Fringe benefits tax - a guide for employers

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Chapter 20 - Fringe benefits tax exempt benefits

20.1 What is an exempt benefit?

A number of benefits are exempt from fringe benefits tax (FBT). Although these are popularly called 'exempt fringe benefits', they are referred to in the FBT legislation as 'exempt benefits' - in fact, by definition, an exempt benefit can't be a fringe benefit.

Exempt benefits are not only exempt from FBT, they are also (with one exception) exempt from income tax in the hands of the employee to whom they are provided. The exception relates to car expense payments, which is explained in section  20.2 .

20.2 Transport exemptions

Cars

There are circumstances in which private use of a car may be exempt from FBT.

An employee's private use of a taxi, panel van or a utility designed to carry less than one tonne, or any other road vehicle designed to carry a load of less than one tonne (that is, one not designed principally to carry passengers) is exempt if their private use of such a vehicle is limited to:

  • travel between home and work
  • travel that is incidental to travel in the course of performing employment-related duties
  • non-work-related use that is minor, infrequent and irregular - for example, occasional use of the vehicle to remove domestic rubbish.
Example: Exempt use
An electrical company employee takes the company van (carrying capacity of less than one tonne) home each night because there is no security at the company premises. The only non-work-related use during the FBT year was a trip to pick up some furniture and take it to the employee's home - this use of the van would be exempt from FBT.
If the use of the vehicle exceeds the limits set out above, it is a car fringe benefit. All the private use of the vehicle, including the travel between home and work, is taken into account in determining the business percentage under the operating cost method. If no logbook records are maintained, the statutory formula method must be used to value the car fringe benefit.
Where the vehicle is not a car as defined in section  7.1 of Car fringe benefits, a residual benefit will arise (refer to section  18.6 of Residual fringe benefits).
Example: Non-exempt use
A council employee takes a utility (carrying capacity of less than one tonne) home each night and on the weekends. Although the utility is clearly marked as a council vehicle, the employee uses it for shopping and other private purposes during the week and often for country trips on the weekends.
This use of the utility would not be exempt from FBT and would be treated as a car fringe benefit. Assuming there are no logbook records, the taxable value of the utility would be calculated using the statutory formula method.

Dual cab vehicles

Dual cab vehicles are variants of conventional goods vehicles, with additional seating positions behind the driver and front passenger seats. They share a common chassis, to which the single or dual passenger cab and alternative tray sections may be fitted.

Dual cabs qualify for the work-related use exemption only if they are either:

  • designed to carry a load of one tonne or more, or more than eight passengers, or
  • while having a designed load capacity of less than one tonne, are not designed for the principal purpose of carrying passengers.

A dual cab that has a designed load-carrying capacity of less than one tonne may qualify for the work-related use exemption only if the vehicle is not designed for the principal purpose of carrying passengers. To determine whether the majority of the designed load capacity is attributable to passenger-carrying capacity, multiply the designed seating capacity (including the driver's) by 68kg, which is the figure used for applying the Australian Design Rules. If the resulting total passenger weight exceeds the remaining 'load' capacity, the vehicle is treated as being designed for the principal purpose of carrying passengers and so is ineligible for the work-related use exemption.

Example
A dual cab vehicle with a gross vehicle weight of 1,950kg, a basic kerb weight of 1,400kg, and a designed seating capacity of five would be considered a vehicle designed principally for carrying passengers. This is because the majority of the total load capacity (340kg (5 × 68kg) of a total of 550kg) would be absorbed by its designed passenger carrying capacity.

Unregistered vehicles

If a car is unregistered for the full FBT year and used principally for business purposes, any private use is exempt from FBT. A car that may be lawfully driven on a public road is regarded as being registered.

See also:

  • Car fringe benefits - for an explanation of the types of motor vehicles that are cars, refer to section 7.1 .

Personal services entities

A car benefit is an exempt benefit in relation to an FBT year if the person providing the benefit can't deduct an amount under the Income Tax Assessment Act 1997 (ITAA 1997) for providing the benefit because of section 86-60 of that Act.

Section 86-60 of the ITAA 1997 limits the extent to which a personal services entity can deduct car expenses. Deductions are not allowed for more than one car for private use.

The use of these cars is an exempt benefit because the entity is not entitled to claim an income tax deduction for these cars.

Car expenses - expense payments

With some exceptions, where you reimburse the operating expenses of an employee's own car according to the distance travelled in the car, an exempt benefit arises - for example, where expenses are reimbursed on the basis of an agreed number of cents per kilometre travelled.

These exempt benefits are a unique category of exempt benefits - they are the only exempt benefits that constitute assessable income in the hands of the employee. All other exempt benefits are both exempt from income tax in the hands of the employee to whom they are provided, and exempt from FBT.

Where the benefits are not exempt, some valuation concessions are available (refer to Reductions in fringe benefit taxable value ).

The exemption is not available where the reimbursement of the car expenses relates to any of the following circumstances:

  • transport to enable an employee to go on holiday (including remote area and overseas employment holiday transport)
  • relocation transport
  • transport to an employment interview or selection test
  • transport to a work-related medical examination, work-related medical screening, work-related preventative health care, work-related counselling or migrant language training
  • transport was provided after the employee had ceased to perform the duties of that employment.

Public transport - residual benefits

Where you operate a business of providing transport to the public, providing free or discounted travel (other than in an aircraft) to employees of that business for travelling to and from work is an exempt benefit. Free or discounted travel on a scheduled metropolitan service you operate is also exempt.

Where the benefit is provided by an associate company, it is also exempt if both you and the associate carry on a public transport business.

Providing travel on public transport to a police officer for travelling between the officer's place of residence and their primary place of employment is an exempt benefit.

Public transport - residual benefits where the benefit is accessed under a salary packaging arrangement

The specific exemption that applies to residual benefits in respect of private home to work travel through public transport and travel on scheduled metropolitan services (where the employer and associate are in the business of providing transport to the public) does not apply from 22 October 2012 where:

  • the benefit is provided in-house and
  • the employee accesses the benefit under a salary packaging arrangement.

Motor vehicles - residual benefits

Where you provide an employee with the use of a motor vehicle that is not a car

This use is an exempt benefit if any private use is restricted to the following circumstances:

  • travel to and from work
  • use that is incidental to travel in the course of performing employment-related duties
  • non-work-related use that is minor, infrequent and irregular - for example, occasional use of the vehicle to remove domestic rubbish.

See also:

  • Car fringe benefits - for an explanation of the types of motor vehicles that are cars, refer to section 7.1 .

If the use of the vehicle exceeds the limits set out above, a residual benefit will arise and the taxable value can be worked out using either the cents-per-kilometre method or operating cost method (refer to section 18.6 of Residual fringe benefits ).

All the private use of the vehicle, including travel between home and work, is taken into account in determining the business percentage under the operating cost method.

Where the motor vehicle is used wholly or principally in connection with your business operations and is at all times unregistered, any private use by the employee is also an exempt benefit. A motor vehicle that may be lawfully driven on a public road is regarded as being registered.

Fly-in fly-out arrangements - residual benefits

Transport you provide to employees who work in remote areas in Australia or overseas, or on oil rigs or other installations at sea

This arrangement, commonly known as 'fly-in fly-out' transport, is exempt where all of the following apply:

  • an employee's usual place of employment is at a remote location in Australia or overseas, or on oil rigs or other installations at sea
  • employees are provided with accommodation at or near the worksite on working days
  • on a regular basis the employee works for a number of days followed by a number of days off, returning to their usual place of residence on their days off
  • you provide the employee with transport between their usual place of residence and their place of employment
  • having regard to the location of the two places, it would be unreasonable to expect the employee to travel to and from work on a daily basis.

Accommodation is considered to be in a remote area in Australia:

  • If it is not in or near an urban centre. This means the accommodation must be located at least 40 kilometres from a town with a census population between 14,000 and 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 between 28,000 and 130,000, and at least 100 kilometres from a town with a census population of 130,000 or more.

From 1 April 2007, 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.

Accommodation is considered to be in a remote area overseas:

  • If it is inaccessible or sparsely populated and is not located close to a built up area such as a town or city.

Factors that should be considered to determine if an overseas location is remote (having regard to comparable Australian standards) are:

  • the distance and time it takes to travel from the worksite to the nearest urban area
  • the population of the nearest urban area
  • accessibility of the overseas site
  • safety and the crime rate, adequacy of local law enforcement, or health risks in the surrounding areas to the worksite (whether the nearest urban area is reasonably safe if adequate precautions are taken, the ability to take safety precautions)
  • location of the worksite relative to the arrival destination in the foreign country - for example, an international airport
  • the quality of the roads between the nearest urban area and the worksite
  • amenities and facilities available at the nearest urban area (in close proximity to the worksite), such as (but not limited to)  
    • public transport
    • availability of accommodation/housing
    • a library, public park or other recreational facilities
    • places for buying a variety of foods
    • a reliable electricity supply and access to clean drinking water/running water and a sewage system
    • availability of access to the internet, mobile phone reception and access to facilities such as banks and medical supplies and facilities.
     

No single factor is expected to be determinative - each location will need to be considered on a case-by-case basis, and all of the factors balanced to see whether it would be considered remote.

See also:

  • FBT exemption for fly-in/fly-out arrangements - for information on remote and non-remote overseas locations.

Operating costs of motor vehicle

Where the use of a motor vehicle gives rise to a fringe benefit, the benefits associated with the costs of operating the vehicle are exempt benefits. There is no additional FBT liability for operating expenses you provide, such as for registration, insurance, repairs and fuel. This is because the valuation rules for use of the motor vehicle also take into account the operating costs of the vehicle.

Employment interviews and selection tests

A benefit that meets the costs of travelling to an interview or selection test, in connection with an application for employment with a new employer or a promotion or transfer with an existing employer, is an exempt benefit.

Where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure.

If the applicant or current employee uses their own vehicle and is reimbursed on a cents-per-kilometre basis for the distance travelled, the benefit is not exempt - however, a reduction in the taxable value may be available (refer to section 19.3 of Reductions in fringe benefit taxable value ).

Motor vehicle parking

The following car parking benefits are exempt from FBT:

  • residual benefits
  • certain expense payment benefits
  • parking for the disabled
  • benefits provided by certain employers.

Residual benefits

Employer-provided parking that is not a car parking fringe benefit is a residual benefit that is exempt from FBT.

Expense payment benefits

Where you pay or reimburse a car parking expense incurred by an employee, it is exempt from FBT if the expense is not a car parking expense payment fringe benefit as explained in section 16.8 of Car parking fringe benefits .

Parking for the disabled (regulation 13A)

Car parking provided for a car used by a disabled employee who is legally entitled to use a disabled person's parking space and has a valid disabled person's car parking permit displayed on the car is exempt from FBT.

Exempt employers

You are exempt from FBT in relation to car parking fringe benefits and car parking expense payment fringe benefits if you are one of the following employers:

  • a scientific institution (other than an institution run for the purposes of profit or gain to its shareholders or members)
  • a registered religious institution
  • a registered charity with the Australian Charities and Not-for-profits Commission (ACNC) and endorsed by us
  • a public educational institution
  • a government body where the employee is exclusively employed in, or in connection with, a public educational institution.

Small business car parking

If you are a small business, car parking benefits you provide are exempt if all the following conditions are satisfied:

  • the parking is not provided in a commercial car park
  • you are not a government body, a listed public company, or a subsidiary of a listed public company
  • you were either a small business for the last income year before the relevant FBT year, or your total income for the last income year before the relevant FBT year was less than $10 million - for this purpose, your income includes ordinary income and statutory income as defined in the ITAA 1997, that is, total gross income before any deductions.

Travel to obtain medical treatment

Benefits that meet the costs of travel from a workplace located in a foreign country in order to obtain medical treatment are exempt benefits.

The exemption applies where the travel is undertaken solely because the employee (or a family member living with the employee) requires medical treatment. It also applies to travel of a person who is required to accompany the patient as an escort for medical reasons, who accompanies a patient who is under 18, or who, as a family member, visits or accompanies the patient.

A condition of exemption is that the place of treatment is the place nearest the work locality where suitable medical treatment could be provided, or the place where suitable treatment could be obtained at least cost.

Accommodation and meals are also exempt if provided en route or during any period in which the person travelling must stay at the place of treatment for reasons related to the medical treatment. However, hospital accommodation and meals provided to the patient are not exempt.

Travel for compassionate reasons

Certain benefits you provide in connection with compassionate travel are exempt benefits.

Compassionate travel is restricted to:

  • travel by an employee for the sole purpose of visiting a close relative who is seriously ill
  • travel by an employee for the sole purpose of attending the funeral of a close relative
  • travel by a close relative of an employee for the sole purpose of visiting the employee, if the employee is seriously ill
  • travel by a close relative of an employee for the sole purpose of attending the funeral of the employee
  • travel by a close relative of an employee for the sole purpose of visiting a seriously ill close relative of the employee (the traveller must ordinarily reside with the employee)
  • travel by a close relative of an employee for the sole purpose of attending the funeral of a close relative of the employee (the traveller must ordinarily reside with the employee).

For the purpose of this exemption, a close relative of an employee means a spouse, a child or a parent of the employee, or a parent of the employee's spouse.

One of the following conditions must be satisfied when the compassionate travel starts:

  • the employee is travelling in the course of performing employment-related duties
  • the employee is living away from home while performing employment-related duties
  • the employee's usual place of residence is in a remote area (refer to section 10.8 of Housing fringe benefits ).

The exemption applies to benefits that would be fringe benefits of the following types, if it were not for the exemption:

  • a car fringe benefit where the car is the means of the compassionate travel
  • an expense payment fringe benefit where the expenditure is for transport, meals or accommodation for the person travelling (you must obtain documentary evidence of the expenditure)
  • a property fringe benefit consisting of meals for the person travelling
  • a residual fringe benefit consisting of transport or accommodation for the person travelling.

Taxi travel

Any benefit arising from taxi travel by an employee is an exempt benefit if the travel is a single trip beginning or ending at the employee's place of work.

Any benefit arising from taxi travel by an employee is also an exempt benefit if the travel is both:

  • a result of sickness of, or injury to, the employee
  • the whole or a part of the journey directly between any of the following  
    • the employee's place of work
    • the employee's place of residence
    • any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.
     

The exemption is limited to travel in a vehicle licensed by the relevant State or Territory to operate as a taxi. It does not extend to ride-sourcing services provided in a vehicle that is not licensed to operate as a taxi.

20.3 Residual exemptions

Recreational facilities, child care facilities - residual benefits

Recreational or child-minding facilities are exempt benefits if the facilities are provided on your business premises for the benefit of employees. Where such facilities are provided on business premises of a related company in a wholly owned company group, they are also exempt.

Use of property - residual benefits

Where plant or equipment located on your business premises is used wholly or principally in connection with the operation of that business, any private use of that plant by an employee on those premises is an exempt benefit - for example, private telephone calls. This exemption applies regardless of whether the plant or equipment is used on a working or a non-working day.

The limited use of equipment off your business premises qualifies for exemption provided the equipment is ordinarily located on those premises or at your worksite for use in connection with business operations. This exemption would extend, for example, to business equipment that an employee borrows to use overnight or at weekends. A power tool or personal computer taken home in these circumstances would give rise to an exempt benefit - however, the exemption doesn't extend to use of one of your motor vehicles.

The use by employees of amenities, such as tea making or coffee making facilities, vending machines and water dispensers located on the business premises is also exempt from FBT.

Child care facility, priority of access - residual benefits

Payments you make to obtain priority access to certain child care facilities for children of employees may be exempt benefits.

The payments must be made under a program administered by the relevant government department to a child care service that is one of the following:

  • an eligible child care centre for the purposes of any provision of the Child Care Act 1972
  • family day care
  • care outside school hours
  • care in school vacations.

Residual benefits - no-private-use declaration

A residual benefit that is covered by a No-private-use declaration - residual benefits is an exempt benefit.

A condition of the exemption is that the residual benefit arises from the use of property that is subject to a consistently enforced prohibition on private use and that, as such, under the 'otherwise deductible' rule, would have a taxable value of nil.

In such instances, you will then be able to make an annual declaration. The declaration must cover all residual benefits provided to employees where you are able to state that the benefits were provided only for employment-related purposes and there was no private portion.

The declaration must be in a form approved by the Commissioner of Taxation and be made by the date your FBT return is due to be lodged (refer to Declarations ).

20.4 Relocation exemptions

Living-away-from-home accommodation - expense payments

Rather than paying a cash living-away-from-home allowance to an employee whose duties of employment require them to live away from their normal residence, you may prefer to reimburse the employee for the accommodation expenses or pay these expenses on behalf of the employee - that is, as with an expense payment fringe benefit.

In these circumstances, the payment is an exempt benefit where the living-away-from-home accommodation requirements below are met.

Living-away-from-home accommodation - requirements

To apply the living-away-from-home accommodation - expense payments and/or residual benefits - exemptions, the following requirements must be met:

Living-away-from-home accommodation exemption requirements

If ...

Then ...

The employee works on a fly-in fly-out or drive-in drive-out basis

  • the employee must have residential accommodation at or near their usual place of employment; and
  • the employee must give you a declaration about living away from home

 

The employee does not work on a fly in fly out or drive in drive out basis and is not eligible for the transitional rules

  • the employee must maintain a home in Australia at which they usually reside and it is available for their use and enjoyment at all times
  • the fringe benefit must relate to the first 12 month period at a particular work location, and
  • the employee must give you a declaration about living away from home.

 

The declarations provided to you must be in a form approved by the ATO (refer to Declarations ).

Living-away-from-home accommodation - residual benefits

Where an employee whose duties of employment require them to live away from their normal residence and they are provided with the use of a unit of accommodation, this use is an exempt benefit if the living-away-from-home accommodation requirements above are met.

Relocation - engagement of relocation consultant

If a relocation consultant is used to help relocate an employee, or their family members, you may be eligible to access a FBT exemption for costs associated with the engagement of the relocation consultant.

A relocation consultant is a person who helps an employee, or their family members, move and settle into a new location.

In order for a benefit, consisting of the engagement of a relocation consultant, to qualify as a FBT exempt benefit, the following conditions must be met:

  • the engagement of the relocation consultant must be an expense payment or residual benefit
  • the engagement of the relocation consultant must be in respect of the employment of your employee
  • the benefit is provided under an arm's length arrangement
  • if the benefit is an expense payment benefit - documentary evidence is provided to you before the date your employee declarations are due (refer to section  4.1 of Fringe benefits tax record keeping)
  • the engagement of the relocation consultant is required solely for one or more of the following reasons  
    • the employee is required to live away from home in order to fulfil their employment duties
    • the employee returns to their usual place of residence, having previously been relocated from their usual place of residence, in order to fulfil his or her employment
    • the employee, having previously been relocated from their usual place of residence, returns to their usual place of residence because they cease to perform the employment duties he or she had previously been relocated for
    • in order to fulfil their duties of employment, the employee moves from his or her usual place of residence.
     

Any expenses a relocation consultant pays on behalf of an employee or their family member is not exempt from FBT.

The common services a relocation consultant can provide to help an employee (or their family member) relocate include:

  • obtaining removalist quotes
  • finding accommodation, including temporary accommodation
  • lease negotiation
  • providing information about transportation to the new location
  • providing information about education and community services at the new location.

Relocation advice provided incidental to the provision of another good or service - for example, by real estate agents - doesn't qualify for this exemption, but may qualify for other relocation exemptions.

Example
Jenny is an employee of Zig  &  Co Mining in Lightning Ridge. She is required to move from Lightning Ridge to Kalgoorlie in order to perform her duties as a geologist. Her employer engages a relocation consultant to help Jenny relocate.
The relocation consultant:
  • provides accommodation and transportation quotes
  • arranges and pays for six months of furniture rental
  • provides information about medical facilities at Kalgoorlie.
Zig  &  Co Mining is eligible for a FBT exemption for the costs involved in engaging the relocation consultant to provide information about and arranging for Jenny's relocation to Kalgoorlie - however, Zig  &  Co Mining is not eligible for an FBT exemption for the six-month furniture rental because this expense was paid by the relocation consultant on Jenny's behalf.

Relocation - removals and storage of household effects

Where you meet the costs of removal and storage of household effects of employees (both new and existing) who are required to live away from home because their job location changes, the benefit is exempt.

The exemption includes the costs of removal, storage, packing, unpacking and insurance of household effects (including pets) kept primarily for the personal use of the employee or family.

Similarly, the exemption also applies where the employee's usual place of residence changes to another location if the removal takes place, or the storage commences, not more than 12 months after the employee begins employment-related duties at the new location.

Relocation - sale or acquisition of dwelling

It is not unusual for employers to bear the cost of various relocation expenses, be it for new employees or for existing employees who are required to change their job location.

Where these relocation expenses are incidental to the sale and/or purchase of a home by the employee, the expenses may be exempt benefits.

Costs incidental to the sale and/or purchase of a house are stamp duty, advertising, legal fees, agent commission, discharge of a mortgage, expenses of borrowing, or any similar capital expenses.

The exemption applies to the home that is sold only if all of the following apply:

  • the sale is made solely because the employee changed their usual place of residence in order to carry out employment-related duties
  • the house was owned when you notified the employee of the change to the new locality
  • the house was the employee's usual place of residence
  • the sale contract was made within two years of commencing duty at the new locality.

The exemption applies to the home that is purchased only if all of the following apply:

  • the employee owned a home at the former locality
  • the purchase was made solely because of the relocation to another job locality
  • the new home was occupied as the employee's usual place of residence
  • the contract to purchase was made within four years of commencing duty at the new location.

Costs associated with the connection or reconnection of gas, electricity and telephone services to the new home are also exempt.

Several other requirements must be satisfied for the exemption to apply, namely:

  • the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption
  • where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure
  • in the case of telephone connections, the employee must have had a telephone connected at the former residence.

From 1 April 2004, costs incidental to the purchase of a new dwelling by an employee relocating for employment purposes are FBT exempt, providing the employee sells, or proposes to sell, their old dwelling within two years after the day of commencing their new employment position - that is, the employee is no longer required to sell their old dwelling before the employer can access this exemption.

If the employee doesn't sell their old dwelling within two years after the day of commencing their new employment position, the benefit will become FBT liable in the year of tax in which the two-year period expires.

Example
Frances was required to relocate from Geelong to Ballarat in order to perform her duties as a police officer, commencing in Ballarat on 1 January 2015.
She purchases a new house in Ballarat on 12 February 2015. On 16 February 2015, her employer pays the conveyancing costs associated with the purchase of the new house.
Frances fails to sell her home in Geelong by 2 January 2017. The conveyancing costs paid by her employer are exempt at the time they are provided - however, because Frances did not sell her dwelling within two years after the day of commencing her new employment position, the benefit provided on the 16 February 2015 will now become FBT liable in the 2016-17 FBT year.

Relocation - connection or reconnection of certain utilities

Where an employee is required to live away from home in order to perform employment duties, the costs of connecting or reconnecting gas, electricity and telephone services to the new place of residence may be exempt benefits. Similarly, where there is a change in the employee's usual place of residence, these costs may be exempt benefits.

Several requirements must be satisfied for the exemption to apply, namely:

  • the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption
  • where the benefit is of a type that would be an expense payment fringe benefit but for the exemption, you must obtain documentary evidence of the employee's expenditure
  • in the case of telephone connections, the employee must have had a telephone connected at the former residence
  • where the employee has permanently relocated, the benefits will be exempt only if the connection or reconnection of services is made within 12 months of the employee starting work at the new location.

Living-away-from-home - leasing of household goods

A benefit that consists of leasing household goods used primarily for domestic purposes while an employee is living away from home may be an exempt benefit.

To qualify for this exemption:

  • the relevant benefit must be of a type that would be an expense payment fringe benefit or a residual fringe benefit but for the exemption
  • the employee must be provided with living-away-from-home accommodation that is an exempt expense payment or exempt residual benefit.

Relocation - transport

Where an employee is required to live away from home, or is required to relocate their usual place of residence, in order to perform employment-related duties, the costs of providing relocation transport (and any meals and accommodation en route) to the employee (and family members) are exempt benefits. The exemption also applies where the employee is returning to their usual place of residence after working at another location.

The exemption doesn't apply to a reimbursement of the employee's car expenses where the reimbursement is calculated by reference to the distance travelled by the car - however, a reduction of the taxable value may be available (refer to section 19.4 of Reductions in fringe benefit taxable value ).

20.5 Religious and non-profit organisation exemptions

Registered religious institutions

Benefits provided by registered religious institutions to a religious practitioner are exempt benefits if the benefits are provided principally because of the practitioner's pastoral duties or any other duties relating to the practice, study, teaching or propagation of religious beliefs.

A religious practitioner is someone who is any of the following:

  • a minister of religion
  • a student at an institution who is undertaking a course of instruction in the duties of a minister of religion
  • a full-time member of a religious order
  • a student at a college conducted solely for training people to become a member of a religious order.

See also:

  • TR 92/17 Income tax and fringe benefits tax: exemptions for 'religious institution '

Registered public benevolent institutions, registered health promotion charities, some hospitals and public ambulance services

Registered public benevolent institutions and registered health promotion charities

A public benevolent institution (PBI) is distinct from a charitable institution. Generally, an organisation is recognised as a PBI if its principal objects are the relief of poverty, sickness, suffering, distress, misfortune, destitution or helplessness, and its activities are carried on without the purpose of private gain for particular people.

A health promotion charity (HPC) is a non-profit charitable institution whose principal activity is promoting the prevention or control of diseases in human beings.

An institution with charitable activities, but which doesn't have as its principal objects the provision of such relief, is not a PBI.

From 3 December 2012, all PBIs and HPCs have to be registered with the ACNC and endorsed by us in order to claim FBT concessions.

Benefits you provide to your employees are exempt from FBT where the total grossed-up taxable value of certain fringe benefits for each employee during the FBT year is $30,000 or less.

If your employees receive benefits above this threshold you are liable for FBT on the excess (or the aggregate non-exempt amount).

For more on registered and endorsed PBIs and registered and endorsed HPCs, refer to Non-profit organisations and fringe benefits tax .

Benefits exempted by this provision may be subject to fringe benefits reporting requirements as explained in Reportable fringe benefits .

Public and non-profit hospitals and public ambulance services

Public and non-profit hospitals and public ambulance services are exempt from FBT if the grossed-up taxable value of certain fringe benefits provided to each employee is less than the relevant cap.

If your employees receive benefits above this threshold, you are liable for FBT on the excess (or the aggregate non-exempt amount).

See also:

  • Non-profit organisations and fringe benefits tax - for more on public and non-profit hospitals and public ambulance services.

Benefits exempted by this provision may be subject to fringe benefits reporting requirements as explained in Reportable fringe benefits .

Live-in residential care workers

Accommodation, residential fuel, meals or other food and drink provided to employees (and their spouse or children) of government bodies, registered religious institutions and non-profit organisations, may be exempt benefits.

The exemption applies only where employees are engaged in caring for elderly or disadvantaged people or their children who reside with them. The employees must also reside in the same residential premises as those they are caring for. Residential premises mean a house or hostel used exclusively for the purpose of providing such accommodation.

Elderly people are those over 60 years of age; disadvantaged people are those who are intellectually, psychiatrically or physically handicapped, or who are in necessitous circumstances.

Benefits exempted by this provision may be subject to fringe benefits reporting requirements as explained in Reportable fringe benefits .

Live-in domestic employees - registered religious institutions

Accommodation, household fuel, meals and other food and drink provided to an employee may be exempt benefits - however, the employer must be either a registered religious institution or a religious practitioner.

A religious practitioner is someone who is any of the following:

  • a minister of religion
  • a student at an institution who is undertaking a course of instruction in the duties of a minister of religion
  • a full-time member of a religious order
  • a student at a college conducted solely for training people to become a member of a religious order.

The employee's duties must be principally the provision of domestic and/or personal services to one or more religious practitioners (and relatives, if any). The performance of those duties must necessitate the employee living in with the practitioner or living in accommodation within the same grounds.

Domestic services may include child care, gardening, repairs or maintenance to the home, house cleaning, nursing care and the preparation of meals. Personal services may include those of a personal secretary or chauffeur.

Non-live-in domestic employees

Food and drink you provide to domestic employees who don't 'live-in' may be exempt benefits - however, the exemption is limited to food and drink consumed by the employee at the place of employment, at or about the time the employee performs the employment-related duties. The employer must be a registered religious institution or a natural person (other than a trustee).

A domestic employee's duties may include child care, gardening, home renovations, repairs or maintenance to the home, house cleaning, nursing care and the preparation of meals.

An example of this exemption is a situation where a babysitter cares for children in their own home and shares lunch with them.

20.6 Property exemptions

Property

Property you provide to an employee may be an exempt benefit. The exemption applies if the property provided to the employee is both provided and consumed on a working day on your premises (if you are a company, the premises may be those of a related company). For example, there is no FBT on bread rolls given to bakery employees for consumption at work.

This exemption doesn't apply to:

  • employers who are exempt from income tax when entertainment arises from the provision of food and/or drink
  • income tax-paying bodies who elect to value the entertainment as meal entertainment
  • meals provided under a salary sacrifice arrangement after 7.30pm AEST on 13 May 2008.

20.7 Worker entitlement contributions

A worker entitlement fund is a (trust) fund for employee long service leave, sick leave or redundancy payments. These funds are often referred to as redundancy trusts or redundancy funds. Although these funds operate in a variety of ways, their purpose is to manage employee entitlements and provide portability and protection.

Contributions to worker entitlement funds for the FBT year commencing 1 April 2006, and for all later FBT years, are exempt benefits where the payment is:

  • made to an approved worker entitlement fund
  • made under an industrial agreement, and
  • either for leave, redundancy or the reasonable administrative expenses of the fund.

A payment made according to an existing industrial practice or an existing fund will not be exempt from FBT unless it satisfies the above criteria.

Approved worker entitlement funds

A fund can only be an approved worker entitlement fund if it is limited to making payments to the employee for whom contributions were received. However, upon the death of an employee, the fund is able to make payments to the employee's dependants or the trustee of the employee's deceased estate without losing its status as an approved worker entitlement fund.

Approved worker entitlement funds comprise:

  • all long service leave funds established by or under a Commonwealth, state or territory law
  • funds that have been prescribed in the FBT regulations as approved worker entitlement funds (pre 28 June 2011)
  • funds that we have endorsed since 28 June 2011.

Funds that were prescribed before 28 June 2011 will be taken to be endorsed from 28 June 2011.

From 28 June 2011:

  • the Australian Business Registrar (ABR) is required to enter a fund or entity as an endorsed fund or entity on the ABR by 28 December 2012
  • all approved worker entitlement funds must have an Australian business number (ABN)
  • existing funds that did not have an ABN had until 28 December 2011 to obtain an ABN
  • we are able to revoke the endorsement of a worker entitlement fund in certain situations.

20.8 Remote area exemptions

Remote area housing

A remote area housing benefit is an exempt benefit. Remote area housing benefits are explained in section 10.8 of Housing fringe benefits .

Certain meals provided to primary production employees

Expense payment, property, board or residual benefits arising in respect of the provision of meals on a working day are exempt benefits if the following conditions are satisfied:

  • you are carrying on a business of primary production for the purposes of the ITAA 1997
  • your business is carried on in a remote area (as explained in section 10.8 of Housing fringe benefits ) - that is, the location of the employee's primary place of employment
  • the meal is provided to the employee (except where the benefit is a board benefit, in which case it may also be provided to an associate of the employee)
  • the provision of the meal doesn't amount to the provision of a meal entertainment benefit (as explained in section  14.3 of Fringe benefits tax and entertainment ).

A business of primary production is:

  • cultivating or propagating plants, fungi or their products or parts (including seeds, spores, bulbs and similar things) in any physical environment
  • maintaining animals for the purpose of selling them or their bodily produce (including natural increase)
  • manufacturing dairy produce from raw material that you produce
  • conducting operations relating directly to taking or catching fish, turtles, dugong, bêche-de-mer, crustaceans or aquatic molluscs
  • conducting operations relating directly to taking or culturing pearls or pearl shell
  • planting or tending trees in a plantation or forest that are intended to be felled
  • felling trees in a plantation or forest
  • transporting trees, or parts of trees, that you felled in a plantation or forest to either the place  
    • where they are first to be milled or processed
    • from which they are to be transported to the place where they are first to be milled or processed.
     

There is no requirement for the benefit to be provided on the business premises of the employer for this exemption to apply.

20.9 Other exemptions

Loans

An exempt benefit arises from a loan in any of the following circumstances:

  • You are engaged in the business of money lending and the interest rate on a loan to an employee is fixed at a rate at least equal to the interest applicable under a comparable loan made to a member of the public in the ordinary course of business at about the time the loan was made to the employee.
  • You are engaged in a business of money lending and, for each year of tax over which the loan extends, the rate of interest is variable, but never less than the arm's-length rate you charged on loans made about the time the loan was made to the employee.
  • You advance money to an employee solely for the purpose of meeting expenses to be incurred within a six-month period of the advance being made. The expense must be incurred in carrying out employment-related duties with you (the employer who made the advance), and the expenses must be accounted for by the employee and any excess advance refunded or otherwise offset.
  • You make an advance, repayable within 12 months, to an employee solely to pay a security deposit (for example, rental bond or service connection deposit) in respect of accommodation. The accommodation must give rise to an exempt benefit in accordance with the conditions relating to living-away-from-home accommodation outlined in section  20.4 , or the accommodation must be temporary accommodation eligible for a reduced taxable value, in accordance with the relocation concessions explained in section  19.4 of Reductions in fringe benefit taxable value.

Expense payments - no-private-use declaration

An expense payment benefit that is covered by a No-private-use declaration - expense payment benefits is an exempt benefit.

A condition of this exemption is that the expense payment benefit that arises from the reimbursement of expenditure is wholly employment related and that, as such, under the 'otherwise deductible' rule, would have a taxable value of nil.

In such instances, you will be able to make an annual declaration. The declaration must cover all expense payment benefits provided to employees where you are able to state that the benefits were provided only for employment-related purposes and that there was no private portion.

The declaration must be in a form approved by the Commissioner and be made by the declaration date (refer to Declarations ).

Food or drink

Where employees receive meals that are board fringe benefits, any additional food and drink supplied to them, such as morning and afternoon tea, is exempt. However, it is a condition of the exemption that the food and drink must be provided on your premises or worksite - food and drink supplied at a party, reception or other social function is not exempt.

International organisations, and diplomatic and consular immunities

Benefits provided by the following employers are exempt benefits:

  • certain international organisations that are exempt from income tax and other taxes by virtue of the International Organisations (Privileges and Immunities) Act 1963
  • organisations established under international agreements to which Australia is a party and which oblige Australia to grant the organisation a general tax exemption.

A benefit that would be exempt from tax in Australia by the operation of the Consular Privileges and Immunities Act 1972 or the Diplomatic Privileges and Immunities Act 1967 is an exempt benefit.

Newspapers and periodicals

The costs of providing newspapers and periodicals to employees for business purposes are exempt benefits. The exemption doesn't apply where the business use is merely incidental.

Compensable work-related trauma

Benefits provided for work-related injury are exempt benefits.

To qualify for exemption, such benefits (for example, the payment of hospital or medical costs or associated ambulance, travel and accommodation costs) must be provided for 'compensable work-related trauma' suffered by an employee.

Compensable work-related trauma is an injury or disease related to employment, for which the employee is entitled to receive compensation under a workers' compensation law. If the employee's employment is not covered by a workers' compensation law, an ailment will qualify if it would have been compensable if such a law had applied - for example, where public sector employers don't pay workers' compensation insurance but directly compensate the employee.

Benefits constituted by the insurance cover provided under a workers' compensation insurance policy are also exempt benefits.

In-house health care facilities

Medical services and other forms of health care are exempt benefits if provided in worksite first aid posts and medical clinics.

The exemption applies to any form of care or test relating to a person's health - for example, medical treatment, first aid, physiotherapy, diagnostic services, health counselling or the provision of drugs in a clinic or other medical facility operated wholly or principally to provide health care relating to work-related injuries of employees. Such a clinic must be on your premises, or those of a related company, or at or adjacent to the employees' worksite - for example, a construction site.

While the clinic or facility must be operated principally for treating employees' work-related injuries, incidental treatment provided in the clinic for illness or injuries not related to work, as well as treatment of members of employees' families, also qualifies for exemption; so does health care provided away from the clinic by a member of the clinic's staff - for example, a home visit by a company doctor.

Occupational health and migrant language training

Several categories of work-related health and counselling benefits are exempt benefits:

  • Work-related medical examinations - These are examinations or tests carried out by a medical practitioner, nurse, dentist, optometrist or audiometrist where the employee is required to undergo the examination or test in order to commence new employment, to transfer to a different job with the same employer, or to gain entry to a superannuation fund.
  • Work-related medical screening - This is an examination or test carried out by a medical practitioner, nurse, dentist, optometrist or audiometrist to determine whether the employee is suffering from, or is at risk of suffering from, an injury or illness related to the employee's employment. It is a condition of exemption that the examination or test is carried out as part of a screening program that applies generally to employees with similar work-related risks.
  • Work-related preventative health care - This is any form of care provided by a medical practitioner, nurse, dentist or optometrist for the purpose of preventing the employee from suffering from an injury or illness relating to the employee's employment. It is a condition of exemption that the care is generally provided to employees with similar work-related risks. The provision of drugs, vaccines or other medical preparations in connection with the preventative health care is also exempt.
  • Work-related counselling - This is individual or group counselling (for example, a seminar) related to matters such as safe work practices, health, fitness, stress management, drug or alcohol abuse, rehabilitation or retirement problems. You must provide the benefit in order to improve or maintain the efficiency of employees or prepare them for retirement and not as a form of remuneration. If counselling is given to an associate of an employee (for example, the employee's spouse), the employee must accompany the associate.
  • Migrant language training - This is an English language course attended by a non-English speaking person who is, or intends to be, an immigrant to Australia. The exemption extends to associates of the employee.

The exemption also applies to benefits that meet the cost of travelling to attend these forms of examinations, screening, preventative health care, counselling or training which, but for the exemption, would be fringe benefits of the following types:

  • a car fringe benefit, where the car is the means of travelling to attend the examination, screening, preventative health care, counselling or training
  • an expense payment fringe benefit, where the expenditure is for transport, meals or accommodation for the person travelling (you must have documentary evidence of the expenditure)
  • a property fringe benefit, consisting of meals for the person travelling
  • a residual fringe benefit, consisting of transport or accommodation for the person travelling.

Where a cents-per-kilometre reimbursement is made of car expenses incurred in travelling to attend a work-related medical examination, screening, preventative health care, counselling session or migrant language training, this exemption doesn't apply - however, a reduction in taxable value may be available as explained in section  19.3 of Reductions in fringe benefit taxable value .

Emergency assistance

Benefits you provide by way of emergency assistance are exempt from FBT.

Emergency assistance is assistance for immediate relief of a victim, or potential victim, of an emergency where the assistance is any of the following:

  • first aid or other emergency health care
  • emergency meals, food supplies, clothing, accommodation, transport or use of household goods
  • temporary repairs
  • any similar matter.

For the purposes of this exemption, an emergency is a natural disaster, an armed conflict, a civil disturbance, an accident, a serious illness, or any similar matter.

If the emergency assistance is health care, the exemption applies only if the treatment is provided by an employee of yours (or a related company), or on your premises (or those of a related company) or at or near an employee's worksite - that is, the exemption would not apply if you pay for an accident victim's medical or hospital bills, but would apply to emergency treatment by a company doctor at the accident site.

Long-term benefits, such as providing a new house or car to replace one destroyed as a result of an emergency, are not exempt as emergency assistance.

Minor benefits

Legislative reference: section 58P of the FBTAA.

Minor benefits are exempt benefits. A minor benefit is a benefit which is both:

  • less than $300 in value (before 1 April 2007 the amount was less than $100), and
  • unreasonable to treat as a fringe benefit.

Less than $300 in value

A minor benefit is a benefit which has a 'notional taxable value' of less than $300. The notional taxable value of a minor benefit is, broadly, the amount that would be the taxable value if the benefit was a fringe benefit.

Where you provide an employee with separate benefits that are in connection with each other (for example, a meal, a night's accommodation and taxi travel) you need to look at each individual benefit provided to the employee to see if the notional taxable value of each benefit is less than $300.

When determining if the notional taxable value of the benefit is less than $300, benefits provided to associates are not included.

If the notional taxable value of a benefit is less than $300, you then need to determine if it would be unreasonable to treat the benefit as a fringe benefit.

Special rules that apply to car benefits

There are different rules for car benefits. The notional taxable value of a car benefit is determined by applying the residual fringe benefit rules - that is, to determine whether a car benefit is less than $300, you may either:

  • apportion the operating costs of the vehicle, or
  • apply the cents-per-kilometre method.

Criteria for determining whether it would be unreasonable to treat the minor benefit as a fringe benefit

The following five criteria need to be considered when deciding if it would be unreasonable to treat the minor benefit as a fringe benefit:

1.

The infrequency and irregularity with which associated benefits, being benefits that are identical or similar to the minor benefit and benefits given in connection with the minor benefit, are provided. The more frequently and regularly associated benefits are provided, the less likely that the minor benefit will qualify as an exempt benefit.

2.

The total of the notional taxable values of the minor benefit and identical or similar benefits to the minor benefit. The greater the total value of the minor benefit and identical or similar benefits, the less likely it is the minor benefit will qualify as an exempt benefit.

3.

The likely total of the notional taxable values of other associated benefits - that is, those provided in connection with the minor benefit. For example, where a meal, which is a minor benefit, is provided in connection with a night's accommodation and taxi travel, which themselves may or may not be a minor benefit, the total of their taxable values must be considered. The greater the total value of other associated benefits, in this case being the accommodation and the taxi travel, the less likely it is that the minor benefit will qualify as an exempt benefit.

4.

The practical difficulty in determining what would be the notional taxable value of the minor benefit and any associated benefits. This would include consideration of the difficulty for you in keeping the necessary records in relation to the benefits.

5.

The circumstances in which the minor benefit and any associated benefits were provided. This would include consideration as to whether the benefit was provided as a result of an unexpected event, and whether or not it could be considered principally as being in the nature of remuneration.

If, after considering the five criteria, you conclude that it would be unreasonable to treat the benefit as a fringe benefit, the benefit will be an exempt benefit.

In determining if the minor benefit exemption applies, you need to examine the nature of the benefit provided and consider each of the various criteria - value, frequency and regularity of provision, and recording and valuation difficulties - before concluding whether the exemption should apply to a minor benefit.

When the minor benefits exemption doesn't apply

The exemption doesn't extend to airline transport fringe benefits or other in-house fringe benefits, the taxable values of which are, in any case, reducible by $1,000 under the concession explained in the respective chapters for these types of fringe benefits.

The exemption also does not apply to minor entertainment benefits provided to employees of income tax-exempt organisations, unless they are incidental to the provision of entertainment to persons who are neither employees of the employer nor associates of employees. However, even in those circumstances, the exemption doesn't apply to meals or benefits provided in connection with meals.

This later exclusion doesn't prevent minor entertainment benefits provided by a tax-exempt organisation to recognise a special achievement of an employee from being exempt as long as they are provided on the employer's premises or a place where the employee performs their employment-related duties. For example, a meal given to the family of a professional footballer in the club's dining room to mark a milestone such as selection in a representative team, or being awarded best and fairest player, may be exempt under this rule.

The exemption doesn't apply to meal entertainment where you elect to use the meal entertainment provisions and calculate the taxable value under the 50:50 split method. If you elect to use this valuation rule, all of your expenditure on meal entertainment must be included when calculating your total meal entertainment expenditure for the FBT year.

Similarly, where you elect to use the 50:50 split method for valuing entertainment facility leasing expenses, the minor benefits exemption doesn't apply.

However, where you elect to use the 12-week register method for valuing meal entertainment, the minor benefits exemption can apply

The minor benefits exemption will not apply to benefits that are provided under an effective salary sacrifice arrangement. Benefits provided under a salary sacrifice arrangement are provided principally as part of a remuneration package. When all of the criteria are considered, and in particular the circumstances in which benefits are provided under a salary sacrifice arrangement, it would be reasonable to conclude that all such benefits are not exempt minor benefits.

Examples
It is common practice for employers to give employees gifts on special occasions, such as at Christmas time. A single gift to each employee of, say, a bottle of whisky or perfume would be an exempt benefit, where the value was less than $300. If the gift is provided at a Christmas party, the gift needs to be considered separately to the Christmas party when considering the minor benefits threshold.
Flowers given to employees on special occasions would be given on an irregular and infrequent basis - this could include flowers given to an employee on the birth of a child, for a birthday, or as a get well gift. These would be an exempt benefit where each individual benefit had a notional taxable value of less than $300 because, looking at the five factors, it would be unreasonable to treat the benefit as a fringe benefit.
By contrast, flowers given to an employee each fortnight would be given on a frequent and regular basis and would not be an exempt benefit, even where the value of each individual benefit is less than $300.
The occasional use of one of your vehicles by an employee for a special purpose, such as rubbish removal or for travel from home to work during a transport strike, would be an exempt benefit provided the employee in question doesn't have a general entitlement to use the vehicle for private purposes.
Subject to the above criteria being satisfied, the following are further examples of benefits that are likely to be exempt under the minor benefits rules:
  • a welcome gift provided to a new employee - for example, a food hamper
  • meals provided on an ad hoc basis to an employee three times in the year, where on each occasion the value is $75
  • tolls provided to an employee through an e-tag facility 20 times during the year, where each benefit has a value of $7
  • a short-term advance to help an employee pay unexpected debts
  • the recovery of overpaid salary by instalment arrangements
  • permitting staff to have waste or leftover materials of a business, such as packing cases or fabric remnants.

Long service awards

Long service awards granted in recognition of 15 years or more service are exempt, provided the value of the award doesn't exceed a specified maximum amount - for this purpose, the value of the award is the amount that would be the taxable value if the award was a fringe benefit.

Where the period of service being recognised by the award is 15 years, the specified maximum value is $1,000. If the first long service award received by an employee recognises a period of service greater than 15 years, the maximum value increases by $100 for each additional year - for example, the maximum value for a first award recognising 20 years' service is $1,500.

If the employee has received a previous long service award (that is, in recognition of 15 years or more service) from you, the maximum value of any subsequent award is $100 for each year in excess of 15 years that is being recognised by the additional award.

Where the value of an award exceeds the relevant maximum value, no part of the award is exempt.

Safety awards

An award genuinely related to occupational health or occupational safety achievements that is granted to an employee is exempt from tax if its value doesn't exceed $200. Where you grant more than one award to an employee during an FBT year, each award is exempt, provided the aggregate value of the awards doesn't exceed $200 - for this purpose, the value of the award is the amount that would be the taxable value if the award was a fringe benefit.

Where the $200 limit is exceeded, no part of the award (or awards) is exempt.

You don't need to keep specific records of awards to individual employees if you can conclude on a reasonable basis that the value of any awards granted to an employee will not exceed the $200 limit.

Australian Traineeship System

Food, drink and accommodation provided to people training under the Australian Traineeship System may be exempt benefits. To be exempt, the benefits must be provided in accordance with an award or an industry custom, and must not be provided at a party, reception or other social function.

Live-in help - elderly or disadvantaged persons

An exemption from FBT applies to certain benefits that you provide to people who are employed in caring for elderly or disadvantaged persons and who reside with them in their own homes. An elderly person is aged 60 or more. Disadvantaged people are those who are intellectually, psychiatrically or physically handicapped, or who are in necessitous circumstances.

The benefits that are exempt are:

  • the provision of accommodation, in the home of the person being cared for, to the employee (and to the employee's spouse and children)
  • the provision of residential fuel in connection with that accommodation
  • meals provided in that home to the employee (and to the employee's spouse and children)
  • other food or drink similarly provided.

Provision of certain work-related items

An FBT exemption applies for the following work-related items:

  • a portable electronic device
  • an item of computer software
  • an item of protective clothing
  • a briefcase
  • a tool of trade.

Even if you provide your employee with these work-related items, you still need to consider the limitations on the exemption.

Portable electronic device

A portable electronic device is a device that is all of the following:

  • easily portable and designed for use away from an office environment
  • small and light
  • can operate without an external power supply
  • designed as a complete unit.

Examples of portable electronic devices include a mobile phone, calculator, personal digital assistant, laptop, portable printer, and portable global positioning system (GPS) navigation receiver.

Limitations on exemption

The exemption is limited to:

  • items primarily for use in your employee's employment - that is, for work-related use
  • one item per FBT year for items that have a substantially identical function, unless the item is a replacement item.

From 1 April 2016, small businesses with an aggregated turnover of less than the relevant small business turnover threshold can provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions.

The income tax year and the FBT year do not align; accordingly for the purpose of determining whether an entity is a small business for a relevant FBT year, the aggregated turnover must be below the relevant threshold for the year of income:

  • starting most recently after the start of the FBT year, or
  • ending most recently after the start of the FBT year.

There are no restrictions where you only provide an employee with the use of an item (that is, it is a residual benefit and not an expense payment or property benefit).

See also:

Work out if you're a small business for the income year

Primarily for use in the employee's employment

An item is primarily for use in the employee's employment if it is provided principally to enable your employee to do their job.

When determining whether or not an item is primarily for use in the employee's employment, the decision is based on the employee's intended use at the time the benefit is provided to them. You don't have to look at the employee's actual usage over the FBT year to determine whether the item is used primarily in the employee's employment.

However, you must use a reasonable basis to determine whether an item is primarily for use in your employee's employment - for example, the employee's job description, duty statement or employment contract.

Alternatively, if you are aware that there may be private use of an item, you could document factors such as those listed below to determine whether the item is primarily for use in the employee's employment:

  • the reason or reasons the item was provided to your employee
  • the type of work your employee will be performing
  • how the use of the item relates to your employee's employment duties
  • your policy and any conditions relating to the use of the item.
Substantially identical functions

An eligible work related item will not be exempt from FBT if earlier in the same FBT year you have provided your employee, by way of an expense payment or property benefit, with an item that has substantially identical functions. This does not apply if the employer is a small business.

It is the features or design specifications that are examined when determining whether items have substantially identical functions, not the intended use of the items.

Items will have substantially identical functions where the functions of two items are the same in most respects. However, items may be different in a number of ways which do not impact on an item's function. For example, colour, shape, brand and design would not generally be relevant considerations when determining whether two items have substantially identical functions.

Where a tablet computer can perform the functions of a laptop computer, even in a reduced capacity, it would be considered to have substantially identical functions to the laptop computer. However, where a tablet computer is designed primarily as a means of digital media consumption, rather than creation, it would not have substantially identical functions to a laptop.

Example - Items do not have substantially identical functions
An employer gives their employee a laptop during the FBT year so that they can work from home and access their email, prepare work related material such as word processing documents and complex spreadsheets and access the internet.
In the same FBT year, the employer gives that employee a tablet as it is more portable than the laptop and is useful for the employee when they are travelling. The tablet is designed to access email and browse the internet. It is not designed to create word processing documents or complex spreadsheets. The tablet does not have substantially identical functions to the laptop computer and would not be considered to be able to replace the laptop. The tablet would also be exempt from FBT, provided it was used primarily for work-related purposes.
Replacement items

An item is a replacement item if the previous item is lost or destroyed, or needed replacing because of developments in technology.

Example
A financial planning company provides its employees with a laptop computer, which are portable electronic devices. The laptops are primarily for use at client visits to provide advice and also between client visits to produce and update reports.
One of the laptop computers is damaged beyond repair during a client visit. The employee is provided with a new laptop computer. The new laptop computer is a replacement item and the employer is exempted from paying FBT on the provision of the second laptop.

Membership fees and subscriptions

Expense payment or property benefits arising in respect of the following are exempt benefits:

  • a subscription to a trade or professional journal
  • an entitlement to use a corporate credit card
  • an entitlement to use an airport lounge membership.

Approved student exchange programs

A benefit consisting of an employee (or an associate of an employee) being placed in an approved student exchange program is an exempt benefit where you (or an associate) have not selected or taken part in selecting the participant.

For a program to be approved, it must be run by a body registered with the relevant state or territory body in accordance with the National Guidelines for Student Exchange . These guidelines are published by the National Co-ordinating Committee for International Secondary Student Exchange.

No fringe benefit where benefit results in a dividend under Division 7A

Where a loan benefit or a debt waiver benefit is provided by a private company to an employee (or associate) who is also a shareholder (or associate), a fringe benefit will not arise if the loan or debt waiver results in the company being taken to have paid a dividend under Division 7A of the ITAA 1936 to the shareholder (or associate).

Changes and updates

The following tables detail any major changes and updates made to this chapter:

July 2017

Section

Changes and updates

Various

20.2 Transport exemptions

20.9 Other exemptions

Updated for grammar changes

Updated the small business car parking exemption to reflect the increase to the small business turnover threshold from 1 April 2017.

Updated information about the work-related items exemption to reflect the increase to the small business turnover threshold from 1 April 2017.

September 2016

Section

Changes and updates

Various

20.2 Transport exemptions

20.8 Other exemptions

Updated for style changes

Included the definition of taxi under the FBT law for clarity

Included information about the work-related items exemption being extended to small businesses with an aggregated turnover of less than the applicable small business turnover threshold that provide employees with more than work-related portable electronic device, where the devices have substantially identical functions.

ATO references:
NO Fringe benefits tax - a guide for employers

SAV/FBTGEMP history
  Date: Version:
  30 March 1997 Original document
  13 December 2013 Updated document
  1 July 2014 Updated document
  7 December 2016 Updated document
  22 May 2017 Updated document
  11 July 2017 Updated document
  17 August 2017 Updated document
You are here 4 September 2017 Current document
Chapters 1 , 2 , 3 , 4 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 16 , 17 , 18 , 19 , 20 , and 21 have been updated. See the Changes and updates sections in the relevant chapters for details.

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