Airline transport fringe benefits are now taxed under the in-house benefit or residual fringe benefit rules.
- Domestic travel benefits normally include GST and are therefore grossed up as a Type 1 benefit.
- International travel is GST free and therefore grossed up as a Type 2.
Rules With Effect from 8 May 2012
(7.30 pm ACT legal time)
The effect of rules which came into effect from 8 May 2012 is to remove the separate treatment of Airline Transport Fringe Benefits and treat them as inhouse property and inhouse residual fringe benefit rules.
The new provisions contain simpler valuation rules for the standby value of air fares.
Under the new rules, the taxable value is therefore to be generally calculated as 75% of the standby value (to be further reduced by employee contributions or otherwise deductible amounts if any), where the “standby value” is:
- Domestic route: 50 % of the carrier’s lowest standard single economy airfare for that route as publicly advertised during the year of tax.
- International route: 50 % of the lowest of any carrier’s standard single economy airfare for that route as publicly advertised during the year of tax.
The effect of the inhouse concessional discounted value of 75% when applied to the standby value discount percentage of 50% results in the same discounted valuation of 37.5% as existed before 8 May 2012. The standby valuation is, is however easier to determine.
- Note also that both before and after 8 May 2012 the taxable value may be reduced by
- employee contributions
- the otherwise deductible rule
- and the $1,000 reduction available under [popup url=”http://www.austlii.edu.au/au/legis/cth/consol_act/fbtaa1986312/s62.html” width=”950″ height=”500″]Section 62[/popup]
(however see October 2012 amendments following)
Further Rule Modifications 22 October 2012 – salary sacrifice arrangements
Under further rule changes which dated from October 2012, the valuation discounts for inhouse property and inhouse residual fringe benefits taxable values, (which from May 2012 includes airline transport fringe benefits) are not to be available where they are being accessed through salary sacrifice arrangements.
Where benefits are accessed through a salary packaging arrangement:
- the taxable value for the benefits will simply be [popup url=”http://www.austlii.edu.au/au/legis/cth/consol_act/fbtaa1986312/s136.html#notional_value” width=”950″ height=”500″]”notional value”[/popup] – i.e. an arms length market valuation
- the $1,000 reduction in value will not be available
These amendments apply to all new salary packaging arrangements from 22 October 2012. Arrangements already in place before 22 October are excluded until 1 April 2014.
The value determination under these new rules is a simplification of the previous rules, in that it will no longer be necessary to track the date of travel for a determination of the ticket value, or to distinguish between scheduled or unscheduled travel.
The Previous Rules – Up to 8 May 2012
Previously an airline transport fringe benefit arose when an employee of an airline operator or a travel agent is provided with free or discounted air travel on a stand-by basis which is customary in the airline industry (including any related incidental services provided on board the aircraft.).
Airline Transport Fringe Benefits were taxed under Div 8 Part III of the FBTAA which determines taxable value (to be further reduced by employee contributions or otherwise deductible amounts if any):
- Domestic route: 37.5 % of the lowest publicly advertised economy airfare charged by the provider (or a carrier where relevant), at or about the time of travel, over that route.
- International route: 37.5 % of the lowest fare published in Australia as charged by any carrier for travel over that route in the 12 months preceding the end of the year of tax.
The transition year – 2012-13
A complication for record-keeping arises within 2012-13 because the 8 May 2012 amendments take effect from that date, and employers need to distinguish any differing treatment of benefits arising before and after that date within the FBT year which ends on 31 March 2013.
This page was last modified on 23 August 2017