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Reform of salary sacrificed ‘in-house’ fringe benefits

Reform of salary sacrificed ‘in-house’ fringe benefits

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On 22 October 2012, as part of the Mid-Year Economic and Fiscal Outlook 2012-13, the government announced reforms to remove the concessional fringe benefits tax (FBT) treatment for in-house fringe benefits accessed through a salary packaging arrangement.

The proposed reforms will apply to in-house benefits provided under salary packaging arrangements made on or after 22 October 2012, and from 1 April 2014 for in-house benefits provided under salary packaging arrangements made before 22 October 2012.

In-house fringe benefits arise when employees receive goods or services from their employer or an associate of their employer that are identical or similar to those provided to customers by the employer or an associate of the employer in the ordinary course of business. Under the existing FBT concession, the taxable value of in-house fringe benefits is 75% of either the lowest price at which an identical benefit is sold to the public or under an arm’s length transaction. In addition, depending on the nature of the in-house fringe benefit, the aggregate taxable value may be reduced by a further $1,000.

The existing FBT concession was introduced before the widespread use of salary packaging arrangements. This measure will return the use of this FBT concession to its original intent.

Under the proposed reform, the taxable value of in-house fringe benefits provided through a salary packaging arrangement will be (depending on the nature of the benefit) either:

  • the lowest price that an identical benefit is sold to the public, or
  • the lowest price under an arm’s length transaction.

Legislation was tabled in parliament on 29 November 2012.

Legislation and supporting material

Tax Laws Amendment (2012 Measures No. 6) Bill 2012 and the Explanatory memorandum tabled in parliament on 29 November 2012.

More information

For more information, refer to:

http://www.ato.gov.au/taxprofessionals/content.aspx?doc=/content/00339112.htm


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