Fringe benefits tax - a guide for employers

  • This document has changed over time. View its history.

Chapter 19 - Reductions in fringe benefit taxable value

19.1 When the value can be reduced

A number of fringe benefits attract concessional treatment. The concession is a reduction in the taxable value of the fringe benefit that results in a reduced amount of fringe benefits tax (FBT), or even no FBT, being payable.

The taxable value of a fringe benefit is calculated in accordance with valuation rules. Where the 'otherwise deductible' rule applies, the taxable value is then reduced.

If the fringe benefit is of a type that attracts any of the concessions listed in this chapter, you (the employer) may reduce the taxable value further. In some instances there may be special conditions that must be satisfied before the concession applies - for example, keeping certain records.

Some of the explanations given in this chapter are necessarily brief. For more on each concession refer to the relevant section of the Fringe Benefits Tax Assessment Act 1986  (FBTAA), a link to which is provided at each concession.

19.2 Remote area reductions

Residential fuel

Residential fuel is any form of fuel (including electricity) used for domestic purposes. If you provide a current employee with residential fuel for use in connection with their usual place of residence, you may reduce the taxable value of the fringe benefit by 50% in the following circumstances:

  • the fringe benefit is an expense payment fringe benefit, a property fringe benefit or a residual fringe benefit
  • the fringe benefit was not provided to the employee under a non-arm's length arrangement, or an arrangement that was entered into by any of the parties for the purpose, or partial purpose, of enabling you to obtain the residential fuel concession
  • the employee is also  
    • the recipient of a remote area housing benefit that is an exempt benefit as described in section  10.8 of Housing fringe benefits
    • under an obligation to repay the whole, or a part of, a remote area housing loan connected with the dwelling and you provide a form of housing assistance referred to below, or
    • incurring remote area housing rent in connection with a unit of accommodation and you provide a form of housing assistance referred to below.
     

Free water provided to an employee under a residential tenancy agreement is part of the remote area housing benefit, as described in section 10.8 of Housing fringe benefits , and is not considered residential fuel.

Remote area housing

Where you subsidise certain costs your employees may incur in acquiring accommodation in remote areas, you may be eligible for a reduction of the taxable value of the benefit arising from subsidising these costs.

These reductions are different from the remote area housing benefit exemption explained in section 10.8 of Housing fringe benefits . There are different requirements you must meet in order to be entitled to the reduction.

Remote area loan

Remote area loan

If:

then:

  • you provide a loan fringe benefit connected with a dwelling to your employee
  • the employee occupied or used the dwelling as their usual place of residence during part of the FBT year (the occupation period) when they had to repay some or all of the loan, and
  • the shared conditions are met

 

you are entitled to a reduction of 50% of the taxable value of the loan fringe benefit that relates to the occupation period.

Remote area interest

Remote area interest

If:

then:

  • you provide an expense payment fringe benefit for interest accrued by your employee on a remote area housing loan connected with a dwelling
  • that employee occupied or used the dwelling as their usual place of residence during part of the FBT year (the occupation period) when the interest accrued, and
  • the shared conditions are met

 

you are entitled to a reduction of 50% of the taxable value of the expense payment fringe benefit that relates to the occupation period.

Remote area rent

Remote area rent

If:

then:

  • you provide an expense payment fringe benefit for rent accrued by your employee for a unit of accommodation
  • the employee used the unit of accommodation as their usual place of residence during part of the FBT year (the occupation period) when the rent accrued, and
  • the shared conditions are met

 

you are entitled to a reduction of 50% of the employee's expenditure that relates to the occupation period.

The reduction applies to 50% of the employee's expenditure (the gross rent), not to 50% of the taxable value.

Remote area property benefit

Remote area property benefit

If:

then:

  • you provide an employee with a property fringe benefit consisting of land, or house and land
  • the employee's property is a remote area residential property, and
  • the shared conditions are met

 

you are entitled to a reduction of 50% of the taxable value of the property fringe benefit.

Remote area residential property

Remote area residential property is:

  • land on which there is a dwelling that is used by the employee immediately after the provision of the fringe benefit as their usual place of residence
  • land on which the employee proposes to build, or finish building, a dwelling for use as their usual place of residence.

The Commissioner of Taxation must be satisfied that the employee has made sustained reasonable efforts to:

  • start building within six months of acquiring the land
  • within 18 months of acquiring the land, use the dwelling as their usual place of residence.

Remote area residential property expense payment benefit

Remote area residential property expense payment benefit

If:

then:

  • you provide an expense payment fringe benefit to your employee
  • the employee's expenditure is in respect of a remote area residential property, and
  • the shared conditions are met

 

you are entitled to reduction of 50% of the taxable value of the expense payment fringe benefit.

Expenditure in respect of remote area residential property

The expenditure must be in relation to the:

  • employee's purchase of land on which they intend to build, or complete the building of, a dwelling (expenditure 1)
  • building of a dwelling on land held by the employee (expenditure 2)
  • purchase of land on which there is already a dwelling (expenditure 3), or
  • extension of a dwelling on the employee's land by adding a room or part of a room to the dwelling (expenditure 4).

The following conditions must also be satisfied:

If expenditure 1 or 2 applies:

  • where expenditure in 1 or 2 is incurred by the employee, they must intend to occupy the dwelling as their residence
  • the Commissioner must be satisfied that the employee made sustained reasonable efforts to start building within six months and to occupy the dwelling within 18 months after the employee incurred the expenditure.

If expenditure 3 or 4 applies:

  • where expenditure in 3 or 4 is incurred by the employee, they must use the dwelling as their usual place of residence as soon as reasonably practicable after incurring the expenditure.
Mortgaged remote area residential property

Where the remote area residential property is mortgaged by the employee, the 50% reduction can still apply as long as your payment or reimbursement relates to the original purchase cost of the land or property.

If your payment or reimbursement relates to an employee's mortgage repayments, the 50% reduction would not apply. However, you may be eligible for the remote area interest reduction as explained above.

Example
An employee purchases a remote area residential property and pays a 10% deposit and uses a mortgage to pay for the rest. The employer agrees to reimburse the employee 20% of the original purchase price of the property. In this case, the remote area residential property benefit reduction may apply provided the other conditions are met.
If, however, the employer agreed to reimburse the employee 20% of their total loan repayments (which includes interest and other charges), the remote area residential expense payment benefit reduction would not apply. This is because the reimbursement is not wholly in respect of the purchase of the property, but rather it is in respect of the employee meeting the conditions of their mortgage. The reimbursement of interest may qualify for the remote area interest reduction above.

Remote area residential option fee

Remote area residential option fee

If:

then:

  • you provide an employee with a property fringe benefit
  • their property is a remote area residential property option fee, and
  • the shared conditions are met

 

you are entitled to a 50% reduction of the taxable value of the property fringe benefit.

Remote area residential property option fee

A remote area residential property option fee is property consisting of a fee paid to an employee in return for the employee granting you an option to buy an interest in land. The following conditions must be satisfied:

  • the employee must hold an interest in the land to which the option relates
  • the land must, at the time when the option fee was paid to the employee, either have a dwelling on it which is the employee's usual place of residence or be land on which the employee intends to build, or complete the building of, such a dwelling
  • if the employee intends to build, the Commissioner must be satisfied that they have made sustained reasonable efforts to  
    • commence building or start completing the construction of the dwelling within six months
    • to occupy the dwelling within 18 months of the time when the option fee was paid
     
  • when the option fee is paid, the shared conditions must be met
  • the contract under which the option fee is paid must be entered into no later than when the employee obtains an interest in the land subject to the option, and the option must also be a recognised remote area housing obligation restricting the employee's right to dispose of the interest in the land.

Remote area residential property repurchase consideration

Remote area residential property repurchase consideration

If:

then:

  • you provide your employee with a property fringe benefit
  • the property is remote area residential property repurchase consideration, and
  • the shared conditions are met

 

you are entitled to a 50% reduction of the taxable value of the property fringe benefit.

However, the 50% discount is denied on that portion of a benefit, arising on repurchased, which is attributable to you paying a repurchase price excessively above market value under a buy-back clause in a remote area housing agreement.

Remote area residential property repurchase consideration
  • the employee must hold an interest in the land to which the repurchase relates
  • the land must, at the time when the repurchase consideration was paid to the employee, either have a dwelling on it which is the employee's usual place of residence or be land on which the employee intends to build, or complete the building of, such a dwelling
  • if the employee intends to build, the Commissioner must be satisfied that they have made sustained reasonable efforts to
    • commence building or start completing the construction of the dwelling within six months
    • to occupy the house within 18 months of the time when the option fee was paid
     
  • when the repurchase consideration is paid, the shared conditions must be met
  • the contract under which the repurchase consideration is paid must be entered into no later than when the employee obtains an interest in the land subject to the repurchase, and the repurchase must also be a recognised remote area housing obligation restricting the employee's right to dispose of the interest in the land.
Recognised remote area housing obligation

A recognised remote area housing obligation is a contractual obligation, binding the employer and the employee, which restricts the employee's ability to dispose of their interest in the relevant land other than to the employer and for a price that can be determined by reference to the contract.

The restriction must exist for a period of at least five years from:

  • for a property fringe benefit in relation to 'remote area property repurchase consideration', the time when the employee acquired their interest in the land
  • for any other type of property fringe benefit, the time when the benefit was provided to the employee
  • for an expense payment fringe benefit, the time when the expenditure was incurred by the employee.

Shared conditions

To qualify for the FBT concession, you must meet the following shared conditions.

Remote area

The concessions apply only to accommodation located in areas that meet the requirements outlined below.

It is located in a remote area 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.

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.

No application of extended remote area test for certain employers

The extension of the remote area test for hospitals, charities, public ambulance services and the police force that applies to the remote area housing exemption doesn't apply to remote area housing assistance concessions.

Current employee

The employee (not an associate or third party) receiving the remote area housing assistance must be a current employee of your business in the FBT year in which you provide the benefit, and their usual place of employment must be in a remote area.

Customary

At the time the employee's expenditure was incurred, it was customary for employers in the industry in which the employee was employed to provide housing assistance for their employees.

A benefit will be accepted as being customary in the industry where it is normal, or common, for employees of that class or job description in that industry to be provided with the same or similar benefits. It is not necessary that all or even the majority of employees in the industry receive the benefit. Where it is unique, rare or unusual within an industry to provide the benefit, it would not be accepted as being customary.

Necessary

It was necessary because, at the time the employee's expenditure was incurred, it was customary for employers in the industry in which the employee was employed to provide housing assistance for their employees.

It is necessary for you to provide accommodation to employees if:

  • the nature of your business is such that employees are likely to move frequently from one residential location to another
  • there is not sufficient suitable residential accommodation otherwise available in the area in which the employee is employed, or
  • it is customary in your industry to provide free or subsidised housing to employees.
Usual place of residence

The accommodation must be the employee's usual place of residence. The following factors may be considered when deciding where an employee's usual place of residence is:

  • an employee's usual place of residence is normally found near to their fixed or permanent employment base
  • the terms of the employee's employment contract or award may indicate whether their move to a new place of residence is merely temporary or of a more lasting nature
  • the longer the employee is required to work at a place, the more indicative it is that the move is not temporary in nature.
A dwelling

All of the concessions, other than the remote area housing rent, must be in respect of a dwelling. A dwelling is (a unit of) accommodation constituted by, or contained in, a building, being a unit that consists in whole or in substantial part of residential accommodation. Examples of dwellings are houses and apartments. A caravan is not considered a dwelling.

Arm's length arrangement

The fringe benefit was not provided to the employee under:

  • a non-arm's length arrangement, or
  • an arrangement that was entered into by any of the parties for the purpose, or partial purpose, of enabling you to obtain the remote area housing concession.

Remote area holiday transport - not subject to ceiling

Under an award or industry custom, an employee working in a remote area may be reimbursed for the costs of travelling from (or may be provided with transport from) the remote area for the purpose of having a holiday and, similarly, back to the remote area after the holiday. The employee may also be entitled to be provided with accommodation and/or meals in connection with the transport from and to the remote area. A remote area is defined in section  10.8 of Housing fringe benefits.

You may reduce the taxable value of the fringe benefits arising from the transport, accommodation and meals by 50% if:

  • the employee travels from the work locality to the town where they lived before being engaged to work at that locality
  • the employee travels to the capital city of the state or territory in which the workplace is located (for this purpose, Perth and Adelaide are treated as if they were the capital cities of Christmas Island and the Northern Territory, respectively).

The following requirements must also be satisfied:

  • the holiday is of three working days or more
  • where the benefit is an expense payment fringe benefit, you are provided with proof of the expenditure - that is, originals or copies of receipts or invoices - or a Remote area holiday transport declaration in a form approved by the Commissioner (refer to Declarations ).

The reduction in taxable value extends also to holiday transport, accommodation and food benefits given to the employee's family, whether accompanied by the employee or not. If a child or the spouse of the employee doesn't live at the employee's work locality, the concession will also apply if the holiday travel by the spouse or child is for the purpose of meeting the employee.

If the benefit is a reimbursement for car expenses calculated on a cents per kilometre basis, the reduction in taxable value is limited. The maximum reduction is 50% of the amount that would be paid if the reimbursement were to be calculated at a certain rate per kilometre. That rate per kilometre is the applicable rate for claiming income tax deductions on a cents per kilometre basis. In addition, a rate of 0.63 cents per kilometre is permitted where more than one family member travels in the car.

The reduction of taxable value doesn't apply to a reimbursement of car expenses calculated on a cents per kilometre basis unless you obtain a Remote area holiday transport declaration , in a form approved by the Commissioner, from the employee.

Cents per kilometre changes

Each of the methods below refers to reimbursement on a cents per kilometre basis. From 1 July 2015, there are changes to the cents per kilometre method and separate rates based on the size of the employee's car are no longer available. Only for the FBT return for 2016, you had the ability to choose either the 2014-15 car rates or the single 66 cent rate. However, from 1 April 2016 onwards, employers must use the single rate that applies for the following income year, per the table below.

Cents per kilometre singles rates

FBT year

Cents per kilometre rate

1 April 2015 - 31 March 2016

64, 76 or 77 cents depending on engine capacity or

66 cents

1 April 2016 - 31 March 2017

Rate for the income year 1 July 2016 - 30 June 2017:

66 cents

1 April 2017 - 31 March 2018

Rate for the income year 1 July 2017 - 30 June 2018:

To be advised.

Remote area holiday transport - subject to ceiling

Where a particular fringe benefit satisfies all but one of the requirements necessary to gain the concession described under Remote area holiday transport - not subject to ceiling, a reduction in taxable value may nonetheless be available. If the only requirement not satisfied is that of the locality of the place to which the employee travels from the remote area, and from which the employee travels to return to the remote area, you may reduce the taxable value of the fringe benefit by 50% of the taxable value, or 50% of the 'benchmark travel amount' (whichever is less).

The benchmark travel amount is the usual cost of return travel between the work locality and capital city of the state in which the workplace is located. This is normally the return economy air fare plus any incidental costs you would ordinarily meet under relevant industrial arrangements. The benchmark travel amount is worked out at the beginning of the employee's holiday.

For remote areas in the Northern Territory and for Christmas Island, the reduction in taxable value is limited to 50% of the usual cost of travel to Adelaide and Perth, respectively.

Remote area home ownership schemes

Broadly, this concession permits the amortisation of fringe benefits provided in connection with remote area home ownership schemes. The period of amortisation is generally five to seven years.

The benefits may consist of:

  • a discount on the purchase of a home or of land on which to build a home
  • a reimbursement of the cost of buying land and/or building a home
  • an option fee entitling you to first choice in repurchasing the home.

There must be a restriction on the employee's freedom to sell the house during the amortisation period.

The remote area home ownership scheme must be genuine rather than merely a contrived attempt to take advantage of this concession.

If you repurchase the home during the amortisation period, the unamortised balance is brought to account in your FBT return for that year.

Where an employee is forced by a contractual buy-back arrangement to suffer a loss in selling the home back to you, you may deduct 50% of that loss from your aggregate taxable values in that FBT year. (The rationale for this reduction is that any fringe benefit given to the employee to facilitate the original purchase of the house is being offset by the loss on its resale to you.)

19.3 Transport reductions

Cents per kilometre changes

Each of the methods below refers to reimbursement on a cents per kilometre basis. From 1 July 2015, there are changes to the cents per kilometre method, and separate rates based on the size of the employee's car are no longer available. Only for the FBT return for 2016, you have the ability to choose either the 2014-15 car rates or the single 66 cent rate. However, from 1 April 2016 onwards, employers must use the single rate that applies for the following income year, per the table below.

Cents per kilometre rates

FBT year

Cents per kilometre rate

1 April 2015 - 31 March 2016

64, 76 or 77 cents depending on engine capacity or

66 cents

1 April 2016 - 31 March 2017

Rate for the income year 1 July 2016 - 30 June 2017:

66 cents

1 April 2017 - 31 March 2018

Rate for the income year 1 July 2017 - 30 June 2018:

To be advised.

Overseas employment holiday transport

Fringe benefits arising from holiday travel provided in accordance with an award or industry custom to employees posted overseas, receive concessional treatment. The travel must be in connection with leave of more than three days. The concession is a reduction in the taxable value of the fringe benefits. The reduction in taxable value may vary in amount, depending on whether the travel is to the employee's home country or to some other destination.

Benefits eligible for the reduction are those that arise from providing transport and, where appropriate, meals and accommodation in connection with that transport. The concession applies to both Australian employees posted overseas and overseas residents posted to Australia.

Where the travel is not to the home country, the concession is limited to 50% of what is called the 'benchmark travel amount'. The benchmark travel amount is normally the cost of a return economy air fare, determined at the commencement of the employee's holiday.

Where the travel is to the home country, the 50% discount applies to the actual cost of travel, even if the cost exceeds the benchmark travel amount. For example, this would occur when an employee travels to their home country on a first-class flight.

If an employee is provided with more than one overseas holiday trip during an FBT year, the concession is determined by calculating the 50% discount for each trip and using the highest discount as the concession for that year.

These concessions also apply where holiday travel benefits are given to the employee's family, whether or not they live with the employee at the overseas post.

If the holiday travel benefit is in the form of a reimbursement of the employee's expenses, you must obtain documentary evidence of the expenses by the time you are required to lodge your FBT return. However, if the benefit is a reimbursement of car expenses on a cents per kilometre basis, you must obtain a signed declaration from the employee that sets out the make, model and engine capacity of the car, the number of kilometres it travelled on the holiday, and the number of persons who travelled in the car.

Employment interviews and selection tests - transport by employee's car

You may reduce the taxable value of an expense payment fringe benefit where an employee:

  • travels in their own car solely for the purpose of attending an interview or selection test connected with an application for a new job or for promotion, or transfer in employment, and
  • is reimbursed on a cents per kilometre basis for the car expenses incurred.

However, the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

The reduction in taxable value is conditional on you obtaining a signed Employment interview or selection test declaration - transport in employee's car in a form approved by the Commissioner of Taxation (refer to Declarations ).

Occupational health and migrant language training - transport by employee's car

Where you reimburse an employee on a cents per kilometre basis for car expenses incurred in attending a work-related medical examination or screening, preventative health care, counselling session or migrant language training (refer to section  20.8 of Fringe benefits tax exempt benefits), the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

You may reduce the taxable value of the expense payment fringe benefit where an employee:

  • travels in their own car for the purpose of attending a work-related medical examination, screening, preventative health care or counselling session, or for migrant language training, and
  • is reimbursed on a cents per kilometre basis for the car expenses incurred.

However, the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

The reduction of taxable value is conditional on you obtaining a signed Declaration of car travel to work-related medical examination, medical screening, preventative health care, counselling or migrant language training in a form approved by the Commissioner (refer to Declarations ).

19.4 Relocation reductions

Relocation - where transport by employee's car

If you reimburse an employee on a cents per kilometre basis for using their own car as relocation transport, you may reduce the taxable value of the expense payment fringe benefit. However, the reduction is limited to the amount you would have reimbursed based on the applicable rate if income tax deductions were claimed on a cents per kilometre basis for that amount of travel.

The reduction in taxable value is conditional on you obtaining a signed Relocation transport declaration in a form approved by the Commissioner (refer to Declarations ).

For this purpose, relocation transport is transport that enables an employee to relocate to a new residence in circumstances where they are required to live away from home in order to perform employment-related duties, or are similarly required to relocate their usual place of residence.

The reduction also applies where the employee is returning to their usual place of residence after working at another location.

There have been changes to the cents per kilometre rate with the rates based on the size of the employee's car no longer being available. For more information, see Changes to the cents per kilometre rate.

Relocation - temporary accommodation

This concession reduces the taxable value of fringe benefits that arise from providing temporary accommodation (including the costs of hiring household goods) to an employee. The temporary accommodation must be required solely because the employee is required to change their usual place of residence in order to perform the duties of employment or in order to commence employment.

The fringe benefits eligible for this reduction are:

  • an expense payment, housing or residual benefit that relates to a lease or licence for the temporary accommodation of the employee
  • an expense payment or a residual benefit that relates to a lease or licence for household goods for use in temporary accommodation of the employee.

The benefit must be provided under an arm's length arrangement.

Temporary accommodation at former location

This concession applies to temporary accommodation at the employee's former location, only if the temporary accommodation is necessary because the former home is unavailable or unsuitable for occupancy as a result of furniture removal or other factors relating to the relocation. In this case, the concession applies to the temporary accommodation for a maximum of 21 days, ending on the day the employee starts work at the new location.

Temporary accommodation at new location

Where the temporary accommodation is at the new location, the employee must begin to make sustained and reasonable efforts to buy or lease suitable long-term accommodation as soon as reasonably practicable after starting work at the new location.

In order for the concession to apply, the employee must either:

  • begin to occupy a long-term unit of accommodation within four months of starting at the new location, or
  • where the employee has not started to live in a long-term unit of accommodation within four months, give a declaration to the employer relating to their efforts to find suitable long-term accommodation by the due date of the lodgment of the FBT return. The Temporary accommodation relating to relocation declaration must be in a form approved by the Commissioner (refer to Declarations ).

Employee has started to occupy a unit of accommodation within four months

Where the employee has started to occupy a long-term unit of accommodation within four months, the concession is limited to a period that begins seven days before the day the employee starts work at the new location and ends on the day the employee could reasonably be expected to occupy the unit of accommodation after it had been purchased or leased.

Employee has not started to occupy a unit of accommodation within four months

If the employee has not started to occupy a unit of accommodation within four months, the concession is limited to a period that begins seven days before the day the employee started work at the new location and ends on the earlier of:

  • the day the employee could reasonably be expected to occupy the unit of accommodation after it has been purchased or leased
  • six months after the day the employee started work at the new location, or
  • 12 months after the day the employee started work at the new location.

The 12 month period will apply where:

  • the employee owned an interest in a unit of accommodation which was their former usual place of residence
  • within six months after the relocation day a contract for the sale of their former usual place of residence has been entered into, and
  • during that period, the employee has attempted to purchase a unit of accommodation at the new location.

Otherwise the six month period will apply.

However, if the employee enters into a contract to purchase or lease long-term accommodation before the six or 12 month time period finishes, the concession ends on the day the employee could reasonably be expected to occupy that unit of accommodation.

In all of the above circumstances, the employee is required to give the employer a Temporary accommodation relating to relocation declaration in a form approved by the Commissioner (refer to Declarations ).

Note that the concession will end before the specified time frame has elapsed if the employee ceases to make reasonable and sustained efforts to buy or lease suitable long-term accommodation.

Relocation - meals

Where you provide meals to an employee (or family member) while they are staying in a hotel, motel, hostel or guesthouse, and that accommodation qualifies for the concession explained under Relocation - temporary accommodation, the taxable value of the meals is reduced to a maximum of $2 per meal (or $1 if the family member is under 12).

Living away from home - food provided

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 reimburse the employee's food costs (giving rise to an expense payment fringe benefit), or provide food to the employee (giving rise to a property fringe benefit).

You may reduce the taxable value of the expense payment fringe benefit or property fringe benefit to the equivalent of $42 a week for each adult and $21 a week for each child (an adult is a person who had attained the age of 12 years before the beginning of the FBT year). You apply this particular reduction to the taxable value before applying the employee contribution.

Food provided because the employee is living away from home from 1 October 2012 onwards

To apply this reduction, the following requirements must be met. The declarations provided to you must be in a form approved by the Commissioner (refer to Declarations ).

Food - Living away from home 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
  • the employee must give you the appropriate 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
  • the employee must give you the appropriate declaration about living away from home.

 

The terms temporary resident and foreign resident have their meaning given by section 995-1 of the Income Tax Assessment Act 1997 . The meaning of temporary resident can also be found by referring to Foreign income exemption for temporary residents - introduction.

19.5 Other reductions

Personal services entities

From 1 July 2000, the taxable value of a fringe benefit can be reduced by the same amount as is made non-deductible to the provider by virtue of the personal services income provisions under the Income Tax Assessment Act 1997  (ITAA 1997).

Sections 85-15, 85-20 and 85-60 of the ITAA 1997 limit the extent to which a person can deduct payments to associates that relate to personal services income.

In-house fringe benefits - tax-free threshold

If you provide one or more in-house fringe benefits to an employee during the FBT year, you may reduce the aggregate of the taxable values of the in-house fringe benefits by $1,000.

Broadly, in-house fringe benefits are benefits that are identical or similar to the benefits you provide to customers in the ordinary course of business.

This concession applies only to:

  • in-house expense payment fringe benefits
  • in-house property fringe benefits
  • in-house residual fringe benefits.

You don't need to keep specific records of in-house benefits provided to individual employees if you don't expect the value of the benefits provided in the year to exceed the $1,000 limit.

If a particular fringe benefit is eligible for both this concession and another concession outlined in this chapter, you reduce the taxable value first by the other concession, and then by this concession.

In-house fringe benefits - tax-free threshold where the benefit is accessed under a salary packaging arrangement

Since 22 October 2012, the $1,000 annual reduction of the aggregate taxable value has not applied to in-house benefits where the employee accesses the benefit under a salary packaging arrangement.

This reduction continues to apply if either:

  • the transitional rules apply
  • the benefit is not accessed under a salary packaging arrangement.

See also:

  • section 17.3 of the Property fringe benefits
  • section 18.4 of the Residual fringe benefits

Entertainment expense payments

A reduction in the taxable value of an expense payment fringe benefit is available where the expense payment fringe benefit arises from expenditure an employee incurs in entertaining people other than the employee or associates - for example, expenditure incurred by the employee on entertaining your clients.

You may reduce the taxable value of the expense payment fringe benefit by the percentage of the expenditure incurred in entertaining the other people.

The taxable value may not be reduced under this concession if the otherwise deductible rule applies.

Overseas employees - education of children

A reduction is available for:

  • any car or expense payment fringe benefit provided in respect of the full-time education costs of an employee's child
  • any property or residual fringe benefit provided solely for the purposes of the child's full-time education.

The reduction is available where:

  • any part of the full-time education is undertaken by the child when the employee is posted overseas
  • the benefits are provided in accordance with an award or industry custom.

The concession applies to both Australian employees posted overseas and overseas residents posted to Australia. The employee's child doesn't have to accompany the employee overseas in order for you to be entitled to this concession.

The full-time education can be provided to a child at a school, college or university, or by a tutor. Where the child receives their education at a school, college or university, the employee must be posted overseas for 28 days or more.

Education costs you bear for children of employees who are posted overseas will be reduced proportionately, in accordance with the extent that the benefit relates to the period of the employee's service overseas. If the overseas service commences or ceases during a school term, and the child receives their education at a school, college or university, the education costs relating to the whole term will be subject to the reduction.

Where the child receives their education by a tutor, the reduction applies to the education costs relating to the period from the day the posting started to the day the posting ended.

For the purposes of this concession, a child is an employee's child who is less than 25 years of age at the time the benefit is provided.

If you reimburse the education expenses incurred by the employee, you must obtain documentary evidence of the expenses before you lodge your FBT return (21 May).

Changes and updates

The electronic version of the guide is reviewed on a regular basis. The following recent changes and updates have been made to this chapter..

September 2016

Section

Changes and updates

Various

Updated for style changes

19.2

Removed reference to transitional rules as no longer relevant.

19.2, 19.3, 19.4

Inclusion of cents per kilometre changes

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.

View full documentView full documentBack to top