Financial Services

Residual Fringe Benefits Tax (FBT)

Further information

Overarching Fringe Benefit Tax Policy

A residual fringe benefit is a fringe benefit not covered by any other division of the Fringe Benefit Tax Assessment Act 1986.

  1. In-house residual fringe benefit
  2. External residual fringe benefits
  3. Declaration forms
  4. Exempt residual benefits
  5. Computers provided to employees for home use

In-house residual fringe benefit

An in-house residual fringe benefit is a benefit provided to an employee which is identical or similar to rights, services or facilities provided to the public in the ordinary course of the University's business; for example, free or subsidised lectures provided to employees that are otherwise provided to the public for a charge.

The taxable value of an in-house residual fringe benefit is equal to 75 per cent of the lowest arm's length price charged to the public at any time for identical benefits less any amount, if any, paid by the employee for the benefit. Applying the 'otherwise deductible' rule may reduce this taxable value to nil.

Otherwise Deductible Rule: Where an employee uses an item of property only in the performance of employment-related duties, the taxable value of the residual fringe benefit is reduced to $nil.

External residual fringe benefits

An external residual fringe benefit is any residual fringe benefit, which is not an in-house residual fringe benefit. The taxable value of an external residual fringe benefit is equal to the arm's length purchase price less the amount of any contribution made by the employee.

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Declaration forms

Before a reduction in the taxable value of a residual fringe benefit is allowable, the employee must provide a written declaration to the University stating the otherwise deductible nature of the expenditure.

One of the following declarations is required:

  • No private use declaration – where an employee receives a residual benefit which is used exclusively in the course of performing the employee's employment activities
  • General declaration – required in all other circumstances where there is a percentage of allowable deduction
  • Recurring declaration – the percentage of allowable deduction is less than 100 per cent. This declaration may apply to cover identical benefits provided over a five-year period as long as the tax deductible percentage does not vary from year to year by more than 10 per cent.

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Exempt residual benefits

A declaration is required for exempt residual benefits which include:

  • the use of the University's equipment for the performance of employment activities (other than motor vehicles) by an employee
  • living away from home accommodation provided to an employee who is required for work purposes to live away from his/her usual place of residence.

In order for the University to avoid exposure to fringe benefits tax (FBT) in respect of residual fringe benefits, only items which are used in the performance of employment activities should be provided to employees.

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Computers provided to employees for home use

Where the University provides computers to staff for home use and these computers are desktop computers, a fringe benefit tax liability may arise where the business usage is less than 100 per cent and/or this percentage is not substantiated.

An employer may provide to employees 'eligible work-related items' free from FBT, under section 58X of the FBT Act. Included in this list are notebook/laptop computers/PDAs or similar portable computers and portable printers provided to employees for business use purposes, provided to them to use at their home. Note that the legislation permits one per employee per year.
This includes as 'eligible work items', cases when the ownership of the property is transferred to the employee, for example through salary sacrifice arrangements.

A desktop computer where ownership remains with the employer, is not an 'eligible work related item', but is an external residual fringe benefit.

In calculating the taxable value of the benefit, the notional value usually represents the market value of the benefit which the employer would pay. For example, market rental value.

Staff should keep a 12-week continuous logbook to estimate the business portion of the computer. This logbook would be kept for a maximum of five (5) years unless there is a change in business use by more than 10 per cent. In this case, a new logbook must be kept.

Each employee must provide a declaration; for example:

A desktop computer is set up in an employee's home for business use. The computer is a University asset. The notional value of the computer is estimated at $1200 per year ($100 per month including GST). The employee makes no contributions during the year and has kept a logbook in the required form, which estimate business usage of 90 per cent. The FBT liability is calculated as:

Notional value
Taxable Value
$120 (being 10 per cent personal use)
Grossed up value
FBT at 46.5 per cent

If the employee had not kept a logbook (or other records), the University would calculate the FBT liability as:

Notional value
Taxable value
Grossed up value
FBT at 46.5 per cent

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