Fringe Benefits Tax (FBT)
An FBT liability in relation to novated leases can occur for several reasons. The most common reasons are:
- There is a shortfall of post-tax contributions required within the FBT year (most common reason). Post-tax shortfalls are quite common in the first year of a lease due to the timing of when the lease commences and when the first payroll contribution is received.
- An FBT exemption cap is breached due to non-disclosure or notification of existing packaged fringe benefits items.
- An employee who has an FBT exemption cap does not disclose or notify us of existing non-salary packaging fringe benefits such as, accommodation provided for employees in remote areas where the accommodation is not owned by the employer
Statewide will work with employees and salary packaging administration service providers to ensure that all FBT liability risk is considered.
FBT Exemption Cap
Employees who work in FBT-exempt workplaces (such as Legal Aid, Queensland Ambulance Service, QG Air and some parts of Queensland Health may be eligible for an FBT Exemption cap (the "CAP limit") as determined by their Employer (based on the Fringe Benefit Tax Assessment Act 1986, ATO rulings, determinations and interpretive decisions). An Employee should contact their Employer to confirm whether they are eligible for an FBT exemption cap.
Employee FBT Obligations
- All taxes, including Fringe Benefit Tax (FBT), charges, fees or other costs associated with salary packaging, regardless of the circumstances, are the sole responsibility of the Employee whether levied against the Employer or otherwise.
- The Employee must make provision for FBT in advance of the FBT liability being incurred and the payment of any FBT.
- FBT liability takes precedent over any other liability payable by the Employee.
- The Employee acknowledges that an FBT exemption cap limit is a tax concession made available to limited employer groups under the Fringe Benefits Tax Assessment Act 1986.
- An Employer's eligibility for an FBT exemption cap is determined by the Employer (based on the Fringe Benefit Tax Assessment Act 1986, ATO rulings, determinations and interpretive decisions).
- The Employee is liable for any FBT incurred through the FBT exemption cap limit being exceeded or through packaging a benefit item that attracts FBT.
- Any outstanding FBT liability has precedence over any amount held in the Employee's Trust Account and over any other payment that may fall due.
- Where the Trust Account balance is insufficient to meet any FBT liability, the Employee, within 14 business days of receiving notice, must make arrangements with Statewide to repay the total FBT liability by a single payment or by installments over a three month period. Repayment of FBT liability may be by additional salary packaging deductions or direct payment. Failure to repay any FBT liability will result in either suspension or termination of the salary packaging agreement.
- If an FBT liability exists at the date of an Employee's termination of employment, the Employer may deduct the outstanding FBT and ATO penalties from any money payable to the Employee, and remit the money to the ATO, If, after such deduction, there is still an FBT Liability, the Employee acknowledges that the matter may be referred to a debt collection agency.
- If an Employee is not eligible for an FBT exemption cap, the Employer's FBT liability for non-salary packaging fringe benefits exclusive of salary packaged benefit remains the responsibility of the employer.
- If an Employee is in receipt of a non-salary packaging Fringe Benefits they must provide to the Administrator a reasonable estimate of the Grossed up Taxable Value to assist in managing the Employee's FBT liability against any FBT exemption cap limit. Any post FBT year adjustments above or below the Grossed Up Taxable Value to any FBT position are the sole responsibility of the Employee.
- It is the Employee's responsibility to provide and update the Supplier to any change to the Employee's non-salary packaging fringe benefits.
- Where an Employee's employment status alters they are required to advise the Supplier within 5 business days.
- The Employee agrees to provide Statewide as a Novated Lease Service Provider, the Employer, the Australian Taxation Office and any other relevant party any declarations, receipts, supporting documentation and any information required to be provided for the purpose of tax legislation in respect of the Employee's salary packaging arrangement.
- The Employee acknowledges that they are responsible for all costs, losses, penalties, general interest charges and liabilities under taxation legislation associated with or arising from the Employee's salary packaging arrangement.
The Salary Packaging Administrator/s have a contracted responsibility to manage an Employee's Fringe Benefits Tax (FBT) liability and adherence to their CAP Limit where applicable. The management of any liability may also occur in conjunction with the Novated Lease Service Provider (NLSP) such as Statewide.
FBT Liability Calculation
The statutory formula method is the only method allowed in the Queensland Government to calculate the taxable value of the novated lease vehicle.
|Taxable value =||(A x B x C) - E|
- A = the base value of the car (specific to your vehicle)
- B = the applicable statutory percentage (currently 20%)
- C = the number of days in the FBT year when the car was used or available for private use of employees
- D = the number of days in the FBT year (365 days or 366 for leap years)
- E = the employee contribution or post-tax contributed
If the taxable value is more than $0, then a calculation for FBT liability is required. Employees may choose to contribute post-tax contributions or not seek reimbursement for eligible paid car expenses to reduce the taxable value to nil.
To work out the FBT liability, the formula is:
Fringe benefits tax liability = Taxable value x Type 1 Gross up rate (currently 2.1463) x FBT rate (currently 49%)
If an FBT liability occurs, the FBT liability will be automatically deducted from the employee's account with Statewide and remitted to the Administration Service Provider. If there are insufficient funds in the account, an invoice for payment will be sent directly to the employee.