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Edited version of private ruling
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Ruling
Subject: Type1 and Type 2 Gross up rates - Decimal places
Question 1
Does the FBTAA 1986 or any other legislation require the gross up rate used in calculating the gross up type 1 and type 2 amounts in subsections 5B(1F) and 5B(1G) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) to be rounded off to four decimal places?
Advice/Answer 1
No
Question 2
Should the gross up rates used in calculating the grossed up type 1 and type 2 amounts in subsections 5B(1F) 5B(1G) of the FBTAA be 2.0647 or 2.06466229981455 for type 1 and 1.8692 or 1.86915887850467 for type 2 benefits for fringe benefits tax (FBT) year ending 31 March 2011?
Advice/Answer 2
Either rate can be used
This ruling applies for the following period
01 April 2010 to 31 April 2015
Relevant facts
The Rulee is the provider of fringe benefits tax software. The Rulee is seeking guidance on how rounding should be applied to Type 1 and Type 2 benefits.
The Rulee, as an employer is also a provider of fringe benefits to their own employees.
In a previous software the Rulee rounded to four decimal places the type 1 and type 2 gross up rates, per the commentary at Chapter 2.11 of the ATO publication Fringe Benefits Tax -a guide for employers, (FBT guide) available on the Australian Taxation Office website www.ato.gov.au, meaning the gross up rates used were 2.0647 and 1.8692. The Rulee subsequently received feedback that the FBTAA does not indicate a number of decimal places at which rounding should occur, and thus believes that in an FBT software product it is more appropriate to use the gross up rates 2.06466229981455 and 1.88915887850467 to calculate the type 1 and type 2 grossed up amounts. The Rulee believes these gross up rates without rounding off give more accurate results when using the formulas in subsections 5B(1F) and 5B(1G) FBTAA respectively.
The Rulee would like to use type 1 and type 2 gross up rates of 2.06466229981455 and 1.88915887850467 to ensure the fringe benefits tax software provides the most correct outcome for users.
The Rulee is effectively seeking a ruling on whether type 1 and type 2 gross up rates of 2.06466229981455 and 1.88915887850467 can be used in the formulae as in subsections 5B(1F) and 5B(1G) FBTAA respectively without rounding off at the fourth decimal place when working out the grossed up amounts.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 Section 5(B)
Fringe Benefits Tax Assessment Act 1986 Section 5B(1F)
Fringe Benefits Tax Assessment Act 1986 Section 5(1G)
Reasons for decision
ATO policy, publications and FBT return guides advise taxpayers to use a type1 and type 2 gross-up rate that has been rounded off at the fourth decimal place when using the gross up formulae in subsections 5B(1F) and 5B(1G) of the FBTAA.
There are no ATO view documents stating that the gross-up rate must be rounded off at the fourth decimal place when applying the FBT gross up formulae set out in subsections 5B(1F) and 5B(1G) of the FBTAA.
There is nothing in the tax legislation that specifies that the gross up rates used in the formulae in subsections 5B(1F) and 5B(1G) of the FBTAA must be rounded off at the fourth decimal place.
The FBTAA does not contain any reference to rounding off or to the fourth decimal place gross up rates that the FBT guide contains. Instead the FBTAA only prescribes a set of formulas.
In effect, the FBTAA does not require the employers to round off the type 1 and type 2 gross up rates to four decimal places.
The Rulee is entitled to use the 14 decimal places in the gross up rate since there is nothing in the tax legislation that prevents employers from using 14 decimal places in the gross-up rate arrived at using the gross-up rate formulae in subsections 5B(1F) and 5B(1G) of the FBTAA.