House of Representatives

Tax Laws Amendment (2004 Measures No. 2) Bill 2004

Explanatory Memorandum

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

Chapter 4 - Fringe benefits tax housing benefits

Outline of chapter

4.1 Schedule 4 to this bill amends the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) to allow for continuity of fringe benefits tax (FBT) treatment for non-remote housing benefits where administration and payment of FBT is devolved by State or Territory governments to a departmental level.

Context of amendments

4.2 A State or Territory may devolve the administration and payment of FBT to eligible State or Territory bodies. Where this happens, each nominated State or Territory body is treated as the employer of the relevant employees for the purposes of the FBTAA 1986.

4.3 At the time when FBT responsibilities are devolved, a requirement could be triggered to reassess the valuation and the character of fringe benefits provided to employees. Section 135X of the FBTAA 1986 allows for continuity of FBT treatment of certain benefits, to avoid the need for reassessment where there has been no material change in the provision of the benefit.

4.4 Section 135X has two objects. The first is to ensure that the calculation of the taxable value of certain fringe benefits is not affected as a result of a break in the continuity of certain record keeping requirements solely because of a 'transitional event'. The second object is to preserve the character of certain benefits where that character would otherwise be lost solely because of a transitional event.

4.5 A transitional event includes situations where a State or Territory devolves the administration and payment of FBT to a nominated State or Territory body, or where such a devolution is revoked or varied, or where the nominated State or Territory body ceases to exist.

4.6 Section 135X allows the Commissioner of Taxation (Commissioner) to enter into a written agreement with the State or Territory about what is to happen when a transitional event occurs in respect of certain benefits.

4.7 Currently, a written agreement may be entered into when a transitional event occurs in respect of issues such as:

·
whether a register kept in relation to the value of car parking fringe benefits is a valid register; and
·
whether a year of tax is to be treated as a log book year of tax for the purposes of calculating the taxable value of car fringe benefits using the cost basis.

4.8 The amendment will allow a written agreement to be entered into when a transitional event occurs in respect of whether a year of tax that is a base year of tax for the purposes of calculating the taxable value of non-remote housing fringe benefits is to continue to be treated as a base year of tax.

Detailed explanation of new law

4.9 The amendment will allow the Commissioner to enter into a written agreement with a State or Territory about what is to happen when a transitional event occurs in respect of whether a year of tax that is a base year of tax for the purposes of calculating the taxable value of non-remote housing fringe benefits is to continue to be treated as a base year of tax. [Schedule 4, item 1, subsection 135X(3)]

4.10 This will allow for continuity of FBT treatment for non-remote housing benefits when a transitional event occurs.

Application and transitional provisions

4 .11 The amendment applies in respect of the FBT year beginning on 1 April 2001 and in respect of all later FBT years. [Schedule 4, item 2]


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