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Ruling
Subject: Fringe Benefits Tax (FBT)
Question 1
For the purposes of subsection 5B(1E) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), where an entity becomes endorsed as public benevolent institution (PBI) part way through the year, will the entity be entitled to the $30,000 capped exemption for an employee who was provided with benefits throughout the FBT year?
Answer
Yes
Relevant facts and circumstances
This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.
The ATO approved the entity as a public benevolent institution (PBI) and was endorsed for charity tax concessions, including the FBT exemption under section 123C of the FBTAA. This status was recognised from part way through a FBT year.
Fringe benefits were provided to an employee of the entity during the FBT year.
The employee had been employed for the entire FBT year.
Relevant legislative provisions
Fringe Benefits Tax Assessment Act 1986 (FBTAA) 123C(1),
Fringe Benefits Tax Assessment Act 1986 5B(1E),
Fringe Benefits Tax Assessment Act 1986 5B and
Fringe Benefits Tax Assessment Act 1986 57A.
Reasons for decision
Summary
The entity is entitled to the $30,000 capped exemption for an employee for the FBT year.
Detailed reasoning
Section 123C of the FBTAA provides the circumstances where the Commissioner may endorse a public benevolent institution (PBI). The entity met these requirements and was endorsed as a PBI part way through the FBT year.
As a PBI, benefits that are provided to employees are exempt from FBT where the total grossed-up value of certain fringe benefits for each employee during the FBT year is $30,000 or less.
This is detailed in subsection 57A(1) of the FBTAA as:
Where the employer of an employee is a public benevolent institution endorsed under subsection 123C(1) or (5), a benefit provided in respect of the employment of the employee is an exempt benefit.
Section 5B of the FBTAA provides the method of calculation for an employer's FBT liability.
Subsection 5B(1D) of the FBTAA requires an adjustment to be made to an employer's fringe benefits taxable amount for the year of tax where benefits have been provided to an employee in respect of their employment which are exempt benefits under section 57A of the FBTAA. Subsection 5B(1D) requires that the employer's fringe benefits taxable amount is increased by the employer's 'aggregate non-exempt amount' for the year of tax.
The aggregate non-exempt amount for the year of tax is determined under the method statement in subsection 5B(1E) of the FBTAA.
Step 1 of the method statement sets out how an employer is to determine the 'individual grossed-up non-exempt amount' for each employee.
Step 2 applies to hospitals and public ambulance services and is not relevant in this case.
Step 3 applies to reduce the employee's individual grossed-up non-exempt amount by $30,0000.
In this case, an employee was provided with benefits throughout the FBT year. However, there is no provision for apportionment when calculating the aggregate non-exempt amount for the year of tax in the FBT legislation. Accordingly, under subsection 5B(1E) of the FBTAA, the entity will be entitled to the $30,000 capped exemption for an employee who was employed both before and after the employer's change in status while being provided with benefits throughout the FBT year.