Fringe benefits tax
The use of the Fringe Benefits Tax Act 1986 and the Fringe Benefits Tax Assessment Act 1986 as the basis for determining the payroll taxable value of payments in kind, has simplified the situation for businesses in returning the value of such payments.
Only one set of records need be kept, as the taxable value under the FBT Act is the taxable value for payroll tax purposes. In situations where the FBT Act gives an exemption to a benefit it is accepted that the benefit is exempt for NSW payroll tax.
Taxable value
To calculate the value of fringe benefits subject to payroll tax, both Type 1 and Type 2 aggregate amounts must be grossed up, using only the 1.8692 multiplier.
Return of fringe benefits tax amounts for pay-roll tax purposes
As payroll tax is returned monthly, businesses are faced with determining their FBT liability on a monthly basis.
To ease compliance, businesses can elect to use a simplified system. The system uses the previous years annual fringe benefit tax amount as the basis of the current liability.
The returned FBT value is divided by 12 and that one twelfth value is returned for the months July to May.
The June annual reconciliation is used to adjust any discrepancy between last year's FBT return and the most recent FBT return.
Where an employer ceases to be liable for payroll tax, regardless of whether or not the election has been made, the amount of fringe benefits declared in the employers final payroll tax return is to be the difference between:
a) the actual taxable value of the NSW fringe benefits paid or payable by the employer for the period from the preceding 1 July to the cease date and
b) the taxable value of the NSW fringe benefits declared in payroll tax returns during that period.
Determining the NSW value of fringe benefits for businesses or groups with interstate wages
For businesses or groups, which operate in NSW and other states, determining the taxable value of fringe benefits that are applicable in NSW, maybe difficult or impossible. If the business is unable to determine the exact value of the NSW fringe benefits, the figure may be done by estimate. When using the estimate method it is assumed that the value of fringe benefits paid in each state is proportional to the wages paid in that state.
Example
Total Australian taxable wages including benefits = $1,000,000
Less total Australian Fringe Benefits taxable value = $200,000
Therefore total Australian non benefits wages = $800,000
Total NSW non benefits wages are $500,000
Therefore the formula is: $500,000/$800,000 x $200,000 = $125,000
If different definitions cover components of a salary package
As the definition of wages includes payments in kind, it is probable that many fringe benefits would be liable as a wage and also as a fringe benefit. If this occurs, only the fringe benefit value, as determined in accordance with the FBT Act is to be used in determining the taxable wage total.
