Fringe benefits tax - a guide for employers
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Chapter 12 - Airline transport fringe benefit
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12.2 What is an airline transport fringe benefit?
An airline transport fringe benefit is an in-house property fringe benefit or an in-house residual fringe benefit to the extent the:
- benefit provided is an in-house property or in-house residual fringe benefit
- benefit is the provision of transport in a passenger aircraft operated by a carrier (including any incidental services on board the aircraft)
- transport is subject to the stand-by restrictions that customarily apply in the airline industry to airline transport employees, for example, free or discounted air travel, and
- benefit is provided by an airline or travel agent to their employees (or associates) for travel in the aircraft.
An airline transport fringe benefit is only provided when an employee or their associate commences the relevant travel (and not when it is booked). This means that an employee may book the travel in one year, but the fringe benefit liability does not arise until the following year when the employee commences the travel.
12.3 Taxable value
The taxable value of an airline transport fringe benefit is aligned with the in-house benefit valuation methods.
Not under a salary packaging arrangement
The taxable value of an airline transport fringe benefit not provided under a salary packaging arrangement is calculated as 75% of the stand-by airline travel value of the benefit, less any employee contribution. The stand-by value is determined at the comparison time for in-house residual fringe benefits or at the provision time for in-house property fringe benefits.
Under a salary packaging arrangement
If the airline transport fringe benefit is provided under a salary packaging arrangement, the taxable value is equal to the notional value of the benefit less any employee contribution. The notional value is determined at the comparison time for in-house residual fringe benefits or at the provision time for in-house property fringe benefits.
Comparison time or provision time
An airline transport fringe benefit is only provided when an employee or their associate commences the relevant travel (and not when it is booked). That is, the comparison time or provision time means when the employee or their associate commences the relevant travel. For example, an employee may book the travel in one year, but the taxable value for the fringe benefit is determined the following year when the employee commences the travel.
- section 17.3 - Taxable value - in-house property fringe benefits
- section 18.4 - In-house residual fringe benefits
12.4 Stand-by airline travel value
The stand-by airline travel value of the benefit differs, depending on whether the transport is over a domestic route or over an international route.
Domestic or international travel scenario
|If the travel is on||Then the stand-by travel value is|
|a domestic route||50% of
carrier's lowest standard single economy airfare for that route as publicly advertised during the year of tax.
This means the provider must use the lowest standard single economy airfare of the carrier that provided the transport.
|an international route||50% of
carrier's standard single economy airfare for that route as publicly advertised during the year of tax.
This means the provider can use the lowest standard economy airfare of any carrier that provides commercial airfares over the relevant route.
Domestic and international route
Generally, a domestic route refers to a route in which the flight's departure and arrival are both within Australia. An international route is considered to be a route in which the flight's departure or arrival (or both) are outside of Australia.
Standard single economy airfare
The standard single economy airfare is the economy airfare that an ordinary customer would be expected to pay in order to travel the same route in that year of tax.
It does not include the use of any of the following for determining the stand-by airline travel value:
- group booking fares
- one-off fares
- heavily discounted fares as part of a marketing campaign.
Example - standard single economy airfare over an international route
An employer that is an airline provider gives one of its employees a free return flight overseas, subject to stand-by restrictions. Included in the flight are a checked luggage allowance, meals and in-flight entertainment.
Another airline provides flights over the same route. Their advertised fare is lower but does not include checked luggage, meals or in-flight entertainment.
In determining the taxable value of the overseas flight provided to its employee, the employer can use the lower fare advertised by the other airline.
Example - group booking fares
An airline provider offers discounted fares where a group booking is made of more than 10 people. Because this discounted fare is not a single economy airfare it cannot be used as a comparable airfare in determining the stand-by airline travel value.
Example - marketing campaign
GoCheap (an airline) is attempting to increase its market share and decides to set up a three month marketing campaign and as part of that, put out a select number of fares per flight over a couple of major routes during the off-peak season that are only $1.
The discounted fares are far below the cost price of the service and do not reflect the standard single economy airfare for that particular route and therefore cannot be used as a comparable airfare in determining the stand-by airline travel value.
Publicly advertised during the year of tax
In determining the stand-by airline travel value, you need to determine the relevant airfare that is publicly advertised during the relevant year of tax that the benefit was provided (that is, when the transport began).
The term 'publicly advertised' includes the internet, newspapers, television and radio, as well as any other medium in which a member of the public would be able to reasonably determine the cost of the fare.
Example - 2017-18 is the year of tax
Axel, an employee of an Australian airline, is travelling on an international carrier that is in an interline arrangement with his employer.
Having waited for a few days to get onto a flight to travel home to Australia as part of the stand-by restrictions, Axel is finally able to get on a flight on 31 March 2018.
Even though the flight lands in Australia on 1 April 2018 local time, the relevant year of tax in determining the stand-by travel value is the 2017-18 FBT year.
Example - 2018-19 is the year of tax
12.5 Reduction in taxable value where expenditure would have been deductible to the employee
The taxable value of an airline transport fringe benefit may be reduced in accordance with the 'otherwise deductible' rule, but only if the recipient of the benefit is the employee. Broadly, this means that the taxable value may be reduced by the amount the employee would have been entitled to claim as an income tax deduction if both of the following conditions are satisfied:
- the provision of transport in the aircraft is not provided as a fringe benefit
- the employee acts as a consumer or member of the public in purchasing the ticket.
For an explanation of how the otherwise deductible rule is applied for property fringe benefits, refer to section 17.5 .
For an explanation of how the otherwise deductible rule is applied for residual fringe benefits, refer to section 18.7 .
12.6 Substantiation requirements
If you use the otherwise deductible rule, you must have documentation to substantiate the extent to which the purchase price of the benefit would have been 'otherwise deductible' to the employee. This means you must obtain from the employee the relevant Property benefit declaration or Residual benefit declaration and the employee may also need to keep a travel diary. You must obtain the documentation from the employee before lodging the relevant FBT return.
12.7 Concessions and exemptions
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 FBT, or even no FBT, being payable.
The taxable value of an airline transport fringe benefit (whether it is an in-house property or residual fringe benefit) may be reduced by up to $1,000, if the benefit is not accessed under a salary packaging arrangement.
There are also a number of exemptions which may apply to airline transport benefits that are either property or residual fringe benefits.
- for information in relation to the concession and exemptions for property fringe benefits, sections 17.8 and 17.9
- for information in relation to the concession and exemptions for residual fringe benefits, sections 18.10 and 18.11
- section 19.5 - Other reductions
- Chapter 20 - Exempt benefits
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