ATO Interpretative Decision
ATO ID 2003/233 (Withdrawn)
Fringe Benefits Tax
Loan fringe benefits: Agreement made for the repayment of overpaid salaryFOI status: may be released
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This ATO ID has been withdrawn on the basis that the issue is covered by Draft Taxation Determination TD 2007/D22.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Does the agreement entered into between the employer and the employee, whereby an employee is given time to repay overpaid salary, constitute a loan benefit for the purposes of subsection 16(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Decision
Yes. The agreement entered into between the employer and the employee, whereby an employee is given time to repay overpaid salary, does constitute a loan benefit for the purposes of subsection 16(1) of the FBTAA.
Facts
The employer is an entity and has employees.
Due to an administrative oversight, an employee is overpaid a substantial amount of salary.
At the point in time the overpayment is identified/quantified the employee is notified in writing of the overpayment.
An agreement is entered into whereby the employee will repay the overpaid salary.
The overpaid salary is a substantial amount and the employee agrees to repay the salary to the employer over a two year period.
Reasons for Decision
Under subsection 16(1) of the FBTAA a benefit, defined as a 'loan benefit' in subsection 136(1) of the FBTAA, arises where a person (the provider) makes a loan to another person (the recipient). The benefit exists in respect of each year in which the recipient is under an obligation to repay the whole or any part of the loan.
A 'loan' is defined in subsection 136(1) of the FBTAA to include an advance of money, the provision of credit or other form of financial accommodation, the payment of an amount on account of another person where there is an obligation (whether express or implied) to repay the amount and a transaction (whatever its terms or form) which in substance effects a loan of money.
The actual overpayment of salary does not constitute a loan fringe benefit as payments of salary or wages are excluded from the definition of 'fringe benefit' in subsection 136(1) of the FBTAA. However, where an agreement is entered into whereby an employee is given time to repay an amount overpaid, it is considered that a loan benefit arises at the time of the agreement being entered into.
Date of decision: 26 March 2003Year of income: Year ended 31 March 2003
Legislative References:
Fringe Benefits Tax Assessment Act 1986
subsection 16(1)
subsection 136(1)
Keywords
FBT arrangement
FBT loan interest
Fringe benefits tax
Loan fringe benefits
ISSN: 1445-2782
| Date: | Version: | |
| 26 March 2003 | Original statement | |
| You are here | 17 December 2007 | Archived |