Fringe benefits tax - a guide for employers

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Chapter 12 - Airline transport fringe benefits

Remember, a fringe benefit may be provided by another person on behalf of an employer. It may also be provided to another person on behalf of an employee (for example, a relative).

The government has announced changes to the method of determining the taxable value of airline transport fringe benefits. The information in this publication about airline transport fringe benefits does not take these proposed changes into account because they are not yet law.

If the proposed changes become law, they may impact on any airline transport fringe benefits provided on or after 7.30pm (AEST) on 8   May 2012. For more information about the proposed changes, refer to Reform of Airline transport fringe benefits .

12.1 What is an airline transport fringe benefit?

An airline transport fringe benefit arises where employees (or their associates) of airlines or travel agents are provided with free or discounted air travel subject to the stand-by restrictions customarily applying to employees in the airline industry.

Free or discounted air travel that is not subject to such restrictions is a residual fringe benefit.

12.2 Taxable value

The taxable value of the fringe benefit is the stand-by value, less the employee contribution.

The government has announced changes to the method of determining the taxable value of airline transport fringe benefits. The information in this publication about airline transport fringe benefits does not take these proposed changes into account because they are not yet law.

If the proposed changes become law, they may impact on any airline transport fringe benefits provided on or after 7.30pm (AEST) on 8   May 2012. For more information about the proposed changes, refer to Reform of Airline transport fringe benefits .

12.3 Stand-by value

Domestic travel

Domestic travel type

Stand-by value

On a scheduled passenger air service the benefit provider operates.

37.5% of the lowest publicly advertised economy airfare the provider charges for travel:

  • at or about that time
  • and for travel over that route.

Not on a scheduled passenger air service the provider operates.

37.5% of the lowest publicly advertised economy airfare a carrier charges for travel:

  • at or about that time
  • and for travel over that route.

On a combination of scheduled passenger air services where there is no:

  • scheduled passenger air service the provider operates over that route at or about that time
  • carrier operating a scheduled passenger air service over that route at or about that time.

37.5% of the lowest combination of publicly advertised economy airfares carriers charge for travel:

  • at or about that time
  • and for travel over that route.

The lowest publicly advertised airfare can be obtained from any published material produced by airlines that is available to the public.

In any other case, the stand-by value is 75% of the market value, at or about that time, for travel over that domestic route.

International travel

International travel type

Stand-by value

On a scheduled passenger air service the benefit provider operates.

37.5% of the lowest published airfare the provider charges for travel over that international route.

Not on a scheduled passenger air service the provider operates.

37.5% of the lowest economy air fare charged by a carrier:

  • at or about that time
  • and for travel over that route.

On a combination of scheduled passenger air services where there is no:

  • scheduled passenger air service the provider operates
  • carrier operating a scheduled passenger air service over that route at or at about that time.

37.5% of the lowest combination of economy airfares carriers charge:

  • at or about that time
  • and for travel over that route.

The lowest published fare for these purposes is the lowest fare published in Australia the carrier charges for travel over that route in the 12   months before the end of the fringe benefits tax   (FBT) year. This includes advance purchase but not group discounts.

In any other case, the stand-by value is 75% of the market value, at or about that time, for travel over that international route.

12.4 Reduction in taxable value where expenditure would have been deductible to the employee

The taxable value of an airline transport fringe benefit may be reduced in accordance with the 'otherwise deductible' rule, but only if the recipient of the benefit is the employee. Broadly, this means that the taxable value may be reduced by the amount the employee would have been entitled to claim as an income tax deduction if both of the following conditions are satisfied:

  • the seat on the airline flight is not provided as a fringe benefit
  • the employee acts as a consumer or member of the public in purchasing the ticket.

For example, if an employee bought a seat on an airline flight in order to travel to perform employment-related duties, the cost would be wholly deductible for income tax purposes. Under the otherwise deductible rule, if you (the employer) provided the ticket to the employee so they could travel to perform employment-related duties, the taxable value of the fringe benefit would be nil, regardless of the amount of employee contribution you required.

Applying the otherwise deductible rule produces different results, depending on whether any employee contribution was intended to be for the private element of the fringe benefit. This is because the employee is entitled to an income tax deduction for expenditure incurred on the portion of the fringe benefit used to derive assessable income, but not for expenditure incurred on the portion used for private or domestic purposes.

Commonly, the taxable value of an airline transport fringe benefit is wholly 'otherwise deductible' or wholly taxable. If it is wholly 'otherwise deductible', there is no FBT payable. If it is wholly taxable, there is no reduction. However, the taxable value of an airline transport fringe benefit may be partially 'otherwise deductible'.

For an explanation of how the otherwise deductible rule is applied for residual fringe benefits, refer to section   18.7 of Residual fringe benefits .

12.5 Substantiation requirements

If you use the otherwise deductible rule, you must have documentation to substantiate the extent to which the purchase price of the airline ticket 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 an Airline transport 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 must be obtained from the employee where the following apply:

  • the airline transport is provided for travel
    • within Australia
    • for more than five consecutive nights, and
    • that 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), or
  • the airline transport fringe benefit is provided 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 the nature of each work or business activity, where and when it took place, the duration of the activity and the date the entry was made.

The requirement to obtain a travel diary is waived where:

  • the employee is performing employment-related duties as a member of an aircrew travelling outside Australia
  • the residual benefit is for accommodation, or is otherwise incidental to the travel.

Employee declaration

You must obtain an Airline transport benefit declaration , except where any of the following apply:

  • the airline transport fringe benefit is used exclusively in the course of performing employment activities
  • 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.

12.6 Concessions

The taxable value of an airline transport fringe benefit may qualify for the 'in-house' benefits concession of up to $1,000, as explained in section   19.5 of Reductions in fringe benefit taxable value .

Before 1   April 2007, the in-house fringe benefits tax-free threshold was $500.

Changes and updates

The electronic version of the guide is reviewed on a quarterly basis. The following tables detail any major changes and updates made to this chapter at each review.

2010 calendar year

Quarter 1

Section

Changes and updates

12.1 What is an airline transport fringe benefit?

Opening paragraph reworded for clarity.

12.3 Stand-by value

Bullet points under 'Domestic travel' converted to table format for clarity.

Bullet points under 'International travel' converted to table format for clarity.

12.5 Substantiation requirements

Included 'approved by the Commissioner' at the end of the opening paragraph.

Changed information regarding when a travel diary needs to be obtained for consistency with other sections of the guide.

Included information about transit time and nights away from home.

12.6 Concessions

Updated rate of in-house benefits concession to $1,000.

Quarter 2

Section

Changes and updates

 

Nil.

Quarter 3

Section

Changes and updates

 

Nil.

Last Modified: Monday, 13 May 2013

ATO references:
NO NAT 1054

Fringe benefits tax - a guide for employers
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