Does endorsement of a PBI employer part-way through the year allow access to the full $30,000 grossed up FBT exemption cap?
Question
We are an employer that is a public benevolent institution (PBI). We only became ‘endorsed’ by the ATO as a PBI part way through the FBT year. Are we entitled to the full $30,000 grossed-up exemption cap for employees who have been provided with benefits throughout the FBT year?
Answer
As a PBI, benefits that are provided to employees are exempt from FBT provided 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 (including the exemption cap).
The calculation 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.
The employer’s fringe benefits taxable amount is adjusted by being 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.
As can be seen from the above steps, there is no provision for apportionment when calculating the aggregate non-exempt amount for the year of tax in the FBT legislation.
Accordingly, you will be entitled to the full $30,000 capped exemption for an employee who was employed both before and after the change in endorsement status and provided with benefits throughout the FBT year.