• 18.8 Substantiation requirements

    Where you use the otherwise deductible rule, you must have documentation to substantiate the extent to which the purchase price of the residual benefit would have been 'otherwise deductible' to the employee. You must obtain the documentation from the employee before lodging the relevant FBT return. Where the documentation is a Residual benefit declaration by the employee, it must be in a form approved by the Commissioner of Taxation (refer to Declarations).

    Travel diary

    A 'travel diary' is a diary or similar document that you must obtain from an employee where the residual benefit is provided:

    • for travel within Australia for more than five consecutive nights and the travel is not exclusively for performing employment-related duties (the fact that the business travel requires the employee to stay away over a weekend will not, in itself, mean the trip is not undertaken exclusively in the course of their employment)
    • for travel outside Australia for more than five consecutive nights.

    In determining whether a travel diary needs to be kept, you need to look at the number of nights the employee is away from home. The number of nights away from home includes transit time.

    A travel diary shows where the activity took place, the date and the approximate time when the activity commenced, and the duration and the nature of the activity.

    If the provision of the residual benefit is covered by an annual 'no private use declaration - residual benefits' (refer section 20.3 of Fringe benefits tax exempt benefits), the requirement to obtain a travel diary is waived. That is, if the residual benefit arises from the use of property which is subject to a consistently enforced prohibition on private use and would result in a taxable value of nil, you will then be able to make an annual no private use declaration.

    Such a declaration would state that the benefits were provided only for employment related purposes and that there was no private portion.

    Employee declaration

    You must obtain a Residual benefit declaration in a form approved by the Commissioner except where:

    • the residual benefit is used exclusively in the course of performing employment-related duties (for example, protective clothing and tools of trade)
    • there is a requirement to keep a travel diary
    • the requirement to keep a travel diary is waived because the employee is a member of an international aircrew
    • the provision of the fringe benefit is covered by a recurring fringe benefit declaration.

    Recurring fringe benefit declaration

    The requirement to obtain an employee declaration is waived if the provision of a fringe benefit is covered by a Recurring residual fringe benefit declaration (refer to Declarations).

    A fringe benefit is covered by a recurring fringe benefit declaration if:

    • it is provided no later than five years after the day on which the declaration was made
    • the deductible proportion of the benefit is not significantly less than the deductible proportion of the benefit for which the declaration was first provided (a difference of more than 10 percentage points is regarded as being significant)
    • it is 'identical' to the fringe benefit for which the declaration was first made.

    Benefits are to be treated as being identical if they are the same in all respects, except for any differences that:

    • are minimal or insignificant
    • relate to the value of the benefits
    • relate to the deductible proportion of the benefits.

    A recurring fringe benefit declaration is automatically revoked by a later recurring fringe benefit declaration made for an identical benefit. This means that the earlier declaration applies to the first benefit and to any identical benefits provided before the later declaration was made. The later declaration applies to the benefit for which it was provided and to any identical benefits provided subsequently.

    The declaration must be in a form approved in writing by the Commissioner. The employee must give you the declaration before the due date for lodging your FBT return or, if you are not required to lodge a return, by 21 May.

    Example

    An employee lives in a house provided by the employer. The telephone service to the house is in the name of the employer and the employer pays each telephone bill. Use of the telephone is a residual fringe benefit.

    The employee gives the employer a recurring fringe benefit declaration which specifies that the deductible proportion of the use of the telephone is 80%. The declaration covers all further use of the telephone over the next five years, providing that the employment-related use of the telephone is not less than 70%. If the employment-related use of the telephone drops to less than 70%, another declaration is required.

    End of example
      Last modified: 15 Apr 2015QC 17817