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Edited version of your written advice
Authorisation Number: 1051381869940
Date of advice: 5 June 2018
Ruling
Subject: Entering into a written agreement under subsection 135X(3) of the FBTAA1986
Question
Will the Commissioner enter into an agreement with a state government under section 135X of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)?
Answer
Yes.
This ruling applies for the following period:
1 April 201x to 31 March 201x
The scheme commences on:
1 July 201x
Relevant facts and circumstances
A state government would like to enter into an agreement with the Commissioner under section 135X of the FBTAA1 to:
● Ensure the calculation of the taxable value of certain fringe benefits previously provided by the bodies listed below is not affected as a result of a break in the continuity of certain record keeping requirements solely because of a transitional event
● Preserve the character of certain benefits where the character would otherwise be lost solely because of a transitional event.
The following employers underwent a reorganisation due to a machinery of government change and their employees were transferred to other nominated bodies:
*A list of government entities was provided that listed the original employer, the new employer, and the date of the change.*
The state government subsequently submitted a nomination in the approved form, in accordance with section 135S.
As the change in employer will affect the calculation of the taxable value of certain fringe benefits, the state government is seeking to enter into a written agreement under section 135X to enable these new employers to:
● Treat a year which would have been a log book year of tax for the previous employer as a log book year for the purpose of using section 10 to calculate the taxable value of a car fringe benefit.
● 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.
● 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 to calculate the taxable value of car parking fringe benefits.
● 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 as an exempt benefit.
● 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 as an exempt benefit.
● 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.
● Use a recurring fringe benefit declaration which would have applied if the employer had not changed.
Relevant legislative provisions
Part XIC of the Fringe Benefits Tax Assessment Act 1986
Section 135S of the Fringe Benefits Tax Assessment Act 1986
Section 135X of the Fringe Benefits Tax Assessment Act 1986
Section 135U of the Fringe Benefits Tax Assessment Act 1986
Reasons for decision
Part XIC 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 department 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, 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 purposes of the FBTAA
● an associate of each other nominated state or territory body of the relevant state or territory, the state 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) 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) 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 government is seeking to enter into a written agreement under section 135X 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
● preserve the character of certain benefits where that character would otherwise be lost solely because of a transitional event.
Subsection 135X(2) states that a transitional event occurs if a state or territory government makes, varies or revokes a nomination made under section 135S, or a nominated state or territory government body ceases to exist.
The state government 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 section 135X, in relation to the records kept by the bodies listed above that were previously taken to be the employers for the purposes of the FBTAA.
It is agreed that the listed bodies may:
● Treat a year which would have been a log book year of tax for the previous employer as a log book year for the purpose of using section 10 to calculate the taxable value of a car fringe benefit.
● 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.
● 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 to calculate the taxable value of car parking fringe benefits.
● 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 as an exempt benefit.
● 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 as an exempt benefit.
● 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.
● Use a recurring fringe benefit declaration which would have applied if the employer had not changed.