EXPLANATORY STATEMENT
STATUTORY RULES 1990 NO. 68
ISSUED BY THE AUTHORITY OF THE TREASURER
FRINGE BENEFITS TAX REGULATIONS
These regulations allow the notional tax amount of an employer, by reference to which the instalments of fringe benefits tax payable by the employer are calculated, to be varied to take account of the reduced rate of fringe benefits tax applying from 1 April 1990.
Subsection 110(2) of the Fringe Benefits Tax Assessment Act 1986 provides that, where the rate of tax declared by Parliament for a year of tax is different from the rate declared for the immediately preceding year of tax, the calculation of the notional tax amount of an employer provided in subsection 110(1) may be varied. The notional tax amount may only be varied if regulations are in place for that purpose and must be varied in accordance with those regulations. The notional tax amount is only varied on and after such date as is prescribed.
The rate of tax that applies to employers liable to pay fringe benefits tax has been reduced, by the Taxation Laws Amendment (Rates and Rebates) Act 1989, from 49 percent to 47 percent. The reduced rate applies to the year of tax commencing on 1 April 1990 and all subsequent years.
As a consequence, it is appropriate to vary the notional tax amount of employers for the year beginning on 1 April 1990. Fringe benefits tax is payable in part by 3 instalments in the course of a year of tax, each instalment equalling 25% of the employer’s notional tax amount. (The amount of tax paid by way of instalments is then credited against the amount of tax assessed - at the end of the tax year - to be the employer’s fringe benefits tax liability for that year.) The employer’s notional tax amount for a year of tax is generally the employer’s fringe benefits tax liability for the previous year.
These Regulations specify a formula by which an employer’s notional tax amount is to be varied to reflect the new reduced rate of fringe benefits tax. The Regulations also prescribe the date from which the variation is to apply.
A detailed explanation of the Regulations is given in the Attachment.
Attachment
Detailed notes on the Fringe Benefits Tax Regulations
Regulation 1 allows the Regulations to be cited as the Fringe Benefits Tax Regulations.
Regulation 2 facilitates references in these Regulations to the Fringe Benefits Tax Assessment Act 1986, which in these Regulations is referred to as “the Act”.
Subregulation 3(1) specifies the formula by which the notional tax amount determined in accordance with subsection 110(1) of the Act is to be varied for the year of tax commencing on 1 April 1990. (Subsection 110(1) sets out the general rule for determining the notional tax amount of an employer.) The formula is that the amount of fringe benefits tax assessed in respect of the employer for the year of tax commencing 1 April 1989 (the notional tax amount in accordance with subsection 110(1) of the Act) be multiplied by the ratio 47/49. This will have the effect of reducing the amount of instalments payable by employers for the year of tax commencing on 1 April 1990, reflecting the decreased rate of tax that will apply for that year.
Subregulation 3(2) prescribes 1 April 1990 as the date from which the notional tax amount of the employer is varied. As a consequence, all of the instalments of fringe benefits tax payable for the 1990-91 year will be calculated by reference to the new reduced rate of tax.
Example:
If for the year of tax commencing on 1 April 1989 an employer was assessed as liable for fringe benefits tax of $10,000, the employer’s notional tax amount for 1990-91 would ordinarily be $10,000. The fringe benefits tax instalments payable for 1990-91 would each be $2,500 (25% of $10,000).
By virtue of the proposed regulations, the employer’s notional tax amount for 1990-91 will instead be:
$10,000 x 47/49 - $9,591.84
The employer’s fringe benefits tax instalments for the year will accordingly be reduced to $2,397.96 (25% of $9,591.84).