EXPLANATORY STATEMENT
Select Legislative Instrument 2007 No. 43
Issued by authority of the Minister for Revenue
and Assistant Treasurer
Fringe Benefits Tax Assessment Act 1986
Fringe Benefits Tax Amendment Regulations 2007 (No. 1)
Section 135 of the Fringe Benefits Tax Assessment Act 1986 (the Act) provides, in part, that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters required or permitted by the Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The purpose of the Regulations is to amend the Fringe Benefits Tax Regulations 1992 (the Principal Regulations) to provide a fringe benefits reporting exclusion for the pooled or shared private use by employees of their employer’s cars. A pooled or shared car is a car that is provided by an employer for the private use of two or more employees.
The fringe benefits reporting rules in the Act require an employer to report the grossed-up taxable value of an employee’s fringe benefits where the value of fringe benefits exceeds $2,000. However, paragraph 5E(3)(i) provides that a fringe benefit may be excluded from the fringe benefits reporting requirement by prescription in the regulations.
The reporting exclusion for pooled or shared cars would result in employees who have pooled or shared private use of their employer’s cars not having the grossed-up taxable value of such fringe benefits reported on their payment summaries. This may increase their access to certain Government benefits and reduce their liability to income-related surcharges and obligations.
This amendment implements the Government’s commitment announced in its final response to the Report of the Taskforce on Reducing Regulatory Burdens on Business – Rethinking Regulation for a fringe benefits tax reporting exclusion for pooled or shared cars. The announcement was made in the Treasurer’s press release
No. 88 of 2006.
Fringe benefits reporting exclusion for pooled or shared cars
Regulation 3F will ensure that an employee who uses a pooled or shared car provided by their employer will not have this benefit reported on their payment summary. A pooled or shared car is a vehicle that is provided by an employer for the private use of two or more employees. The fringe benefits reporting exclusion will operate where the provision of the vehicle by the employer results in a car benefit for more than one employee.
Public consultation was undertaken on the proposal, with targeted confidential consultation being conducted on the proposed regulation.
The Regulation 3F will have effect from 1 April 2007, the commencement of the 2007-08 fringe benefits tax year, and will continue to apply to later FBT years.
Overview
The Fringe Benefits Tax Amendment Regulations 2007 (No. 1) were enacted to amend the Fringe Benefits Tax Regulations 1992 and provide a fringe benefits reporting exclusion for the pooled or shared private use by employees of their employer’s cars. This was introduced to address the gap in the existing legislation which required employers to report the grossed-up taxable value of fringe benefits exceeding $2,000, but did not specifically address the situation where multiple employees shared the use of a single car. The policy objective of this amendment is to reduce regulatory burdens on business, as outlined in the Government’s final response to the Report of the Taskforce on Reducing Regulatory Burdens on Business. The Regulations were issued under Section 135 of the Fringe Benefits Tax Assessment Act 1986 by the Minister for Revenue and Assistant Treasurer, and they took effect from 1 April 2007.
Scope and Application
The Fringe Benefits Tax Amendment Regulations 2007 (No. 1) apply to employers and employees in Australia and relate specifically to the reporting of fringe benefits associated with the private use of employer-provided cars shared among two or more employees. The regulations are an extension of the Fringe Benefits Tax Assessment Act 1986, which mandates that employers report the taxable value of fringe benefits exceeding $2,000. However, the new regulations introduce an exemption under certain conditions for pooled or shared cars, thereby excluding such fringe benefits from the reporting requirement. This exclusion aims to potentially enhance employees' access to certain government benefits and reduce their liability to income-related surcharges and obligations. The amendment came into effect from 1 April 2007, aligning with the commencement of the 2007-08 fringe benefits tax year, and applies prospectively to subsequent tax years.
Key Provisions
The Fringe Benefits Tax Amendment Regulations 2007 (No. 1) introduce significant amendments to the Fringe Benefits Tax Regulations 1992, primarily concerning the reporting of fringe benefits related to the private use of employer-provided cars. Regulation 3F is the key provision of these amendments, establishing a reporting exclusion for pooled or shared cars (Regulation 3F). This regulation effectively excludes the grossed-up taxable value of fringe benefits from the reporting requirement if the employer provides a car for the private use of two or more employees. Under Section 135 of the Fringe Benefits Tax Assessment Act 1986, the Governor-General has the authority to issue these regulations, provided they do not conflict with the Act and are necessary for its implementation. Regulation 3F ensures that employees sharing the private use of their employer’s cars will not have these benefits reported on their payment summaries, potentially increasing their access to government benefits and reducing their liability for income-related surcharges and obligations.
The Act imposes specific obligations on employers to report the grossed-up taxable value of fringe benefits exceeding $2,000. However, under paragraph 5E(3)(i), the regulations can exclude certain fringe benefits from this reporting requirement. Employers must ensure compliance with these regulations by accurately determining whether their employees are sharing the private use of employer-provided cars and applying the exclusion as specified in Regulation 3F. This involves maintaining records and calculations that demonstrate adherence to the new reporting rules, ensuring that the fringe benefits related to shared private use of cars are not included in the grossed-up taxable value reported on payment summaries.
Failure to comply with the regulations may result in civil or criminal consequences. While the specific penalties for breach are not detailed in the explanatory statement, breaches of fringe benefits tax regulations can generally lead to substantial penalties under the Fringe Benefits Tax Assessment Act 1986. These may include fines and legal action, depending on the severity and intent of the non-compliance. Employers found to be in breach could face financial penalties and the obligation to rectify past reporting errors, potentially leading to audits and further scrutiny by the Australian Taxation Office. It is essential for employers to understand and adhere to these regulations to avoid such consequences.