Edited version of private advice

Authorisation Number: 1052266888897

Date of advice: 12 July 2024

Ruling

Subject: Application of the Fringe Benefits Tax Assessment Act 1986 to nominated state or territory bodies

Question

Will the Commissioner enter into an agreement with a state government under subsection 135X(3) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?

Answer

Yes.

This ruling applies for the following period:

FBT year ending 31 March 20XX

The scheme commences on:

1 April 20XX

Relevant facts and circumstances

A state or territory government wishes to enter into an agreement with the Commissioner under subsection 135X(3) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).

Employers within the state or territory government underwent a reorganisation due to a machinery of government change and their employees were transferred to other nominated bodies (new employers). As the change in employer will affect the calculation of the taxable value of certain fringe benefits, the state or territory government is seeking to enter into a written agreement under subsection 135X(3) of the FBTAA to:

•         ensure the calculation of the taxable value of certain fringe benefits previously provided by the original employers is not affected as a result of a break in the continuity of certain record keeping requirements solely because of a transitional event; and

•         preserve the character of certain benefits where the character would otherwise be lost solely because of a transitional event.

In particular, the agreement is sought to enable the new employers to:

a)    treat a year which would have been a logbook year of tax for the previous employer as a logbook year for the purpose of using section 10 of the FBTAA to calculate the taxable value of a car fringe benefit;

b)    treat a year of tax that would have been a base year of tax for the previous employer as a base year for the purpose of calculating the taxable value of a housing fringe benefit under section 26 of the FBTAA;

c)    treat a register that would have been a valid register for the previous employer as a valid register for the purpose of using the 12-week record keeping method in Subdivision D of division 10A of the FBTAA to calculate the taxable value of car parking fringe benefits;

d)    treat a benefit relating to the relocation of an employee that would have been an exempt benefit for the previous employer under sections 58B, 58C or 58D of the FBTAA as an exempt benefit;

e)    treat a benefit relating to trainees engaged under the Australian traineeship system that would have been an exempt benefit for the previous employer under section 58S of the FBTAA as an exempt benefit;

f)     use the end date that would have been used by the previous employer for the purpose of calculating the amortisation of the taxable value of fringe benefits relating to a remote area home ownership scheme under section 65CA of the FBTAA; and

g)    use a recurring fringe benefit declaration which would have applied if the employer had not changed.

Relevant legislative provisions

Fringe Benefits Tax Assessment Act 1986 Part XIC

Fringe Benefits Tax Assessment Act 1986 Section 135S

Fringe Benefits Tax Assessment Act 1986 Section 135T

Fringe Benefits Tax Assessment Act 1986 Section 135U

Fringe Benefits Tax Assessment Act 1986 Section 135X

Reasons for decision

Part XIC of the FBTAA enables state and territory governments to transfer the administration and payment of fringe benefits tax (FBT) to a departmental level.

To transfer its FBT responsibility, a state or territory government must nominate the relevant body and provide certain information to us to facilitate the process.

A state or territory government is able to nominate:

• an eligible state or territory body as an employer for the purposes of the FBTAA
• that a class or classes of employees who do not perform their duties of employment wholly or principally in a nominated state or territory body are to be taken to have a sufficient connection with a nominated state or territory body.

A state or territory will not be an employer for the purposes of the FBTAA unless it has been nominated by the relevant state or territory.

In accordance with section 135U of the FBTAA, once a nomination has been made, the nominated body is:

• taken to be a government body
• treated as the employer of each employee who has a sufficient connection with that body
• taken to be a company for the purpose of the FBTAA
• an associate of each other nominated state or territory body of the relevant state or territory, the state or territory or territory and each authority of the state or territory.

Although a nominated body is treated as an employer for the purposes of the FBTAA, subsection 135U(4) of the FBTAA provides that the ultimate responsibility for the FBT obligations remains with the state or territory.

A nomination will always apply from 1 April of the first year in which the body is to be treated as an employer.

Subsection 135S(3) of the FBTAA provides that a nomination only needs to be made for the first year in which the body is to be treated as an employer.

As the change in employer will affect the calculation of the taxable value of certain fringe benefits, the state or territory government in these circumstances is seeking to enter into a written agreement under subsection 135X(3) of the FBTAA to:

• ensure that the calculation of the taxable value of certain fringe benefits is not affected where continuity in the fulfilment of certain record-keeping provisions is broken solely because of a transitional event, and
• preserve the character of certain benefits where that character would otherwise be lost solely because of a transitional event.

Subsection 135X(2) of the FBTAA states that a transitional event occurs if a state or territory government makes, varies or revokes a nomination made under section 135S of the FBTAA, or a nominated state or territory government body ceases to exist.

The state or territory government in the current circumstances made a nomination in the approved form; thus, a relevant transitional event occurred.

Therefore, it is considered appropriate for an agreement to be entered into, under subsection 135X(3) of the FBTAA, in relation to the records kept by the relevant bodies that were previously taken to be the employers for the purposes of the FBTAA.

It is agreed that the relevant nominated bodies (i.e. the new employers) may:

a)    treat a year which would have been a logbook year of tax for the previous employer as a logbook year for the purpose of using section 10 of the FBTAA to calculate the taxable value of a car fringe benefit;

b)    treat a year of tax that would have been a base year of tax for the previous employer as a base year for the purpose of calculating the taxable value of a housing fringe benefit under section 26 of the FBTAA;

c)    treat a register that would have been a valid register for the previous employer as a valid register for the purpose of using the 12-week record keeping method in Subdivision D of Division 10A of the FBTAA to calculate the taxable value of car parking fringe benefits;

d)    treat a benefit relating to the relocation of an employee that would have been an exempt benefit for the previous employer under sections 58B, 58C or 58D of the FBTAA as an exempt benefit;

e)    treat a benefit relating to trainees engaged under the Australian traineeship system that would have been an exempt benefit for the previous employer under section 58S of the FBTAA as an exempt benefit;

f)     use the end date that would have been used by the previous employer for the purpose of calculating the amortisation of the taxable value of fringe benefits relating to a remote area home ownership scheme under section 65CA of the FBTAA; and

g)    use a recurring fringe benefit declaration which would have applied if the employer had not changed.

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