We are a not-for-profit income tax exempt organisation that pays payroll tax (PRT) – we also pay FBT as a section 65J rebateable employer.
Are we required to include fringe benefits as wages in our PRT return?
Many income tax exempt not-for-profit organisations pay pay-roll tax (‘PRT’) under the relevant State or Territory PRT legislation.
Where PRT is payable, it is the specifics of the relevant State or Territory legislation which determine what amounts are required to be included as ‘wages’ and subject to PRT.
With relation to ‘fringe benefits’, an employer is generally required to include the taxable value of fringe benefits grossed up at the lower gross up rate (the Type 2 rate which is 1.8868).
Where a fringe benefit does not give rise to a taxable value (for example the benefit is exempt or an employee contribution has reduced the taxable value to nil) there is no taxable value and therefore no amount to be included as wages.
Any eligibility to a section 65J rebate does not impact the taxable value and as such is not relevant to the amount to be declared as wages.
However ‘tax-exempt body entertainment’ fringe benefits’ (as defined for the purposes of section 38 of the Fringe Benefits Tax Assessment Act 1986) are generally not required to be included in the PRT wages base as they are excluded from the definition of ‘fringe benefit’ in the PRT legislation of all States and Territories (except Western Australia).
The exclusion applies equally where the nature of the entertainment is ‘meal entertainment’ and the concessional meal entertainment valuation rules (the 50/50 or 12 week register method) in section 37BA and section 37C of the Fringe Benefits Tax Assessment Act 1986 have been applied when preparing the FBT return.
Where an organisation reviews the basis on which fringe benefits have been included in PRT returns and identifies that tax-exempt body entertainment fringe benefits have been included incorrectly, a PRT refund should be available subject to any amendment time limits in the PRT rules of the relevant State or Territory.
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