Changes to rules regarding eligibility measures for various Federal Government benefits/payments and income tests (effective 1 January and 1 July 2017) impact Reportable Fringe Benefit disclosure for all employers on 2017/18 Payment Summaries.
2017/18 Payment Summaries require an employer to respond to the following question:
Is the employer exempt from FBT under section 57A of the FBTAA 1986?
It is critical that employers understand and correctly answer the question. Selection of ‘yes’ will impact (reduce) how Reportable Fringe Benefits are treated in calculating an individual’s Adjusted Taxable Income. Adjusted Taxable Income determines entitlement to various Government benefits/payments and income tests. For more information regarding the Adjusted Taxable Income click here.
Section 57A type FBT employers should respond ‘yes’ even where the employee has exceeded the $30,000 cap and FBT is payable in relation to that part of the total value of benefits received by the employee that exceeds the capping threshold.
All non-section 57A type employers should respond ‘no’.
Issues arise, however, where an employer can access the s. 57A exemption for certain work performed by an employee but not all work (for example an employee of a Government department that may perform duties in a public hospital).
In this situation the ATO instructions for Payment Summary completion suggest the employer should complete a Payment Summary for each period, for example a Payment Summary for the period marked ‘yes’ when the employee was in receipt of benefits that attract s. 57A exemption and another marked ‘no’ for the period when no exemption was available.
The ATO instructions can be found at the ‘Reportable Fringe Benefits Amount’ area of the ATO Payment Summary instructions – click here to view the ATO instructions.
Reportable Payment Fringe Benefit rules that continue to apply include:
- only where an employee has Reportable Fringe Benefits with a taxable value in excess of $2000 (prior to gross up) should an amount be reported and the gross up rate is the Type 2 rate of 1.8868;
- salary sacrificed meal entertainment and entertainment facility leasing type fringe benefits are now included in determining whether the $2,000 threshold is exceeded;
- certain benefits are excluded for Reportable Fringe Benefits purposes (but otherwise subject to FBT); and
- section 57A type employers must include benefits as Reportable Fringe Benefits (‘quasi benefits’) notwithstanding the benefits may not be subject to FBT due to the capping exemption.