I realise this is the 3rd week I have been writing about Fringe Benefits Tax, but as stated last week, it is really important that you understand the basics and there are a lot of basics to understand. This week we look at the types of Fringe Benefits in more detail. We have previously summarised them, but today we look a little bit deeper.
Fringe Benefits have been categorised into 13 different types so that specific valuation rules can be used.
Car Fringe Benefit
If you or your business owns a car and you make it available to an employee for them to use privately the a car fringe benefit arises. It is deemed that a car is being made available for private use by a employee on any day the car:
- Is actually used for private purposes by the employee or associate
- Is not at your premises, and the employee is allowed to use it for private purposes
- Is garaged at their place of residence, regardless of whether they have permission to use it privately.
It is also important to note that travel to and from work is private use of a vehicle and private use of a motor vehicle that is not a car may also attract a residual fringe benefit.
Debt Waiver Fringe Benefit
A Debt Waiver Fringe Benefit comes about when you waive or forgive an employee’s debt. So for example, if you sold something to an employee and then later told them not to worry about paying for the goods, you have provided a Debt Waiver Fringe Benefit.
If you happen to write the debt off as a genuine bad debt, this is not a Debt Waiver Fringe Benefit. If you are unsure about this, make sure you discuss it with your Accountant.
Loan Fringe Benefit
If you lend your staff money, either on a short term or long term basis and either don’t pay interest at all on that loan or pay a low rate of interest, then a Loan Fringe Benefit will have arisen. A low rate of interest is one that is less than the statutory rate of interest that is published by the ATO each year, usually in April.
In this instance the term ‘loan’ is quite a broad term. For example, if an employee owes you a debt but you don’t enforce payment after the debt becomes due, the unpaid amount is treated as a loan to the employee.
Expense Payment Fringe Benefit
An Expense Payment Fringe Benefits may occur where you:
- You reimburse the employee for expenses they incur
- You pay a third party for expenses incurred by an employee.
It doesn’t matter if the expenses you are reimbursing for are business or private expenses, or a combination of both, but they must be incurred by the employee.
Housing Fringe Benefit
If one of your employee’s primary place of residence is a unit of accommodation that you own, then this is a Housing Fringe Benefit. They do not have to have exclusive use of the accommodation. A unit of accommodation includes:
- A house, flat or home unit
- Accommodation in a house, flat or home unit
- Accommodation in a hotel, motel, guesthouse, bunk house or other living quarters
- A caravan or mobile home
- Accommodation on a ship or other floating structure
Living-Away-From-Home Allowance Fringe Benefit
If you are paying an allowance to an employee that is intended to compensate for additional expenses incurred and any disadvantages suffered because the employee has to live away from home to perform employment-related duties, then you are providing a living away from home allowance fringe benefit. Additional expenses don’t include expenses the employee could claim as an income tax deduction
Airline Transport Fringe Benefit
An airline transport fringe benefit arises where employees of airlines or travel agents are provided with free or discounted air travel on a stand-by-basis.
Board Fringe Benefit
If you provide an employee with accommodation and there is an entitlement to at least two meals a day, the meals may be a Board Fringe Benefit. Examples of this include:
- Meals provided in a dining facility located on a remote construction sit, oil rig or ship
- Meals provided to a live-in housekeeper or resident teachers in a boarding school.
The provision of entertainment means the provision of entertainment by way of food, drink or recreation. Although there is no Fringe Benefit category called Entertainment Fringe Benefit, the following types of fringe benefits may arise from providing entertainment:
- An expense payment fringe benefit – eg. The cost of theatre tickets purchased by an employee and reimbursed by the employer
- A property fringe benefit – eg providing food and drink
- A residual fringe benefit – eg. Providing accommodation or transport in connection with such entertainment
- A tax-exempt body entertainment fringe benefit (only employers who are exempt from income tax)
Tax-Exempt Body Entertainment Fringe Benefit
If you incur entertainment expenses and you are wholly or partially exempt from income tax, or you don’t get assessable income from the activities related to the entertainment then a tax-exempt body entertainment fringe benefit may arise.
Only entertainment expenditure that is non-deductible for income tax purposes can give rise to a tax-exempt body entertainment fringe benefit.
Car Parking Fringe Benefit
If you provide car parking for an employee at or near where they work and:
- There is a commercial parking station available for all-day parking within a one-kilometre radius of the premises on which the car is parked, and
- That commercial car parking station charges a fee for all-day parking that is more than the car parking threshold
The a Car Parking Fringe Benefit may arise.
Each year the Australian Tax Office will announce the car parking threshold and publish it in April. This will determine the amount of your Car Parking Fringe Benefit.
Property Fringe Benefit
A property Fringe benefit occurs when you provide an employee with free or discounted property.
Residual Fringe Benefit
The fringe benefits that remain or are left over because they are not one of the more specific categories are Residual Fringe Benefits. These benefits could including providing services (such as travel, or the performance of professional or manual work) or the use of property.
So there you have it, the 13 Fringe Benefits that you need to know about. If you have any questions around Fringe Benefits Tax or anything else we have talked about in previous blogs, you can email me or contact me on Facebook or Twitter.