Members, Groups and the Defence Tax Management Office must comply with all taxation laws.
FBT declarations must be in a form approved by the Australian Taxation Office (ATO), and must be given to Defence before the date on which Defence must lodge its fringe benefits tax return for the year. Any employee declaration which is incomplete, erroneous or untruthful may result in Defence being liable for any deficiencies which may be discovered. In this case, Defence will seek reimbursement of all unpaid tax, interest and penalties from the member.
If, on audit, the ATO considers that a benefit is an allowance instead of a fringe benefit, the benefit may be included in the member's assessable income in the annual income tax return and upon which the member may be liable for income tax. Some allowances require declarations, documentary evidence or other criteria to be satisfied in order not to be included in a member's assessable income. Accordingly, members should complete all FBT declarations correctly.
Example: The ATO audits a member and does not agree that an individual was living away from their usual place of residence. In that case, the member's living away from home allowance is included in the member's assessable income and will be subject to income tax.
The value of certain fringe benefits must be reported on the annual Payment Summary which details a member's Defence income for the full income year. Such benefits are referred to as 'reportable benefits'.
This Part has been prepared for illustrative purposes only. The content is maintained by the Defence Tax Management Office and any enquires should be directed there. The listings are not conclusive and do not cover the full range and variations of ADF pay and conditions of service.
The purpose of this Part is to assist the reader in understanding the likely taxation treatment of the allowances or benefits they may receive.
This Part should not be used as a legal authority in the event of any dispute between a member and the Australian Taxation Office and does not replace specific rulings or determinations of the Australian Taxation Office.
The Income Tax Assessment Act 1997, the Income Tax Assessment Act 1936 and the Fringe Benefits Tax Assessment Act 1986 are complex legislation. This Part does not cover all possible taxation issues or circumstances of individual members. Members should obtain their own tax advice from a qualified tax adviser if income other than salary and allowances has been received. The tax self-assessment system requires taxpayers to lodge an accurate income tax return annually. Defence bears no responsibility for individual or joint acts or omissions of members that affect their personal tax liability.
If a benefit has a tax effect, the relevant item in this Manual corresponds with the relevant tax alert at Annex A and Annex B.
Example: Chapter 9 Part 3 Division 4 Reunion travel for service in Australia Tax Alerts 129, 130. Refer to items 129 and 130 at Annex A, Tax alerts for ADF pay and conditions within Australia.
FBT applies. Not FBT reportable. Note that reverse reunion travel attracts FBT and is FBT reportable.
The Defence Tax Management Office (DTMO) has the following roles.
It manages taxation compliance and advice in Defence.
It is responsible for Defence taxation policy and procedures.
It represents the paying employer for Pay As You Go (PAYG) Withholding tax, and the responsible Department for Fringe Benefits Tax (FBT).
It is the only area of Defence with the technical expertise to discuss taxation matters with the Treasury Department and the Australian Taxation Office.
It can give members general information on tax matters on behalf of Defence as the employer, but not advice on their individual tax affairs.
It provides an e-mail and telephone hotline service within Defence.
Telephone: 1800 806 053 during business hours in Australia (AEST).
Useful tax information is also available on the Finance in Defence DEFWEB page at http://intranet.defence.gov.au/find/index.html
If members have any queries about fringe benefits tax, they should contact the DTMO for clarification in the first instance.
The DTMO does not give personal taxation advice. Members should seek advice from their personal tax adviser. However the DTMO does provide the following assistance.
Advice on items included in the reportable fringe benefits amounts (RFBA) on payment summaries.
Advice on how taxation applies to various conditions of service.
If tax has been deducted from overpaid salary and the amount was overpaid in a previous financial year, then either of these two options is available.
Defence will amend the member's Payment Summary for the previous financial year and the member must submit an amended income tax return to the ATO for that year by excluding the overpaid amount. The member will receive a refund or a reduced tax bill from the ATO in respect of the tax overpaid. The member repays to Defence the overpaid amount, including any PAYG Withholding.
The member's gross salary is reduced by the gross amount overpaid in the current financial year. The member's Payment Summary for the current year will reflect the reduced salary and PAYG Withholding amounts.
Example: A member is advised that she was overpaid $2,000 in the previous financial year, including an amount of PAYG Withholding of $600. The member must forego gross salary of $2,000 in the current financial year.
If a member repays their overpaid salary amount by instalments, a loan fringe benefit may arise, depending on the circumstances.
Chapter 1 Part 5 section 1.5.4, Overpayment
Chapter 3 Part 4 section 3.4.2, Overpayment (more detailed)
If the amount is overpaid and discovered in the same financial year, arrangements are made with the member to reduce the member's gross salary so that the overpayment is rectified by the end of the financial year.
If the overpayment cannot be rectified by the end of the financial year, for example because of the size of the overpayment or because the overpayment was not discovered until some time in June, the member's Payment Summary will include the member's overpaid amount. In this case, refer to subsection 1 – overpayment in a previous financial year.
If tax has been deducted from an amount overpaid in a current financial year, the gross amount must be recovered. This is usually done by adjustments to future pays within the same income year.