Residual Fringe Benefits

A residual fringe benefit is a kind of catch-all, applying to fringe benefits which are not captured under the other more specific fringe benefits headings.

A residual fringe benefit can include employer-provided services such as travel or professional or manual work, or the use of property.

In general if a benefit comprises both goods and services, the goods component is valued as a property fringe benefit and the services component as a residual fringe benefit.

However if the supply of goods is integral to the services, for example the carrying out of repairs involving the supply of spare parts, the benefit may be considered entirely a residual fringe benefit.

“Fringe benefits” includes benefits provided on behalf of an employer, and/or to another person on behalf of an employee.

In-house residual fringe benefits

An in-house residual fringe benefit is a benefit of the kind provided by the employer to the public in the ordinary course of its business.

The taxable value of an in-house residual fringe benefit is 75% of the lowest arm’s length price or value, less any amount paid by the employee, unless (since 22 October 2012) provided under a salary packaging agreement, in which case the valuation is 100%.

In-House Property and Residual Benefits – concession withdrawal 22 October 2012 – and salary sacrifice arrangements

Until 22 October 2012, the concessions provided that

  • the taxable value is 75% of the lowest selling price to the public or the cost of the benefit to the employer; and
  • The first $1,000 of in-house goods and services provided to employees is exempt from FBT.

Under amendments foreshadowed in the 2012 MYEFO, these concessions were removed, subject to transitional arrangements, which provide that pre-existing salary sacrifice arrangements implemented before 22 October 2012 are excluded from the new rules until 1 April 2014.

See Sec 62 Reduction of aggregate value and Tax free threshold

External residual fringe benefits

External residual fringe benefits are typically the sort of benefit which the employer doesn’t normally provide to the public in the ordinary course of its business.

Examples from the Tax Office website (linked below) include health insurance provided for employees of a hairdresser, or accounting services provided to employees of a legal firm. In both cases the service provided is “external” to the employer’s usual business.

The taxable value is simply the arms’ length cost or value (less any employee contribution).  Services overlapping financial years are apportioned. See External residual fringe benefits

Motor vehicles other than cars

The following types of vehicles (including four-wheel drive vehicles) are “cars”:

  • motor cars, station wagons, panel vans and utilities (excluding panel vans and utilities designed to carry a load of one tonne or more)
  • all other goods-carrying vehicles designed to carry less than one tonne
  • all other passenger-carrying vehicles designed to carry fewer than nine occupants.

There are two methods for valuing the private use of vehicles which are not cars:

  • The operating cost method – as used for car fringe benefits; or
  • where there is extensive business use, a cents per kilometre rate based set rates published by the Tax Office and revised in an annual determination. See Cents/km for vehicles other than cars

FBT under this method is calculated by the gross-up of Kms x $rate – generally at the Type 2 gross-up percentage because the employer is normally entitled to GST credits – and FBT is payable on the resulting value at the FBT rate. Rates and gross-up percentages change on 1 April 2014 and again 1 April 2015 – see FBT rates

See also Ruling MT 2034 Private use of motor vehicles other than cars

Electric e-bikes

The Tax Office has determined that the provision of an electric ‘e-bike’ (of the kind for which no registration or drivers licence is required) under a novated lease to an employee is a residual fringe benefit. The fringe benefit may be exempt from FBT if the use of the e-bike is restricted to:

  • travel to and from work
  • use that is incidental to travel in the course of performing employment-related duties, and
  • non-work-related use that is minor, infrequent and irregular.

See Ruling CR 2015/80

Further information

Residual Fringe Benefits – ATO guide

 

 

 

This page was last modified 2018-12-10