Disclaimer
This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4.

Edited version of your private ruling

Authorisation Number: 1012593381603

Ruling

Subject: Fringe Benefits Tax Expense Payment Fringe Benefits Otherwise Deductible Rule

Question 1

Does the 'otherwise deductible rule' in section 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) apply to reduce the taxable value relating to financial advice paid for on your behalf by your employer to nil, where the expenditure would otherwise be wholly deductible by you for income tax purposes?

Answer

Yes

Question 2

Do you need to provide a declaration, in the approved form, to your employer to allow your employer to reduce the taxable value of an expense payment fringe benefit provided to you under the 'otherwise deductible rule' in section 24 of the FBTAA?

Answer

Yes

This ruling applies for the following periods:

The scheme commences on:

1 July 2013

Relevant facts and circumstances

Relevant legislative provisions

Income Tax Assessment Act 1997, section 8-1

Fringe Benefits Tax Assessment Act 1986, section 20

Fringe Benefits Tax Assessment Act 1986, section 24

Fringe Benefits Tax Assessment Act 1986, section 152A

Reasons for decision

Issue 1

Question 1

Summary

You propose to provide your employer with a tax invoice from your financial advisor that solely relates to advice given on your income producing investments, which your employer will pay on your behalf. In these circumstances the 'otherwise deductible rule' in section 24 of the FBTAA would operate to reduce the taxable value of the associated expense payment fringe benefit to nil.

Detailed reasoning

Under section 20 of the FBTAA an 'expense payment fringe benefit' may arise in either of two ways:

In either case, the expenses may:

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction against your assessable income where you incur expenditure which relates to you gaining or producing your assessable income or is necessarily incurred in carrying on your business. Where expenditure is a capital outgoing or private or domestic in nature, section 8-1 of the ITAA 1997 specifically denies a deduction.

Section 24 of the FBTAA allows your employer to reduce the value of an expense payment fringe benefit they provide to you by the amount you would have otherwise been entitled to claim as an income tax deduction. The rule in section 24 of the FBTAA is often referred to as the 'otherwise deductible rule'.

Thus in circumstances where expenditure solely relates to you gaining or producing your assessable income you would be able to claim the full amount as an income tax deduction. Under the 'otherwise deductible rule'; if your employer reimbursed you for this expenditure, or paid a third party on your behalf; the taxable value of the expense payment fringe benefit would be reduced to nil.

Paragraph 5 of Taxation Determination TD 95/60 Income tax: are fees paid for obtaining investment advice an allowable deduction under section 8-1 of the ITAA 1997 for taxpayers who are not carrying on an investment business? provides that:

In your case you propose to provide your employer with a tax invoice from your financial advisor that solely relates to advice given on your income producing investments, which your employer will pay on your behalf. In these circumstances the 'otherwise deductible rule' in section 24 of the FBTAA would operate to reduce the taxable value of the associated expense payment fringe benefit to nil.

Question 2

Summary

You will need to provide a declaration, in the approved form, to your employer to allow your employer to substantiate the reduction in the taxable value of an expense payment fringe benefit provided to you under the 'otherwise deductible rule' in section 24 of the FBTAA.

Detailed reasoning

In order to apply the 'otherwise deductible rule' in section 24 of the FBTAA your employer will need a declaration, in the approved form, to substantiate the reduction of the taxable value of the benefit. Your employer must obtain the declaration from you before they lodge the relevant fringe benefits tax (FBT) return or if they do not need to lodge an FBT return by the 21 May each year.

You do not need to provide an annual declaration in circumstances where you are covered by a recurring fringe benefit declaration. A recurring fringe benefit declaration is valid if:

Benefits are to be treated as being identical if they are the same in all respects except for any differences that:

Copyright notice

© Australian Taxation Office for the Commonwealth of Australia

You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).