House of Representatives

Taxation Laws Amendment Bill (No. 2) 2001

Explanatory Memorandum

(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)

Chapter 1 - Fringe benefits tax: exemption for certain free travel on public transport by police officers

Outline of chapter

1.1 Part 1 of Schedule 1 to this Bill will amend the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) to exempt from fringe benefits tax (FBT) certain free public transport provided to police officers.

Context of reform

1.2 Under arrangements with State and Territory Governments, police officers are provided free public transport for travel to and from duty. Irrespective of their oath of office, which requires that police officers respond to any incidents they observe on or off duty, a residual fringe benefit currently arises under section 45 in respect of this free travel.

1.3 Under section 45 of the FBTAA 1986, a benefit is a residual fringe benefit if it is not a benefit under any other provisions of the FBTAA 1986, for example, free or discounted services such as travel. However, section 47 provides that certain residual benefits are exempt benefits, for example, free travel provided to an employee by an employer who carries on a business of providing transport.

Detailed explanation of new law

1.4 Section 47 is amended to exempt from FBT a benefit that is provided in the following circumstances:

a person is provided with a residual benefit arising from the provision of travel on public transport between the persons place of residence and primary place of employment;
the person is an employee of a government body; and
the persons duties of employment are performed in a police service.

[Schedule 1, Part 1, item 1, subsection 47(1A)]

1.5 The terms place of residence, primary place of employment and government body are defined in subsection 136(1) to mean, respectively:

a place at which a person resides or a place at which the person has sleeping accommodation whether on a permanent or temporary basis and whether or not on a shared basis;
the employers business premises, or associated premises, on which the employee would normally carry out his or her employment duties; and
the Commonwealth, a State, a Territory or an authority of the Commonwealth or of a State or Territory.

Application and transitional provisions

1.6 This measure will apply from the FBT year commencing 1 April 2000 and all later years. [Schedule 1, Part 1, item 2]

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