Mid-Year Economic and Fiscal Outlook Update
One of the main changes is in relation to the Fringe Benefits Tax (‘FBT’) treatment which means that employees will lose ability to pay for in-house benefits with pre-tax salary without the employer incurring FBT.
What are in-house benefits?
These are goods and services which are similar or identical to those sold by the employer to the public in the ordinary course of business: for example, a clothing retailer providing the clothes it sells to the public to its employees.
There are two current FBT concessions in relation to these arrangements:
- The in-house goods and services are concessionally valued at below the market value; and
- The first $1,000 of in-house goods and services provided to each employee is exempt from FBT.
The new measures will mean that the exemption for the first $1,000 will be removed and in-house goods and services will generally be valued at lowest selling price to the public or at arm’s length transaction value.
These measures will NOT remove the concessions available where goods and services are provided to employees at no cost or which are paid from after tax income, provided there is no formal or informal salary sacrifice arrangement in place.
The announced measures will apply to all new salary sacrifice arrangements entered into from 22 October 2012.
The new measures will apply to pre-existing salary sacrifice arrangements from 1 April 2014.
Warning: renewal or changes to an existing arrangement may cause it to be treated as a “new” arrangement and thus trigger the new provisions. Please consult your Ruddicks adviser if you think you might be affected by this change.