ATO Interpretative Decision
ATO ID 2001/758
Fringe Benefits Tax
Fringe Benefits Tax - Recipients ContributionFOI status: may be released
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This ATO ID contains references to repealed provisions, some of which may have been re-enacted or remade. The ATO ID is current in relation to the re-enacted or remade provisions.
Australia's tax treaties and other agreements except for the Taipei Agreement are set out in the Australian Treaty Series. The citation for each is in a note to the applicable defined term in sections 3AAA or 3AAB of the International Tax Agreements Act 1953.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Whether an employer who pays the income tax liability of an expatriate employee is able to treat the employee's income tax refund as a "recipient's contribution" under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).
Decision
No. A refund of the expatriate employee's income tax, paid by the employer, is not a "recipients contribution" under subsection 136(1) of the FBTAA. However, the refund will reduce the taxable value of the residual fringe benefit that arose from the payment of the employee's income tax under section 50 of the FBTAA.
Facts
The employer was the host entity of a number of expatriate employees.
The expatriate employees were remunerated on a net salary basis with the host entity paying the employee's income tax obligations.
A formal agreement with the expatriate employees provided for income tax refunds to be returned to the host entity.
No tax instalments were deducted from salary paid to the expatriate employee, but provisional tax instalments were paid.
The employer received an income tax refund from the final income tax return lodged by the expatriate employee.
Reasons for Decision
The term "recipients contribution" is defined in subsection 136(1) of the FBTAA as the amount of any consideration paid to the employer in respect of the provision of the recipients benefit.
A refund resulted from the lodgement of the final income tax return of the employee as the provisional tax instalments paid exceeded the employee's income tax liability for the year. The refund does not constitute consideration paid by the employee to the employer, so it will not be a "recipients contribution".
However, the income tax refund will reduce the taxable value of the residual fringe benefit that arose from the payment of the employee's income tax liability under section 50 of the FBTAA.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 6 April 2018 | Title, Issue | Minor punctuation and formatting amendments |
Year of income: Year ended 31 March 1998
Legislative References:
Fringe Benefits Tax Assessment Act 1986
subsection 136(1)
section 50
Keywords
Fringe benefits tax
Expense payment fringe benefits
Residual fringe benefits
Double tax agreements
Objections
Overseas employees
Date reviewed: 12 March 2018
ISSN: 1445-2782