Payroll – Why do we need to disclose exemption from FBT under s. 57A on an employee’s payment summary form?

Payment summaries now require an employer to indicate whether they are exempt from FBT under s. 57A of the FBTAA. This is due to changes to eligibility measures for various Federal Government benefits, payments and income tests. Specifically, The Department of Human Services (DHS) has changed how reportable fringe benefits amounts (RFBAs) are used to determine family assistance and youth income support payments.

Why does it matter?

From January 2017, the DHS is using the full RFBA reported on an individual’s income tax return to determine their family assistance and youth income support payments. The exception to this is where an employer is exempt from FBT under s. 57A. In this case, the DHS will only use 51% of the RFBA reported. Therefore, it is important that employers understand and correctly disclose whether they are eligible for FBT exemption under s. 57A. Correct disclosure will ensure that employees receive correct entitlement to any Federal Government benefits and payments they receive.

Which employers are exempt under s. 57A?

Payment summaries include the following question:

The ATO’s payment summary instructions (QC 21978) state that you should respond ‘yes’ for benefits that you provide as one of the following entities:

  • ‘registered public benevolent institution that is endorsed by the Commissioner of Taxation as eligible for exemption from FBT
  • government body and the employee’s duties are exclusively performed in or in connection with
  • a public hospital
  • a hospital carried on by a society or association that is a rebatable employer
  • registered health promotion charity that is endorsed by the Commissioner of Taxation as eligible for exemption from FBT
  • public ambulance service and the employee is predominantly involved in providing that service.’

Employers that are eligible for an exemption under s. 57A should respond ‘yes’, even where the employee has exceeded the $30,000 cap and FBT is payable on the part of the total value of benefits received by the employee that exceeds the capping threshold.

All employers that are not eligible for an exemption under s. 57A should respond ‘no’.

Employees with both exempt and non-exempt duties

You may have an employee that has performed both exempt and non-exempt duties during the income tax year. For example, a government department may have an employee that performs duties in a public hospital for part of the year. The question about exemption under s. 57A now becomes a little more confusing—should you respond ‘yes’ or ‘no’?

In this situation, the ATO’s state that an employer should complete a payment summary for each period. In other words, an employer would complete two payment summaries: one marked ‘yes’ for the period 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.