FBT Fundamentals

What is subject to FBT? The concept is fairly broad. Paul Hockridge talks about what's a fringe benefit - cars, expense payments, residual fringe benefits, what “in respect of employment” means, and tie-breakers - Division 7A.

Date published: 21 April 2022

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TRANSCRIPT

What's Subject to FBT?

Things, you know, really broad sense things which we call benefits for FBT purposes are incredibly, broadly defined. So if something feels like, seems like a benefit or to use another term, an advantage, if you're getting some advantage over some other person, then chances are it will be a benefit.

So it might be something simple, like you get the use of a car or work pays your phone bill because I recognize you're using your phone quite a bit. The provision of the car clearly benefits. Maybe it's a kind of fringe benefit. Paying the phone is likely to be an expense payment fringe benefit. Getting to use something like if you use the bathroom at work, that's a fringe benefit.

Now, that gives you a fair idea as to how broad the net is, that there's going to be an exclusion in the legislation for using the bathroom, so hopefully that gives you a sense about how incredibly broad the concept of benefit is and if it's provided in respect of employment and you're getting to use a bathroom because you're at work after all. You can bet it's in respect of employment. 

And if it wasn't it even goes further because there might be an arrangement, so a benefit could be provided by someone else. So the toilets aren't working in our office today, so we go and use the one next door. Well, getting to use that use that bathroom next door, that's a benefit and is not provided by my employer, but it's provided under an arrangement between my employer and someone else.

And so please don't feel uncomfortable next time you're in the bathroom, but just think of this little chat on FBT and if not, set the tone for thinking broadly about the concept of benefit. 

What Does ‘In Respect of Employment’ Mean? What About Division 7a?What’s Subject to FBT?

It's the term in respect of tax. It's legal meaning which means in some way connected with and then the FBT legislation goes further and says even if we don't want it, even if it's access to our needs or wants or desires, if it's in any way connected with employment, it's in. And so going to your point earlier about Division 7A then we look for tie breaker rules.

Now, the tie breaker rule between income tax generally and FBT is in section 23L 36 act and the tie breaker between the division 7A rules and FBT you find that at the end of division 7A that runs through as you'd expect with division 7A, loans, payments, debt forgiveness and then it tells you which one is the paramount provision, either division 7A or FBT.