DISCLAIMER

• These notes contain a collection of slides for use by lecturers in

Fringe Benefits Tax (FBT) Taxation Law.
• It is not meant to be a complete nor comprehensive coverage of the
topics involved. Rather it is an aid to assist students in note taking.
It should be understood that these slides may be modified,
discarded or supplemented by lecturers at their absolute
discretion.
• Students should not rely on the information contained in the slides,
Lecture Slides but should use them as a preliminary basis for research only. This
area of the law is changing on a daily basis and these slides are not
meant to cover more than some broad themes referred to in
lectures and to trigger discussion. At all times, students should
refer to primary sources such as the actual legislation, court
reports & current ATO rulings.
• Do not rely on the summaries contained in these slides.
© The Australian College for Microcomputers Pty Ltd Sydney 2020
(Provided under License to Taxation Law Students for study purposes only. Selling, copying or any commercial dealings of any kind is strictly prohibited)
• For individual and /or personal advice, students should consult
qualified advisors in finance, tax, accounting and law.

1 2

General Comments
Why a Fringe Benefits Tax? • The tax is imposed on the Employer NOT the Employee.
• It generally applies when an Employer provides a Fringe Benefit to an
• Due to widespread rorts, white paper Employee.
recommended introduction of FBT. • It is usually [but not always] a non-cash benefit.
• Thirteen specific categories of fringe benefits, including a “residual
• Fringe Benefits Tax Assessment benefit” category which is a “catch-all” category.
Act 1986 (FBTAA 1986) • The year of tax is 1 April - 31 March (different from Income Tax Year
which is 1 July to 30 June).
• Commenced on 1 July 1986 • The aim is to tax Private Benefits only
• The cost of providing the Fringe Benefit and the Fringe Benefits Tax is
• Separate regime from Income Tax an allowable deduction for income tax purposes to the EMPLOYER
• Fringe Benefits are not subject to income tax in the hands of the
• Has been impacted by GST – refer to EMPLOYEE , with one exception: reimbursement of car expenses on a
gross up taxable value cents/km basis.

3 4

1
 Calculating Fringe Benefits Tax Know the correct terms in FBT
1. Determine if there is a Fringe Benefit. Taxable Value (TV)
The value determined for each fringe benefit according to the rules
2. Determine the Taxable Value, if any for each type of benefit.
a. Identify the type of benefit
b. Identify any Exemptions.
c. Determine the Taxable Value of the benefit. Grossed-up Taxable Value (GUTV)
d. Determine any Reductions in the Taxable Value. Taxable Value (TV) x Gross-up Rate (GUR) (either Type 1 or 2).
3. Gross-up the Taxable Value (if any)
Either Type 1 Gross-up or Type 2 Gross-up.
4. Calculate Fringe Benefits Tax Payable (if any). Fringe Benefits Tax (FBT)
Grossed-up Taxable Value (GUTV) x FBT Rate (FBTR).

5 6

Example 1. Is There a Fringe Benefit?

2018 FBT Employer can claim Employer cannot claim Subsection 136(1) FBTAA 1986 defines a fringe benefit
Tax Year GST Input Tax Credits GST Input Tax Credits as:
Type 1 Gross up Rate - 2018 Type 2 Gross up Rate - 2018 • a benefit provided during the year of tax.
2.0802 1.8868
• by an employer or associate or arranger
Taxable Value (TV) $100 $100
• to an employee or associate of the employee
Grossed-up Taxable Value $100 x 2.0802 = $208.02 $100 x 1.8868 = $188.68
• in respect of the employment of the employee
FBT Rate is 47% in 2018 $208.02 x 47% = $97.77 $188.68 x 47% = $88.68

• Note Exclusions - refer next slide

7 8

2
 Exclusions Key Words
• Salary or wages; Benefit (section 136(1))
• A benefit that is an exempt benefit; “includes any right (including a right in relation to, and an interest in, real
or personal property), privilege, service or facility …” including where
• Superannuation contributions; these are provided under an arrangements.
• Payments from superannuation funds; Associate of the employer (or employee) (section 136(1))
• Benefits under an employee share scheme; Broadly speaking, it is any relative of the employer (or employee, as the
• Payments on termination of employment; case may be) or any entity (such as a company, trust or partnership)
connected with the employer (or employee).
• Consideration of a capital nature in respect of:
Arranger (section 136(1) definition of fringe benefit)
(i) a legally enforceable contract in restraint of trade by Broadly speaking, someone who, by arrangement with the employer,
a person; provides the benefit to the employee.
(ii) personal injury to a person; Provided in respect of the employment of the employee
The benefit must be provided because of the employment relationship,
not because of a family relationship or because of a shareholding in a
Refer to the definition for a complete list of exclusions company.

9 10

2. Calculate Taxable Value - Part III FBTAA 1986 FBT Exemptions

Thirteen different categories of fringe benefits: Division 2 Division 3 Division 4 Division 5 Division 11 Division 12

• Division 2 Car Fringe Benefit Car Debt waiver Loan Expense payment Property fringe Residual
fringe benefit fringe benefit fringe benefit fringe benefit benefit fringe benefit
• Division 3 Debt Waiver Fringe Benefit
• Division 4 Loan Fringe Benefit
Section 8 N/A Section 17 Section 20A Section 41 Section 47
• Division 5 Expense Payment Fringe Benefit
Section 22 Section 47A
• Division 11 Property Fringe Benefit
• Division 12 Residual Fringe Benefit
• Division 6 Housing Fringe Benefit
Division 13 Division 13 Division 13
• Division 7 Living Away from Home Fringe Benefit
Section 58H Section 58H Section 58H
• Division 8 Airline Transport Fringe Benefit Section 58M Section 58M Section 58M
• Division 9 Board Fringe Benefit Section 58P Section 58P Section 58P

• Division 9A Meal Entertainment Fringe Benefit Section 58X Section 58X Section 58X
Section 58Y Section 58Y
• Division 10 Tax Exempt Bodies/Entities Fringe Benefit Section 58Z Section 58Z Section 58Z
• Division 10A Car Parking Fringe Benefit All section refer to the FBTAA 1986

Focus on Divisions 2, 3, 4, 5, 11 & 12 only

11 12

3
 Step 2:
Structure of Part III
Determine the Taxable Value, if any
Each of the Divisions in Part III is divided into:
a. Identify the type of benefit
b. Identify any Exemptions. • Subdivision A - Identifies the Benefit
- Identifies any exemptions
c. Determine the Taxable Value of the
benefit.
• Subdivision B - Identifies Taxable Value
d. Determine any Reductions in the - Identifies any Reductions to
Taxable Value
Taxable Value.

13 14

Division 3 - Debt waiver fringe benefits Division 2 - Car fringe benefits

Subdivision A - Debt waiver benefits Subdivision A - Car benefits
Section 7 Car benefits
Section 14 Debt waiver benefits
Section 8 Exempt car benefits
A person (referred to as the “provider”) waives the obligation of exempt vehicles (taxi, panel van, utility only work related travel, unregistered
another person (referred to as the “recipient”) to pay or repay to car)
the provider an amount, the waiver shall be taken to constitute a Subdivision B - Taxable value of car fringe benefits
benefit. Section 9 Taxable value of car fringe benefits - statutory formula
Section 10 Taxable value of car fringe benefits - cost basis
There Are No Exemptions
Section 10A No reduction of operating cost in a log book year of
tax unless log book records and odometer records are maintained
Subdivision B - Taxable value of debt waiver fringe benefits Section 10B No reduction of operating cost in a non-log book
year of tax unless log book records and odometer records are maintained in
Section 15 Taxable value of debt waiver fringe benefits
log book year of tax
The taxable value of a Debt Waiver Fringe Benefit is the amount Section 11 Calculation of depreciation and interest
of the payment or repayment of which is waived.
Section 12 Depreciated value
Section 13 Expenditure to be increased in certain circumstances
There are No Reductions in Taxable Value

15 16

4
 Division 2 - Car Fringe Benefit Division 2 - Car Fringe Benefit
Determine the Taxable Value
• Identify the Car Fringe Benefit - Section 7(1)
Two methods of determining the taxable value of a car
Car applied to or available for private use fringe benefit
1. What is a car? See s.136 (FBTAA)/s.995-1 (ITAA 1997)
1. Section 9 (Statutory Formula Method) based on
Motor vehicle designed to carry < 1 tonne & < 9 passengers
e.g. a 5 tonne truck is not a car - motor cycles not included total kilometres. This method applies if no election is
made by the employer - Ignores Private Use
What is private use Taxable Value = { [A*B*C] / D } – E
2. Deemed private use 2. Section 10 (Cost Basis method) based on private
Subsections 7(2) and 2(A) - Cars garaged at home, except kilometres. Employer must make an election under
emergency vehicles section 10 and based on Business Kilometres / log book
Subsections (3) read legislation
Taxable Value = {C * (100%-BP)} - R

17 18

Method 1 - Taxable Value of Car Fringe Benefit Car Fringe Benefit – s9 example - 2018 FBT Year
• Section 9 - Statutory Formula Method Ben’s employer provides him with a new car as part of his salary
package on 1 April 2017. Each night the car is garaged at Ben’s house.
Taxable Value = { [A*B*C] / D } - E The cost of the car was $22,000. The other running costs including
A = Base value (including non-business accessories) registration, insurance etc. are $300 per month. The employer can
(depends on whether car is owned or leased and date first provided) claim Input Tax Credits. The car travelled 20,000 km during the year,
25% of which was on business.
B = Statutory fraction (20%)
Section 9 - Statutory formula method ((AxBxC)/D) - E
C = Number of days car is provided during the year
A is the base value = $22,000
D = Number of days in the tax year (365 or 366) B is the statutory fraction = 0.2
E = Recipient’s Payment C is the number of private days = 365
▪ Any car expenses paid by the employee. D is the number of days in the year = 365
▪ Any amount the employee pays for the car benefit.
E is the recipient’s contribution = $0
Taxable Value = $4,400 (22,000 x 0.2 x 365)/365 – $0
Calculate the Grossed-up Taxable Value and FBT

19 20

5
 Method 2 - Taxable Value of Car Fringe Benefit Car Fringe Benefit – s10 Example - 2018 FBT Year
Ben’s employer provides him with a new car as part of his salary
Section 10 - Cost method - {C * (100%-BP)} - R package on 1 April 2017. Each night the car is garaged at Ben’s house.
C = Operating cost: The cost of the car was $22,000. The other running costs including
In general terms, the operating cost consists of: registration, insurance etc. are $300 per month. The employer can
• Repairs, Maintenance, Fuel, Registration and Insurance costs for the claim Input Tax Credits. The car travelled 20,000 km during the year,
car, no matter who pays them. 25% of which was on business.
• Depreciation (25% Diminishing value method) on the value of the
car and of any non-business accessories fitted to the car if the car is C = Operating Costs
owned by the employer.
• Running Costs ($300 per month) $3,600
• Imputed interest (at the same rates for loan fringe benefits) on the
value of the car and of any non-business accessories fitted to the car • Deemed Depreciation ($22,000 * 25%) $5,500
if the car is owned by the employer. • Deemed Interest ($22,000 * 5.25%) $1,155
• Leasing costs if the car is leased by the employer.
BP = Business % 25%
BP = Business Percentage
R = Recipient’s Payment (same as under s9) R = Recipient’s Contribution $0

21 22

Section 10 - Operating Costs Method - [C x (100%-BP)] – R

Division 4 - Loan fringe benefits
C = Operating costs Subdivision A - Loan benefits
Section 16 Loan benefits
Running Costs $300 *12 = $3,600
Where a person (employer) makes a loan to another person (employee)
Deemed Depreciation $22,000 * 25% = $5,500
Deemed Interest $22,000 * 5.25% = $1,155 Section 17 Exempt loan benefits
Total Operating costs = $10,255
Subdivision B - Taxable value of loan fringe benefits
Section 18 Taxable value of loan fringe benefits
Taxable Value = [C x (100%-BP)] – R
Taxable Value = ($10,255 x {100% - 25%}) - $0 = $7,691 The taxable value of a loan fringe benefit is the difference between
the FBT statutory interest rate and the actual interest rate (if any)
Calculate the Grossed-up Taxable Value and Fringe Benefits Tax payable by the employee
Section 19 Reduction of taxable value - otherwise deductible rule
Hint: Interest paid by the employee reduces the taxable value

23 24

6
 Reductions in Taxable Value?
FBT Loan Interest Rates • Recipient’s Contribution
Payments (interest on loan) by the employee to the
FBT Year ended Interest Rate employer in relation to the benefit provided
31 March 2016 5.65% • Otherwise Deductible Rule - Section 19
31 March 2017 5.65% The otherwise deductible rule permits the gross taxable
31 March 2018 5.25% value of certain fringe benefits to be reduced by the
amount of the notional once-only income tax deduction
31 March 2019 5.20% that the employee would "otherwise" have been entitled
31 March 2020 5.37% to claim.
31 March 2021 4.80% Where the employee uses the loan for an income producing
purpose, such as:
▪ To acquire shares from which the employee receives
dividends or
▪ To acquire an investment property from which the
employee receives rent.

25 26

Example Example - Part Year Loan

On 1 April 2018 ABC Limited lent one of its employees On 1 January 2019 ABC Limited lent one of its employees $10,000
$10,000 at 5% per annum. Loan existed the whole year at 5% per annum. Loan existed for the rest of the FBT year (1/1/19 -
(1/4/18 – 31/3/19) and was used for private purposes. 31/3/19) and was used for private purposes.
Taxable value equals Taxable value equals
(Loan Amount * Statutory rate) – (Loan Amount * interest charged) [(Loan Amount*Statutory rate) - (Loan Amount*interest charged)]*part of year
($10,000 * 5.50%) – ($10,000 * 5%) [($10,000*5.50%) minus ($10,000*5%)] * (90/365)
$550 minus $500 = $50 [$550 minus $500] x (90/365) = $12

Alternate calculation
$10,000 * .50% = $50 Alternate calculation
($10,000 * .50%) * 90/365 = $12
Calculate the Grossed-up Taxable Value and FBT
Calculate the Grossed-up Taxable Value and FBT

27 28

7
 Example – 100% Income Producing Loan Example - Partial Income Producing Loan
On 30 April 2018 ABC Limited lent one of its employees
On 1 January 2019 ABC Limited lent one of it’s $100,000 at 5% per annum. Loan existed for the rest of the
employees $10,000 at 5% per annum. FBT year (30/4/18 - 31/3/19) and was used for both private
purposes and Income Producing purposes (50/50).
Taxable value equals
Loan existed for the rest of the FBT year (1/1/19 [{($100,000*5.5%) minus ($100,000*5%)} * 336/365]
- 31/3/19) and was used for Income Producing minus
purposes. [{($50,000*5.5%) minus ($50,000*5%)} *336/365]
($10,000 * .50%) * 90/365 = $12 minus ($10,000 * .50%) * 90/365 = $12 (ODR)
= $230
Taxable value equals NIL Alternate calculation
[($50,000*0.5%) * 336/365] = $230
Calculate the Grossed-up Taxable Value and FBT

29 30

Loan Fringe Benefit - Taxable Value Division 5 - Expense payment fringe benefits

Loan Fringe Benefit can be affected by the Subdivision A - Expense payment benefits
following: Section 20 Expense payment benefits
Employee pays an expense and the employee obtains a
• Interest charged reimbursement from the employer - paragraph 20(a)
• Term of the loan Expense paid directly to supplier by the employer on behalf of
employee - paragraph 20(b)
• Income producing use
• Statutory Interest Rate Section 20A Exemption - no-private-use declaration
• Amount of Loan
Section 22 Exempt car expense payment benefits

Division 13 exemptions - Sections 58H, 58M, 58P, 58X, 58Y and 58Z

31 32

8
 Division 5 - Expense payment fringe benefits Example - Expense Payment Fringe Benefit
Subdivision B - Taxable value of expense payment fringe benefits Ben accepts an offer of employment made by ABC Pty Limited. His salary package
Section 22A includes:
Reimbursement of his mobile telephone expenses. The cost is $200 per annum. As
Taxable value of in-house expense payment fringe benefits (not
the phone was not used for work Ben would not be entitled to claim a deduction
examinable) under the Income Tax Assessment Act 1997 or 1936 had he paid the amount. ABC
Pty Limited is entitled to claim the input tax credit for GST purposes.
Section 23 Required:
Taxable value of external expense payment fringe benefits Advise ABC Pty Limited of the taxable value payable (rounded to the nearest dollar)
on the fringe benefit for the FBT year ended 31 March 2019.
The taxable value is the amount of the payment or the reimbursement Answer
reduced by the Recipients Contribution. Identify the type of benefit Expense payment fringe benefit
Identify any Exemptions No exemptions
Section 24 Determine the Taxable Value of the benefit $200
Reduction of taxable value - otherwise deductible rule (ODR) Note: The otherwise deductible rule does not apply here as the phone was not used
for work.
Note: ODR does not apply to all types of fringe benefits Calculate the Grossed-up Taxable Value and FBT

33 34

Expense Payment Fringe Benefit

Example - Expense Payment Fringe Benefit - s20A Exemption Reduction in Taxable Value - Otherwise Deductible Rule (Section 24)
Ben accepts an offer of employment made by ABC Pty Limited. His salary package ▪ The question is:
includes:
▪ If the employee had acquired the benefit directly, would they
Reimbursement of his mobile telephone expenses. The cost is $200 per annum. As have been entitled to a deduction for the expenditure?
the phone was used 100% for work Ben would have been entitled to claim a
▪ If a deduction would have been allowed to the employee, the
deduction for the $200 under the Income Tax Assessment Act 1997 or 1936 had he
paid the amount. ABC Pty Limited is entitled to claim the input tax credit for GST employer’s fringe benefit taxable value is reduced by that notional
purposes. deduction.
Required: ▪ This applies where the employee uses the benefit for an income
Advise ABC Pty Limited of the taxable value payable (rounded to the nearest dollar) producing purpose - for example:
on the fringe benefit for the FBT year ended 31 March 2019. ▪ Work related tax deductions e.g. travel / car expenses; clothing
or uniform expenses; self education; subscription to
Answer association; work books and journals; work related
Identify the type of benefit Expense payment fringe benefit newspapers; home office expenses; telephone; small items of
Identify any Exemptions Yes - Section 20A FBTAA 1986 tools and other non capital items that relate directly to
Determine the Taxable Value of the benefit $0 employment.
▪ Other income producing activity e.g. rental property or shares.

35 36

9
 Division 11 - Property fringe benefits - FOCUS on Subdivision A
Example - Expense Payment Fringe Benefit - ODR
Ben accepts an offer of employment made by ABC Pty Limited. His salary package Subdivision A - Property benefits
includes: Section 40 Property benefits
Reimbursement of his mobile telephone expenses. The cost is $200 per annum. As
the phone was used for work Ben would have been entitled to claim a deduction of
Provision of any type of property
10% of the total expense under the Income Tax Assessment Act 1997 or 1936 had Section 41 Exempt property benefits
he paid the amount. ABC Pty Limited is entitled to claim the input tax credit
Consumption on the business premises of food or drink
for GST purposes.
Required:
Advise ABC Pty Limited of the taxable value payable (rounded to the nearest dollar) Subdivision B - Taxable value of property fringe benefits
on the fringe benefit for the FBT year ended 31 March 2019. Section 42 Taxable value of in-house property fringe benefits
Answer
(not examinable)
Identify the type of benefit Expense payment fringe benefit
Identify any Exemptions No exemptions Section 43 Taxable value of external property fringe benefits
Determine the Taxable Value of the benefit $200 - $20 (ODR) = $180 Section 44 Reduction of taxable value - otherwise deductible rule
Note: The otherwise deductible rule applies here as the phone was used partly for
work. Division 13 exemptions - Sections 58H, 58M, 58P, 58X, 58Y and 58Z
Calculate the Grossed-up Taxable Value and FBT

37 38

Division 12 - Residual fringe benefits - FOCUS on Subdivision A

Step 3 - Gross Up Taxable Value
Subdivision A - Residual benefits
Section 45 Residual benefits • The FBTAA 1986 requires the taxable value of a fringe benefit
Anything not mentioned in the other divisions! Usually the provision of services to be “Grossed up” so that FBT is levied on a “before tax” value
or the use of property
Section 47 Exempt residual benefits e.g. child care etc on the premises
in the same way income tax is.
Section 47A Exemption - no-private-use declaration • Grossing up rules have been amended as a result of the GST
Subdivision B - Taxable value of residual fringe benefits and changes to the FBT rate.
Section 48 Taxable value of in-house non-period residual fringe benefits - (not examinable) • Type 1 Gross up (Subsection 5B(1B) of the FBTAA)
Section 49 Taxable value of in-house period residual fringe benefits - (not examinable)
FBT rate + GST rate
Section 50 Taxable value of external non-period residual fringe benefits
Section 51 Taxable value of external period residual fringe benefits (1 – FBT rate) x (1 + GST rate) x FBT rate

Section 52 Reduction of taxable value - otherwise deductible rule • Type 2 Gross up (Subsection 5B(1C) of the FBTAA)
Division 13 exemptions - Sections 58H, 58M, 58P, 58X and 58Z 1
1 – FBT rate

39 40

10
 Type 1: higher gross-up rate Type 2: lower gross-up rate
This rate is used if the benefit provider is This rate is used if the benefit provider is
entitled to claim GST input tax credits (or simply GST credits) not entitled to claim GST input tax credits (or simply GST credits)

FBT year Type 1 gross-up rate FBT year Type 2 gross-up rate

Ending 31 March 2016 and 31 March 2017 2.1463 Ending 31 March 2016 and 31 March 2017 1.9608

Ending 31 March 2018 and 2019 and 2020 2.0802 Ending 31 March 2018 and 2019 and 2020 1.8868

41 42

Step 4 - Fringe Benefits Tax Rate

Type 1: Gross-up Type 2: Gross-up
FBT year FBT Tax Rate
Entitled to GST credits Not entitled to GST credits

FBT year FBT rate Years Ended

31 March 2016
2.1463
and 1.9608 49%
31 March 2017
Ending 31 March 2016 and 31 March 2017 49.00% Years Ended
31 March 2018
31 March 2019 2.0802 1.8868 47%
and
Ending 31 March 2018 and 2019 and 2020 47.00% 31 March 2020

43 44

11
 Interaction Between FBTAA & ITAA
• Section 23L(1) & (1A) of the ITAA 1936
▪ Income derived by a taxpayer by way of the
provision of a fringe benefit is not assessable
income and is not exempt income.
▪ Income derived by a taxpayer by way of the
provision of an exempt fringe benefit is exempt
income - except where s.15-70 (reimbursed car expenses
cents/km) of the ITAA 1997 applies

45

12