FBT Q&A ‘ Contribution towards employer FBT liability

FBT, Public
Author: Steve Griffiths
7 Sep 2017

Question

We have an employee provided with a car fringe benefit by way of a novated lease who chose not to contribute post tax employee contributions during the FBT period. This has resulted in a large FBT liability and associated reportable fringe benefits amount.  The employee in question repaid us the FBT liability in May prior to lodgement of our FBT return.  Can we use the repayment of this money as the contribution to remove the FBT liability and subsequent reportable fringe benefit amount?

Answer

The term ‘recipient’s payment’ as is applies to determining the taxable value of a car fringe benefit reads as follows:

‘in a case where expenses were incurred to the provider or employer during the holding period by recipients of the car fringe benefits by way of consideration for the provision of the car fringe benefits — the amount of those expenses paid by the recipients less any amount paid or payable to the recipients by way of reimbursement of those expenses’

Our concern is that the contribution made by the employer towards the employers FBT liability cannot be regarded as a recipient’s payment with the effect of reducing the taxable value of the car benefit provided.

The effect of section 136A of the FBT Act is that any amount paid in respect of FBT cannot also constitute consideration for the provision of a fringe benefit or any other matter. This means that an employee who bears the whole or part of an employer’s FBT liability has not made a recipient’s contribution which would have the effect of reducing the taxable value of a fringe benefit.

This article provides a general summary of the subject covered as at the date it is published. It cannot be relied upon in relation to any specific instance. TaxEd Pty Ltd and any person connected with its production disclaim any liability in connection with any use. It is not intended to be, nor should it be relied upon as, a substitute for professional advice.

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