direct route (by whichever means this route is travelled - for example by foot, car or boat).
Operating cost method
Also known as the log book method. The taxable value of a car fringe benefit is a percentage of the total costs of operating the car during the FBT year. The percentage varies with the extent of actual private use. The lower the private use of the car, the lower the taxable value will be.
Otherwise deductible rule
The taxable value of a benefit may be reduced by the amount that an employee would have been entitled to claim as an income tax deduction in their personal tax return if the benefit was not paid for, reimbursed or provided by you, the employer.
Place of residence
A place where a person lives or has sleeping accommodation. It doesn't matter whether it is on a permanent or temporary basis. It also doesn't matter whether the person shares the place with someone else.
Primary place of employment
Basically, the employer's premises at which the employee performs the majority of their employment-related duties on a particular day.
A car is made available for private use by an employee on any day the car is not at your premises and the employee is allowed to use it for private purposes, or the car is garaged at the employee's home.
Benefits that are exempt from FBT solely because they are provided to either:
- employees of public benevolent institutions, certain charitable institutions or some hospitals (including government employees who work in public hospitals)
- live-in carers of disadvantaged or elderly people where the employer is a government body, religious institution or non-profit company.
Quasi-fringe benefits are included in the employee's reportable fringe benefits amount.
Certain non-government, non-profit organisations. Those that may qualify for an FBT rebate include:
- religious, educational, charitable, scientific or public educational institutions
- trade unions and employer associations
- non-profit organisations established
- to encourage music, art, literature or science
- to encourage or promote a game, sport or animal races
- for community service purposes
- to promote the development of aviation or tourism
- to promote the development of Australian information and communications technology resources
- to promote the development of the agricultural, pastoral, horticultural, viticultural, aquacultural, fishing, manufacturing or industrial resources of Australia.
For most employers, accommodation is in a remote area if it is not in or near an urban centre. The accommodation must be located at least 40 kilometres from a town with a census population of 14,000 to less than 130,000, and at least 100 kilometres from a town with a census population of 130,000 or more (population figures based on the 1981 Census).
If the accommodation is in zone A or B (for income tax purposes), it must be located at least 40 kilometres from a town with a census population of 28,000 to less than 130,000, and at least 100 kilometres from a town with a census population of 130,000 or more.
Where the shortest practical surface route between a locality and an eligible urban area includes a route by water, the distance travelled by water is doubled for the purposes of working out how remote that locality is from the eligible urban area.
Where the circumstances warrant it, the Commissioner of Taxation has the discretion to treat a person who resides or works in an area adjacent to an eligible urban area as residing or working outside that area if people who live or work near that person are outside the area.
An extended exemption applies to housing benefits provided to employees of certain hospitals, charitable institutions or a police service. For such benefits, accommodation is treated as being in a remote area where it is situated at least 100 kilometres from a town with a census population of 130,000 or more.
Reportable fringe benefits amount
If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year, you must report the grossed-up taxable value on the employee's payment summary. These are called reportable fringe benefits.
Before 1 April 2007, the reporting exclusion threshold was $1,000.
For the purposes of a car parking fringe benefit, the fee for any particular day is not representative if it differs substantially from the average lowest fee ordinarily charged for all-day parking. For this purpose, an employer may compare the fee for a particular day with the average fee charged during either of the four-week periods beginning or ending on that particular day.
The place, especially the house, in which a person resides. It also means a dwelling place or a dwelling.
Residual fringe benefit
Any fringe benefit that doesn't fit into one of the other 12 categories of fringe benefits.
Salary sacrifice arrangement
An arrangement between an employer and an employee, whereby the employee agrees to forgo part of their future entitlement to salary or wages in return for the employer or associate providing them with benefits of a similar value.
Small business entity
An entity that carries on a business and satisfies the annual turnover test of $2 million. A formal definition is contained in section 328-110 of the Income Tax Assessment Act 1997.
Statutory formula method
The statutory formula method for car fringe benefits is based on applying a statutory percentage to the car's base value.
Statutory interest rate
Also known as the benchmark interest rate. This interest rate is published by the Commissioner of Taxation each year and must be used to calculate the taxable value of either:
- a fringe benefit provided by way of a loan
- a car fringe benefit where an employer chooses to value the benefit using the operating cost method.
When calculating the taxable value of a car fringe benefit using the statutory formula method, the car's base value is multiplied by a statutory percentage.
For all car fringe benefits provided after 7.30pm AEST on 10 May 2011 (except where there is a pre-existing commitment in place to provide a car) a flat statutory rate of 20% applies.
For car fringe benefits provided prior to 7.30pm AEST on 10 May 2011, or where you have a pre-existing commitment in place to provide the car after this time, the statutory percentage varies according to the total number of kilometres travelled by the car during the FBT year.
Taxable supplies (sales)
For GST, a sale or supply includes a sale of goods or services, a lease of premises, hire of equipment, giving of advice, export of goods and the supply of other things. You are required to pay GST on taxable supplies (sales) you make. You are entitled to claim GST credits for the GST included in the price of purchases you use to make taxable supplies.
You make a taxable supply if you are registered or required to be registered for GST and:
- you make the supply for consideration
- you make the supply in the course of furtherance of a business (enterprise) you carry on
- the supply is connected to Australia.
However, the supply is not taxable to the extent it is either GST-free or input taxed.
The value of fringe benefits that you use as a basis for calculating your FBT liability. There are different rules for calculating the taxable value of the different types of fringe benefits.
Type 1 gross-up rate
Used where an employer (or other provider) is entitled to claim a GST (input tax) credit.
The rate is 2.0647.
Prior to the FBT year commencing 1 April 2006, the type 1 gross-up rate was 2.1292.
Type 2 gross-up rate
Used where an employer (or other provider) is not entitled to claim a GST (input tax) credit.
The rate is 1.8692.
Prior to the FBT year commencing 1 April 2006, the type 2 gross-up rate was 1.9417.
Usual place of residence
An employee is regarded as living away from their usual place of residence if they are required to do so in order to perform their employment-related duties and could have continued to live at the former place if they did not have to work temporarily in a different locality.
Whether a place is an employee's usual place of residence is a question of fact, based on all the circumstances.