FBT RETURNS LIVE CHAT: QUESTIONS AND ANSWERS - CPA Australia

FBT RETURNS
    LIVE CHAT: QUESTIONS AND ANSWERS

INTRODUCTION
A recent live chat provided members with an opportunity to ask questions about the procedures and
mechanics involved in preparing Fringe Benefits Tax (FBT) returns for the FBT year ended 31 March 2019.
CPA Australia’s 2019 FBT Checklist will help you to identify the potential areas of benefits provided to
employees (and/or their associates) that may be subject to FBT. These expenses could include car, loan, debt
waiver, housing, living away from home allowance, expense payment, meal entertainment, car parking, board,
property and residual fringe benefits.
Changes in 2019
For the 2019 FBT year, there are changes to the below rates:
• for the car parking fringe benefit, the commercial car park threshold rate is more than $8.83 a day
• for the operating cost formula in calculating car fringe benefits, the annual statutory interest rate is 5.20%
• for loan fringe benefits, the annual statutory interest rate is 5.20%.

The experts were:
• Mark Morris CPA, Principal of Morris & Associates
• Gavan Ord, Business Investment Policy Manager, CPA Australia.

RESOURCES
•   2019 FBT checklist
•   Reconciliation of FBT paid workpaper
•   Sample FBT tax return letter
•   Year-end checklists
•   Year-end tax letter templates

PROFESSIONAL DEVELOPMENT
Professional Development resources provided by CPA Australia include FBT learning manuals, FBT
workshops and tax webinars. Find out more.

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QUESTIONS AND ANSWERS
Can you please tell us more of the LAFHA?
In relation to LAFHA, a good starting point is the guidance from the Australian Taxation Office.
Would it make any difference if the client is a sole trader as compare to as an employee?
FBT will apply to any employer regardless of the entity used to carry on the business. It is not limited therefore to
just corporate entities.
Is there any FBT concession for small business, e.g. personal usage of car expenses?
Eligible small business entities may not be subject to FBT on car parking they provide to their employees in certain
circumstances. See sub-chapter 16.10 of the FBT Guide for Employers. Otherwise any car which is made available
for the private use of an employee will be regarded as being a car fringe benefit subject to FBT regardless of the
size of the employer. Also, eligible small business entities can provide their employees with multiple work-related
portable electronic devices (e.g. laptops) to their employees where those devices have substantially identical
functions provided they are primarily used for work-related purposes.
If a director buys a car under the company name, but does not claim any expenses, depreciation or interest or
any other expenses under the company and pays it all himself, will that involve FBT in such scenario?
If a company buys a car for the private use of an employee (which could include a director whose payments will
be subject to the PSYG withholding provisions) that will constitute the provision of a car fringe benefit. The
taxable value of such a benefit can be reduced by any employee contributions paid from after-tax salary of the
director in respect of the use of that car if the expense relates to fuel, registration, insurance and maintenance
provided invoices are retained. For more information see the ATO website.
An employee who given a company has paid all his employee contribution for private usage to the company
car, Does the company still need to lodge FBT return?
You are not required to lodge an FBT return if the taxable value of the car fringe benefit is nil where the taxable
value has been offset by the employee's eligible running costs paid from post-tax contributions provided such
costs are evidenced by receipts and invoices. Please note that one-eleventh of such contributions must be
remitted by the employer for GST purposes.
Are car parking facilities operated by city councils considered “commercial car parking” if their all-day parking
exceeds the car parking threshold?
Yes. A commercial car park is a permanent facility where the car spaces are available to the public on an all -day
basis for a fee. This will include a carpark provided by a city council.
If an employer has paid the novated lease of an employee but haven’t recovered it, will this be treated as a
loan fringe benefit?
No. The provision of the novated car to an employee for their private use is a car fringe benefit. The employee will
have payment obligations under the novated lease. If the employer is going to loan them money to pay for these
obligations it is a separate loan fringe benefit which should be documented under a separate loan agreement to
the extent that the loan is made at a discounted interest rate.

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An employee travelled to Europe for a required business trip but included a personal trip prior to her return. If
the personal trip was more than the business-related days, and she paid for her personal expenses (i.e.
accommodation and meals), should we apportion the airfare for FBT purposes?
Yes. The cost of the business-related travel would appear to be an expense payment fringe benefit. The taxable
value of the benefit may be reduced if it would have been deductible to the employee had it been incurred by
that employee instead of the employer. See TR2017/D6.
Is FBT still payable on car parks provided to Employees if the car park is on leased premises paid for by the
employer as part of the lease? Wouldn’t it be considered a necessary business expense taken as a whole in
providing the leased premises similar to sustenance not being considered fringe benefit?
Yes. Refer to the ATO website. Car spaces leased by the employer in respect of an employee will constitute a car
parking fringe benefit. For further details please see the ATO website.
An employee (e.g. Sales representative) is a frequent recipient of entertainment meal and therefore generally
the minor benefit exemption does not apply to him or her. However, should we treat a meal entertainment
portion of a company-wide Christmas party, if less than $300, as a separate one-off benefit and therefore the
minor benefit exemption could apply?
Yes. The cost of the Christmas party would be regarded as the provision of a separate minor benefit where the
employer determines FBT based on actual expenditure incurred on entertainment. Please see TR2007/12.
What are the circumstances where a superannuation salary sacrifice arrangement is considered ineffective
salary packaging?
It is very important that a valid salary sacrifice arrangement is entered into where an employee foregoes future
salary in return for making additional voluntary superannuation contributions. See TR2001/10 for further details.
This is important in the lead up to financial year end as you cannot sacrifice voluntary superannuation after you
have earned it and need to think now if you want to make extra voluntary contributions in lieu of future gross
salary.
Does that mean as long as Christmas party expense is less than $300, it's not treated as FBT?
The cost of the Christmas party will not be subject to FBT under section 58P provided all the requirements of that
exemption are met. See TR2007/12 for more details.
If an employer chooses the 50/50 split method for all entertainment during the FBT year and also incurs
Christmas party cost of < $300 per head – please confirm that the Christmas party costs would not be exempt
under the minor benefit ($300 rule) as it has chosen the 50/50 for other entertainment?
Paragraph 14 of TR2007/12 provides that where an employer elects to use the 50/50 method to value meal
entertainment benefits the minor benefit exemption under section 58P cannot be applied to reduce the taxable
value of the fringe benefit.
If an interstate employee travels to HQ in NSW for a one-day meeting, then spends the weekend with family
near HQ, is any part of the travel cost subject to FBT?
The reimbursement of meals, accommodation and travel of an employee whilst on private travel are subject to
FBT and accordingly such costs need to be apportioned where the entertainment comprises both deductible and
non-deductible components.
The employee lives far away from the primary work location but needs to perform work duties near where she
lives. If she takes the company car home, and return the car to company next day, does it incur FBT?

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Yes. Generally, a car fringe benefit will arise where the car is under the custody and control of the employee for
their private use which will include any travel between work and home. Where a car is garaged at an employee’s
home it will also usually be treated as being available for private use including where the place of employment
and residence are the same. In very limited circumstances employment duties may commence at home where
the employee is on call on a standby basis in which case the home to work travel will not be regarded as private
travel. However, care needs to be taken in applying this exemption to ensure that it is applicable.
Follow up to question above on novated lease balance paid by the company, but not yet recovered back from
the employee. What if there was no separate loan agreement, but the balance remains unpaid by the
employee for months as of the end of FBT year, the reason being the employee is still disputing the amount
with the lease company?
It is always prudent to have a loan agreement in place so that there is clarity on any loan term. However, a loan
fringe benefit can potentially apply where the loan is not documented, and it is given for a nil or low interest rate.
Please see the ATO website for further details as to when a loan fringe benefit may arise.
An employee is given $15k as part of his salary package which will cover his fuel and other motor
vehicle/business related expenses. Is this subject to FBT?
An employee receiving a lump sum amount for fuel and other running costs will most likely be regarded as
deriving a car allowance which should be included in their assessable income. This is different to a reimbursement
which would be subject to the FBT regime where a precise amount that has been paid by the employee has been
incurred and reimbursed. Such an allowance can be potentially offset by deductions for work related travel which
would need to satisfy the substantiation rules that apply to car expenses incurred on a cents per kilometer or log
book method.
Is FBT only apply for corporate entities, is it applied to sole trader?
It makes no difference if you are a sole trader, partnership, trust, company, unincorporated association or
government body, or if you have to pay other taxes such as income tax, in determining whether you are subject
to the FBT regime.
An employee travelling for business purpose to attend overnight conference, meals provided during the
conference are not considered entertainment. What about the alcohol and food consumed at a bar/restaurant
after the conference and outside the conference venue, does this consider as entertainment?
It is only possible to reduce FBT where the entertainment would otherwise have been deductible which would be
the case where the costs of food, drink and travel were incurred in respect of an eligible seminar. Upon the
seminar concluding the costs would be regarded as entertainment if it is undertaken for general entertainment or
to discuss ordinary business issues.
If an employee pays all the cost of the company car he is using, is he still required to bring in as income an
employee contribution for the depreciation and interest on the loan.
If the employee is being provided a car by an employer, the provision of the vehicle will be a car fringe benefit.
There is no need to include any claim for interest and depreciation, but the taxable value can be reduced by other
running costs under the statutory formula method which is the default method applied to calculate FBT on a car
fringe benefit being provided by an employer. One eleventh of such employee contributions needs to be remitted
by the employer for GST purposes. The inclusion of depreciation and interest as deemed running costs is only
relevant where the operating cost method is used as these costs will form part of the eligible costs for the

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purposes of applying this method. Such amounts do not have to be included in the employee’s assessable
income.
If the employer provides an access to the private car park for its employees, will it be subjected to FBT?
The provision of a car park to an employee is a car parking fringe benefit but there is an exemption for eligible
small business entities with an annual turnover of less than $10 million. Refer to the CPA Australia 2019 FBT
checklist for further details.
If an employee purchase a laptop and they want to use it more than 50% for business usage: Does this create a
RFBT on the PAYG Payment Summary of the employee assuming that the employee signed a document stating
that he will be using the lap top for business/work related for more than 50%. Assuming her gross wages
$100,000 and the cost of lap top is $3000. Do we report $97,000 as a gross wage on the PAYG Payment
summary? If we need to pay payroll tax in NSW, do we include $100,000 or $97,000 as wages?
No reportable fringe benefit is provided on the employee's payment summary in respect of the exempt laptop.
An employee can obtain an FBT exemption under section 58X if the laptop is used primarily for work. From a
practical perspective ‘primarily’ means more than 50%. Where this requirement is met the amount disclosed on
the payment summary will be $97,000.
If a company provides an employee with a mobile phone, can the employee just estimate work use/private use
& FBT is applied to private use? Or is the phone completely FBT-free?
The purchase and use of a mobile phone will be exemption under section 58X if the phone is primarily used for
work. However, it is necessary to confirm that the phone is used more than 50% for work-related purposes in
each year. if you prove this is the case then the mobile calls as well as the purchase of the phone will be fully FBT
exempt.
The company has organised the business strategy retreat for the staff to discuss business directions and set
strategies for the coming year. This includes meals and accommodations and the use of the hotel conference
room for all staff in the same city where the business operates. Is this subject to FBT?
The cost of the business strategy course would be subject to FBT as it will not be regarded as an eligible seminar.
See sections 32-35 and 32-65 for further information.
Is there any FBT concession for small business?
For information on FBT concessions available for small business see the ATO website.
The concessions fundamentally relate to the provision of certain car parking fringe benefits to employees and the
provision of multiple electronic devices with substantially identical functions to employees provided all such
devices were primarily used for work-related purposes.
Which industries come under FBT?
FBT is a tax payable by employers for benefits paid to an employee (or an employee's associate e.g. a family
member) in lieu of salary or wages. It is difficult to say which industries will be most impacted by FBT - it is really
an issue determined by each employer and how they choose to remunerate their employees. Typically, FBT only
offers benefits to employees where the benefit is either exempt or concessionally taxed.
So, is it work better for an employee to salary sacrifice a laptop than claim the depreciation for laptop as they
need to apportion % for business use, whereas for FBT is primarily use for business?

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It is likely best to fully salary sacrifice the laptop as it will be fully FBT exempt if it is primarily used for work
purposes under section 58X whereas it will only be deductible to the extent that it is used for work purposes.
If an employer owns the building and has a warehouse downstairs and allows certain employees to park their
cars in the warehouse, even though it is not a car park. Is this subject to FBT?
Yes, provided the building is the employee’s primary place of employment; the car parked is owned or leased by
the employee; the car is parked for more than four hours between 7.00 a.m. and 7.00 p.m. on work days and a
commercial car park providing all day public parking is located within a one-kilometer radius of the employer’s
building and the lowest fee charged by such a parking station is more than $8.83 on 1 April 2018. However, small
business entities may be exempt from this requirement in certain circumstances where parking is not provided in
a commercial car park. See the ATO website for more information.
For small business, if the director's personal usage of company car is less than 20%, does the company still
required to pay FBT?
Yes. The provision of a car to an employee including a company director will be subject to tax as a car fringe
benefit if it is made available for any private use (including where the car is merely garaged at home). Hence, it
will be subject to FBT.
Going back to my query on ineffective SSA. If an employee with a fixed monthly income of say $10000 where
pay is paid monthly as two weeks in arrears and two weeks in advance, and say in forthcoming payroll in April,
employee requested the employer that he wished to salary sacrifice $1000 to his super and employer
concurred, is this considered an effective SSA being the fixed monthly income will only be earned in April?
The key point is that you can only forego future salary which has not yet been derived in the sense that the
employer can direct the employer on how to apply it. Hence, the important point is that you sacrifice income
before it is derived which for employees is generally when an amount of salary for the provision of services has
been received. Please see paragraphs 63 to 67 of TR20121/10 for more details.
Do employee contributions or 'otherwise deductible rule' reduce the taxable value when using the 50/50
method?
All meal entertainment costs incurred by the employer are 50% FBT and deductible and 50% non FBT and non-
deductible. However, meal entertainment costs incurred by the employer are reduced by the employee
contributions under the 50/50 method as such costs are not regarded as having been incurred by the employer.
Please see sub-chapter 14.8 of the FBT Guide for Employers.
The company owns the car and provides it to the employee, but the employee is paying the running costs?
The provision of a car to the employee for their private use will constitute a car fringe benefit. The taxable value
of such a car fringe benefit can be reduced by post tax contributions made by the employee for the running costs
of the car applying the statutory formula method. One eleventh of such contributions must be remitted by the
employer as GST.
We have an employee who has a novated lease with us, and the car is a luxury vehicle. We learned that this
would be treated as a loan benefit instead of the normal car fringe benefit, can you confirm this is the case?
How do we actually calculate the FBT on the vehicle?
I am not sure why it would not be a car fringe benefit as the luxury car limit does not apply for car fringe benefit
purposes. However, it will be treated as a loan for income tax purposes in terms of the deductibility of interest

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and depreciation rather than lease costs assuming it satisfies the definition of a luxury car. Thus, the
characterisation of the car for FBT and income tax purposes may be different.
When we salary sacrifice a car, mobile, laptop etc., the company is allowed to claim the GST on the car, mobile,
etc., is that right?
Employers are entitled to GST credits for acquisitions made to provide fringe benefits if you are registered or
required to be registered for GST. However, there are some exceptions to this general rule, such as where the
acquisition of the benefit relates to a GST-free or input taxed supply.
If you are entitled to a GST credit in providing a fringe benefit, you use the higher gross-up rate (called Type 1
benefits) to calculate the FBT payable. For more on calculating FBT payable, refer to Chapter 2 of the ATO’s FBT
Guide for Employers.
An employee is being transferred to another location and the company paid for the employee's moving costs
(moving van). Is this FBT?
Such removal costs are potentially FBT exempt under section 58B. See subchapter 20.4 of the FBT guide for
employers.
Is provision of education also subject to FBT (i.e. work-related course fee)? How about the membership fees to
a trade or profession?
The payment of self education costs would not be subject to FBT if the employee could have obtained a
deduction for such costs had they incurred such costs. Please see TR98/9 for details as to when self-education
costs are allowable. Care should be taken with the first $250 of costs which may be added back even where the
course of study is deductible. The same answer applies to membership fees as they will not be subject to FBT to
the extent that they would have been deductible to the employee had that person deducted such fees
themselves.
An employee is being reimbursed their CPA subject fee (around $1000) after successful completion. Is this FBT?
The reimbursement of the CPA expenses should not be subject to FBT if the employee would have obtained a full
deduction had they paid for the course themselves. To do that the CPA course must enable the employee to do
their current job or future role in their existing profession (as opposed to obtaining an initial qualification or
seeking to gain qualifications in a different occupation). See TR98/9 for further details.
If the employee pays an FBT Contribution and the FBT is reduced to NIL do I still lodge an FBT Return?
You do not need to lodge an FBT return if the taxable value of the fringe benefit(s) has been reduced to nil. For
example, if the taxable value of a car fringe benefit is fully extinguished by employee contributions there is no
taxable car fringe benefit and therefore no FBT return is required to be lodged.
Follow up question relating to Carol Slade's travel question - would flight costs need to be apportioned in this
case?
You do need to apportion between deductible travel and private travel. FBT is designed to apply to the private
and non-deductible portion of the travel. In the current ATO audit environment it is important to get this right.
Can you confirm the private use rule that came in on vehicles over 1 tonne in the 2019 FBT year - is this any
usage not between work and home and does it have to be over a certain %?
The ATO has issued new rules on the conditions that must be met for such work-related vehicles to be considered
exempt in PCG2018/3 which sets out half a dozen conditions that need to be met to retain the exemption. I

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suggest you review the guideline as the concessions applied in the ruling do not apply where, amongst other
things, the employee has had the chance to voluntarily package the vehicle under a salary sacrifice arrangement.
Motor Vehicle personal travel - where a vehicle is home garaged due to an absence of secure storage available
at work does the home-work trip still constitute private use?
The only circumstance in which a car will not be regarded as being available for private use is where it is kept on
the employer's premises and the employer is the only party that has custody and control of the car.
Car parking exempt benefit for Educational Institutions - for the car parks to be exempt from FBT do they need
to be located on an Educational institute site or will provided car parks in commercial facilities still comply?
Please refer to section 58G. The exemption is available if you are an employee of a public university.
Is FBT applicable if you only claim 50% of your entertainment expenses?
If an employer chooses to use the 50/50 method, then 50% of all meal entertainment costs are subject to FBT and
deductible (and the other 50% is not subject to FBT and is non-deductible). For further information please see
TR97/17.
An employee has an agreement to work 1 week from home. if the employer pays the flight cost for the travel
between place of work to home, is that to be considered for FBT?
Yes. However, in certain limited circumstances fly in fly out employees can salary package the cost of self-funded
airfares between their usual place of residence and usual place of employment provided certain conditions are
met including the need to regularly work in an eligible remote location. This would exclude one-off agreements to
work from home.
Reportable benefit on Shared vehicle usage - If a vehicle is shared under direction by the employer is it still
considered reportable?
Not if certain conditions are met which can be found on the ATO website.
One of our employees left in December, and vehicle was sold to him as well. How do I calculate the FBT for this
one?
If the car was sold to him at a discounted value below market value it may be regarded as a property fringe
benefit or a residual fringe benefit in certain circumstances. See IT 2509 for more details on the ATO’s website.
For the $300 minor benefit exemption, are all meals aggregated even if these are for different events (i.e.
Christmas party, Melbourne Cup, entertainment for each client)? If it is only to entertain clients, is this counted
per client?
As discussed, the minor benefits exemption under section 58P is only available in limited circumstances and
details on when minor benefits may be provided is set out in TR2007/12.
What steps do we need to take as an employer to ensure that the employees are actually salary sacrificing into
a mortgage account and or credit card and not depositing the amounts to redraw/offset account etc.
Firstly, it is crucial that the employee enter into a valid salary sacrifice agreement as set out under TR201/10.
Secondly, you need to understand which category of fringe benefit applies and what are the implications as there
may be different outcomes for a discounted loan under the loan fringe benefit rules and the reimbursement of
interest expenses made as an expense payment fringe benefit. Thirdly, you need to consider the impact of any
available exemption. For example, a remote area housing loan interest benefit will only be 50% exempt where the
loan is wholly applied for the acquisition of a house and the loan is not drawn down for other purposes.

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Hi All, one of our NSW sales reps accepted QLD based sales role with our company & needed to relocate to
Brisbane, QLD as a result of acceptance of the new role. The company paid for his meal expenses, tolls, petrol
and car hire when he was travelling.
The cost of providing relocation transport (and any meals and accommodation en route) to the employee (and
family members) are exempt benefits. This would not typically include road tolls. For further details, see Section
58F and the FBT guide for employers.
Company A owns company B, Company A offer discounted product to company B employees.
i) who should pay FBT, A or B?
ii) will $1000 "in house" exemption still applies;
iii) without knowing the best arm length pricing, how will the FBT benefit being calculated?
iv) what if it is company B providing discount product to company A employees? The same consequences?
i) Company B. FBT is payable by the employer on fringe benefits provided to its employees even where the fringe
   benefit is provided by an associate such as a parent company.
ii) It appears that the benefit being provided would be an in-house property fringe benefit as the benefit is the
   provision of tangible property being products or goods. To recap an in-house property fringe benefit will arise
   where an employee is provided with benefits that are similar or identical to those provided to the employer’s
   customers. The first $1,000 of the taxable value of such benefits are potentially exempt provided the benefit is
   not provided as part of a salary packaging arrangement between the employer and the employee. As discussed,
   the provider of the benefit may be the employer, or the employer may arrange for another entity such as an
   associated company to provide the benefit.
iii) The calculation of the taxable value of an in-house property fringe benefit depends on the nature of the goods
    provided and whether the provider would typically sell them as a wholesaler or retailer. If the goods are
    identical to goods sold in the ordinary course of business by the provider of the benefit to manufacturers,
    wholesalers or retailers the taxable value of the benefit is the lowest arm’s selling price of such goods less any
    employee contribution. Where the goods provided are identical to those normally sold by the provider to the
    public at a retail level the taxable value of the benefit is equivalent to 75%of the lowest price charged to the
    public less any employee contribution. Finally, where the goods provided are similar (but not identical) to
    goods sold in the ordinary course of business (e.g. seconds items of clothing) the taxable value of the benefit is
    75% of the amount that the employee could reasonably be expected to pay to acquire the goods under an
    arm’s length transaction less any employee contribution. Accordingly, the first step is to determine which
    category of in-house property fringe benefit is being provided. The next step is then to determine the
    appropriate arm’s length price. Taxation Determination TD93/231 provides some guidance on what the ATO
    will accept as methodologies that may be applied in determining the arm’s length values of goods for the
    above purposes. Such methodologies include obtaining the price of comparable goods advertised in local
    newspapers and/or relevant magazines or similar publications; identifying the price paid for comparable goods
    at a public auction; obtaining the price of comparable goods at a second-hand store; or engaging a qualified
    valuer to determine the market value of the relevant goods. Valuation methods which are not acceptable to
    the ATO include using the lease residual value of goods or accepting the best offer made by an employee.
iv) Company A would be liable to FBT on the provision of any in-house property fringe benefit provided by its
   associate Company B to employees of Company A.

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Company A owns company B, company A is foreign based and send employee to company B on short business
trip regularly (for work purpose). Company B does not have those employees on payroll or pay salary.
However, Company B pays for some of the travel cost, and provides business lunch and/or dinner in decent
restaurant. I would like to know if TR97/17 will applies and sees them as "travelling employee", thus no FBT
applies to these meals?
It is very unlikely that the seconded employee would be regarded as being a travelling employee for the purposes
of TR 97/17 for the reasons detailed below.
The issue here is whether the employee seconded by the non-resident Company A is an ‘employee’ for the
purposes of the FBT legislation. FBT will only be payable by Company A on the provision of entertainment in
respect of a person where that individual would be regarded as being an employee of either Company A or
Company B under the definition of employee under section 136(1) of the Fringe Benefits Tax Assessment Act
(1986).
For these purposes an employee is essentially defined to mean a person who receives, or is entitled to receive,
salary or wages. The term salary and wages is defined under section 136(1) of the Fringe Benefits Tax Assessment
Act (1986) to mean a payment from which an amount must be withheld under the PAYG withholding provisions
set out in Schedule 1 of the Taxation Administration Act (1953).
Accordingly, if a non-resident person is briefly seconded to work in Australia and does not receive salary and
wages which are subject to the Australian PAYG withholding that individual will not be regarded as being an
employee for FBT purposes.
Typically, provisions apply under double tax agreements to ensure that remuneration paid to such a seconded
individual would be subject to tax by their employer in their home country rather than in Australia in order to
prevent double taxation. However, it may be prudent to check whether this is the case under the double tax
agreement between Australia and the jurisdiction in which the proposed seconded employee ordinarily works.
Given that the seconded person will not be regarded as being an employee for the purposes of the FBT law any
entertainment provided that person as a non-employee would not be subject to FBT, and that person would not
be treated as a travelling ‘employee‘ for the purposes of determining the deductibility of any entertainment
expenses incurred in respect to that person under TR 97/17.
Company A has its staff benefit program, gathers and offers corporate discount from non-related merchants,
such as private health insurance, fashion clothing etc. Will this form any fringe benefit? I would say no FBT by
common sense, but may I know why and documents I can refer to? How do you define the term "arrange"?
Will this change if the merchant is a supplier of Company A?
From a practical perspective, FBT does not generally apply where a third party provider (e.g. a private health
insurance fund) provides a discount on the cost of goods or services which is open to all employees of a particular
employer. This will be regardless of whether the third-party market merchant supplying the discounted item is a
supplier of the employer or not. However, in reaching this conclusion it is necessary to consider the application of
the specific fringe benefit valuation rules that apply to the provision of external property fringe benefits and
external residual fringe benefits.
Firstly, it is necessary to consider whether the benefit has been provided by the third-party under an arrangement
with the employer. Unfortunately, this is a question of fact in each particular case. For example, the making of an
offer to the employees of an employer to take up a discount on the supply of particular goods and services by a
third-party will not generally constitute a benefit provided under an arrangement where the employer played a
passive role in any such arrangement. For example, a dry-cleaning offer posted outside the lift area of an

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employer’s building offering discounted prices to employees for the supply of dry-cleaning would not be regarded
as a benefit provided under an arrangement where there was no approach by the third-party to the employer.
However, where the employer has actively facilitated the provision of a benefit by a third party under an
arrangement it will be necessary to determine the taxable value of any external property fringe benefit or
external residual fringe benefit.
In determining the taxable value of such a benefit, it will be necessary to consider the notional value of that
benefit where the employer did not incur any cost in relation to the provision of such a benefit. For example,
Taxation Determination TD 93/231 states that to ascertain the notional value of an external property fringe
benefit the employer must determine the amount that the employee would have to pay for a comparable (on the
basis of age, type and condition) benefit under an arm’s length transaction.
Where an external supplier’s discounted goods or services are available for sale which are available to all
employees of the company the notional value of the fringe benefit would be the amount that the employee
would have to pay after considering the amount of the discounted price which will be regarded as being a
comparable arm’s length price.
Accordingly, where the amount paid by the employee is equal to the discounted value of the property fringe
benefit the taxable value of that benefit provided in the above circumstances would be nil provided the
employer’s contribution is equal to the taxable value of the discounted goods. The equivalent concepts can also
be extrapolated to apply to the provision of an external residual fringe benefit in the form of discounted services.
Company A pays for a leadership course for a group of employees across managerial and non-managerial roles
in various departments. It is an "in-house" training initiative which they pay an external facilitator to conduct
such course mainly on premises. On several occasions it also conducted the courses at a conference venue. I
would like to know if the course is considered to be "otherwise deductible"? The training or course is geared to
maintain or improve the skills, ability and knowledge of a team member’s employment and focuses on both
professional and personal development, however has no direct link to increasing the income in their current
employment. My concern is "leadership" training may not be seen as a "direct connection" to employment but
rather "generally related to the employment". What is your view on this? Is there a way the company can
establish such parameters for this to be considered ‘otherwise deductible’?
The cost of attending a leadership seminar run by business for its employees is unlikely to constitute an eligible
seminar which would be regarded as deductible under the entertainment provisions. Accordingly, the cost of
company employees attending such a seminar would be regarded as being subject to FBT for the reasons detailed
below.
Food or drink provided to employees as part of their attendance at a seminar will constitute either an expense
payment fringe benefit or a property fringe benefit. However, the otherwise deductible rule may apply to reduce
the cost of such entertainment where the cost of attending that seminar would be deductible under section 32-
35 of the Income Tax Assessment Act (1997).
To recap section 32-35 provides that the cost of providing food, drink, accommodation or travel to an individual
that is reasonably incidental to that individual’s attendance at a seminar for at least four hours will be deductible
provided the seminar is not a business meeting.
For these purposes section 32-65 (3) provides that a seminar is a business meeting if its main purpose is for
individuals who are (or will be) associated with carrying on the business to give or receive information, or to
discuss matters relating to the business.

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In this context it is important to note that it was held in Amway of Australia V FCT (No. 2) (2003) 54 ATR 480 that a
leadership seminar was a business meeting because, amongst other things, business with the principal purpose of
the seminar and other purposes were ancillary. This decision was subsequently upheld by the Full Federal Court in
FCT v Amway of Australia (2004) 57 ATR 339.
Hence, if the seminar predominantly related to the application of leadership concepts to the business carried on
by the employer it is very likely that the seminar would be a business meeting which would not be a deductible
eligible seminar for the purposes of section 32-35. Accordingly, it would not be possible to reduce the taxable
value of the relevant fringe benefit under the otherwise deductible rule.
Given the prominence of the above Federal Court decisions it would be advisable to seek to apply a private ruling
it was contended that the leadership course was wholly generic in nature as the ATO would probably regard
attendance at such a seminar as having a sufficient business focus to make it an ineligible seminar for the above
purposes.
Accordingly, it would be preferable to address this issue before determining whether there was a sufficient nexus
between generic leadership training which did not apply to the particular employer’s business and the
performance of staff in their current employment. However, applying the principles on the deductibility of self-
education expenses set out under Taxation Ruling TR 98/9 it may be difficult to contend that there is such a
sufficient nexus which may have to be considered on a per employee basis as it would be unlikely to have any
application to employees who are not in a leadership role or likely to have such a leadership role in the
foreseeable future.
When choosing the operating cost method for car fringe benefits, is it necessary for the employee to have kept
a 12-week log book? Can an employee sign a statutory declaration stating their business use percentage
without keeping a log book?
No.
Under Sections 10A and 10B of the Fringe Benefits Tax Assessment Act (1986) an employee can only choose to
apply the operating cost method in valuing the taxable value of a car fringe benefit if the employee maintains a
log book.
Accordingly, it is not sufficient that the employee merely complete a declaration in order to ensure that reliance
can be placed on the operating cost in calculating the taxable value of the car held by the employer. The log book
must be kept for a continuous 12-week period. The log book period may overlap to FBT years but the keeping of
the log book must commence on the 1st of those 2 years.
Further details on compliance with the log book method are set out on the ATO website.

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provided.

March 2019

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