A fringe benefit is a form of employee remuneration other than salary and wages, contributions to complying superannuation funds, exempt fringe benefits and eligible termination payments.
Under the Fringe Benefits Tax Assessment Act 1986, an employer must pay fringe benefits tax if all these conditions are met.
A benefit is provided to an employee or an associate of the employee (eg to a family member).
The benefit is provided in respect of the employment of the employee including a past or prospective employee.
The benefit is provided by any of these parties.
The employer (Defence).
An associate of the employer.
Example: Defence Housing Australia.
A third party under an arrangement.
Example: Discounted car hire under an arrangement between the car hire company and Defence.
Defence as the employer is liable for fringe benefits tax (FBT). A member does not pay FBT but the reportable fringe benefits a member receives may appear on their annual Payment Summary.
The value of many fringe benefits is grossed-up by a factor of 1.8692 before being reported on the member's annual Payment Summary. The amount reported on the member's Annual Payment Summary, known as the Reportable Fringe Benefits Amount (RFBA) may have financial consequences for the member.
See: How fringe benefits tax reporting works and The tax effect of receiving a benefit that is a fringe benefit.
Example: Reunion travel is subject to fringe benefits tax but is not included in the RFBA reported on a member's Payment Summary. Reverse reunion travel is generally subject to FBT and the grossed-up amount must be in the RFBA reported on the member's Payment Summary. Information about how fringe benefits tax reporting (the RFBA) works can be found in the following section.
The grossed-up amount is reported, provided the total taxable value of all reportable benefits (before gross-up) is more than $2,000.
The FBT year is 1 April to 31 March each year.
If a member receives reportable fringe benefits and the total taxable value of those benefits is more than $2,000 in an FBT year, the grossed-up amount of the taxable value of those benefits must be reported on the member's Payment Summary for the income tax year that ends three months later. This amount is called the reportable fringe benefits amount (RFBA).
The RFBA is the value of the benefit multiplied by a gross-up rate of 1.8692. This is the rate all employers must use when determining a member's RFBA, irrespective of whether GST was included in the benefits. If GST is included in benefits provided to a member, a higher gross-up rate (2.0647) is used to determine an employer's FBT liability (but not a member's RFBA).
Example: A member receives reportable fringe benefits to the value of $10,000 between 1 April 2015 and 31 March 2016. Defence reports an RFBA of $18,692 (the grossed-up amount) on the member's Payment Summary for the income tax year ending 30 June 2016.
The reportable fringe benefits amount (RFBA) is included in determining a person's eligibility to certain income-tested tax concessions and a person's liability to income-tested surcharges for a tax year. Accordingly, the RFBA may result in a member receiving less tax concessions or becoming liable for additional government surcharges.
The RFBA is included in determining a person's eligibility or liability for the following.
Medicare levy surcharge (but not the Medicare levy).
Superannuation contributions surcharge.
Terminations payment surcharge.
Tax rebate (maximum rebate $540) for superannuation contributions paid to a complying superannuation fund on a spouse's behalf.
Government co-contribution for personal superannuation contributions.
Higher Education Contribution Scheme (HECS) repayments. (An accumulated HECS debt amount may include a Postgraduate Education Loans Scheme (PELS) amount and an Open Learning Deferred Payment Scheme amount.
Child support obligations.
The RFBA shown on a member's Payment Summary does not change the amount of income tax or the standard Medicare levy the member may be liable to pay.
Some non-reportable fringe benefits may be taken into account in assessing child support obligations. Non-reportable fringe benefits are benefits received but not reported on a payment summary.
See: www.humanservices.gov.au, or call 13 12 72, for further information on child support.
The taxable value of fringe benefits before being grossed-up may decrease the member's entitlement to some government benefits.
Examples: Family Tax Benefit, Child Care Supplement.
Example: A member receives gross salary and allowances of $40,000. The member also receives reportable fringe benefits with a taxable value of $10,000 (RFBA of $18,692). The member's Family Tax Benefit is assessed on an income of $50,000 ($40,000 + $10,000).
After the death of a member, the member will not receive fringe benefits from Defence. However, the deceased member's spouse or dependants may continue to receive fringe benefits such as Defence housing.
When a member dies, they are no longer an 'employee' or a 'former employee' for the purposes of the Fringe Benefits Tax Assessment Act 1986.
Accordingly, benefits received after death are not subject to either fringe benefits tax or the Payment Summary reporting requirements.
Any entitlements of the deceased member to payments for unused leave or eligible termination payments are not subject to fringe benefits tax. Such payments may have income tax consequences.
Remote area travel is a fringe benefit for occasional travel to a major population centre in Australia. It is provided to members and dependants not resident in or adjacent to an eligible urban area. A member who is not resident in an eligible urban area is regarded as living in a remote area. Remote area travel is not included in a member's RFBA reported on the member's Annual Payment Summary.
Occasional travel is travel that is irregular and infrequent. A member is resident in a remote area if any of these conditions is met.
The home is in an urban centre with a 1981 census population of less than 14,000 (or less than 28,000 if the urban centre is in Zone A or B).
The home is more than 40 kilometres by the shortest practical surface route from the centre of an urban centre with a 1981 census population of between 14,000 (or 28,000 if the urban centre is in Zone A or B) and 130,000.
The home is more than 100 kilometres by the shortest practical surface route from the centre of an urban centre with a 1981 census population of at least 130,000.
Remote area travel is different from remote area holiday travel.
See: Practice Statement Law Administration (PS LA) 2000/6 on the Australian Taxation Office website (www.ato.gov.au) for a list of urban areas that are remote and non-remote.
The definition of 'remote' in the tax laws is different from the Defence definition, because Defence has included additional areas. This is why some ADF entitlements for remote locations are included in a member's RFBA.
Examples: Darwin, Cairns and Townsville are listed as remote locations (see Annex 4.4.A), whereas those locations are not remote for tax purposes.