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6.10 Fringe Benefits

• 6.10.1 Description of Fringe Benefits
  • 6.10.1.1 Introduction
  • 6.10.1.2 Overseas Fringe Benefits
  • 6.10.1.3 Use of Exchange Rates to Convert Overseas Fringe Benefit Values
  • 6.10.1.4 Exemptions
• 6.10.2 Car Fringe Benefits
  • 6.10.2.1 Definitions
  • 6.10.2.2 When?
  • 6.10.2.3 Example
  • 6.10.2.4 Conditions
  • 6.10.2.5 Exemptions
  • 6.10.2.6 Example 1
  • 6.10.2.7 Example 2
• 6.10.3 Housing Fringe Benefits
  • 6.10.3.1 Definitions
  • 6.10.3.2 When?
  • 6.10.3.3 Example 1
  • 6.10.3.4 Example 2
  • 6.10.3.5 Conditions
  • 6.10.3.6 Exemptions
• 6.10.4 Low Interest Loan Fringe Benefit
  • 6.10.4.1 Definition
  • 6.10.4.2 When?
  • 6.10.4.3 Example 1
  • 6.10.4.4 Example 2
  • 6.10.4.5 Conditions
  • 6.10.4.6 Exemptions
  • 6.10.4.7 Example 1
  • 6.10.4.8 Example 2
• 6.10.5 School Fees Fringe Benefit
  • 6.10.5.1 Definitions
  • 6.10.5.2 When?
  • 6.10.5.3 Example
  • 6.10.5.4 Conditions
  • 6.10.5.5 Exemptions
• 6.10.6 Private Health Insurance Fringe Benefit
  • 6.10.6.1 Definitions
  • 6.10.6.2 When?
  • 6.10.6.3 Example
  • 6.10.6.4 Conditions
  • 6.10.6.5 Exemptions
• 6.10.7 Expense Payment Fringe Benefit
  • 6.10.7.1 Definitions
  • 6.10.7.2 When?
  • 6.10.7.3 Example
  • 6.10.7.4 What is the value
  • 6.10.7.5 Exemptions
• 6.10.8 Cash Management Trust and Financial Investment Fringe Benefit
  • 6.10.8.1 Definitions
  • 6.10.8.2 When?
  • 6.10.8.3 Cash Value
  • 6.10.8.4 Exemptions
• 6.10.9 Valuing Fringe Benefit
  • 6.10.9.1 Definitions
  • 6.10.9.2 Cars
  • 6.10.9.3 Example
  • 6.10.9.4 Housing
  • 6.10.9.5 Is Housing in a Metropolitan Non-Metropolitan or Special Location?
  • 6.10.9.6 What is a "Special Housing Location"?
  • 6.10.9.7 Definitions: "Urban Centre" "Census Population" and "Eligible Urban Areas"
  • 6.10.9.8 What Places Are in Zone A or Zone B?
  • 6.10.9.9 Value to be Reduced Because of Employee Contributions
  • 6.10.9.10 Example
  • 6.10.9.11 Australian Defence Force Housing Fringe Benefits
  • 6.10.9.12 Loans
  • 6.10.9.13 Loan Fringe Benefit Calculation
  • 6.10.9.14 Example
  • 6.10.9.15 School Fees and Health Insurance
• 6.10.10 Matrix of Car Values
• 6.10.11 Matrix of Housing Values

Introduction

This chapter details which fringe benefits are to be included in the income and how they are to be valued. As ABSTUDY is aligned to YA for students under 21 and Newstart for students 21 years and over, refer to Social Security law and the Social Security Guide. 

Following changes to Taxation legislation employers are required to report Fringe Benefits amounts on group certificates where the value of certain Fringe Benefits received during Fringe Benefits Tax year exceed $1,000.  This amount will start to be recorded on group certificates for the 1999/2000 financial year and will relate to Fringe Benefits received between 1 April 1999 and 31 March 2000.  The Fringe Benefits amount on the group certificate is expressed as a 'grossed-up' value.  So that a Fringe Benefit having a taxable value of $1,000 becomes a reportable Fringe Benefit amount of $1,941.  For assessment follow the same procedure as YA.

6.10.1 Description of Fringe Benefits

6.10.1.1 Introduction

Fringe benefits apply to both aspects of current income, so that increases of 25% or more in income, including fringe benefits, and substantial decreases in income, may warrant reassessment based on current income.

The modified tests recognise the value of employer provided car, housing, low interest loan, school fees, private health insurance, expense payments, and cash management trust and/or other financial investment fringe benefits. The measure is limited to these items because they are the "big ticket" non-monetary sources of income offered to employees.

Only the amount of a person’s fringe benefits over $1000 is added to income. So, for example, a person’s car fringe benefit may be $2000 in the relevant year but only $1000 is added to income. This works so that where a combination of the specified fringe benefits exceeds $1000, the combined amount over $1000 will be added to income. For example, where a person’s car, house and loan fringe benefits combined add up to $5000, $4000 is added to income.

6.10.1.2 Overseas Fringe Benefits

The Australian equivalent of the value of fringe benefits provided overseas is taken into account for income testing purposes. If a student’s partner or parents are working overseas and receiving any of those fringe benefits, the Australian equivalent of the value of the benefits is to be included.

Example
Harry is a full-time student who is eligible for ABSTUDY. His parents are Australian residents who live and work in New Zealand. Their employer provides them with a company car for their private use. The Australian equivalent of the value of the car fringe benefit is to be included under the income testing arrangements.

6.10.1.3 Use of Exchange Rates to Convert Overseas Fringe Benefit Values

The overseas value of the car benefit (see above) is converted to an Australian Value by dividing the New Zealand value by the appropriate exchange rate.

6.10.1.4 Exemptions

There are several exemptions from the declaration of fringe benefits for ABSTUDY purposes.

Exemptions for fringe benefits have been provided to employees of religious institutions and public benevolent institutions.

6.10.2 Car Fringe Benefits

6.10.2.1 Definitions

A car is a motor vehicle (including a four wheel drive vehicle) being a motor car, station wagon, panel van, utility truck or similar vehicle, or any other road vehicle designed to carry:

• a load of less than 1 tonne, or
• fewer than 9 passengers.

A motor cycle or similar vehicle is not a car.

"Private travel" means travel that is not exclusively within the employee’s employment.

6.10.2.2 When?

A car fringe benefit arises when an employer (or an associate acting on behalf of an employer) provides a car to an employee (or an associate of an employee) for the employee’s private travel.

A car fringe benefit also arises when an employer makes a car available for use by an employee for private travel. A car is available for private travel if it is garaged by the employee at his or her place of residence, or any other place where the employee has sleeping accommodation. A car is also available for private travel if:

• it is in the care and control of the employee away from any business premises of the employer; and
• the employee is not performing duties of employment.

There is no distinction made between business travel and private travel. Once a car is identified as a fringe benefit car it is taken to be exclusively (ie 100%) used, or available for use, for the employee’s private travel.

6.10.2.3 Example

6.10.2.4 Conditions

There must be a car. The car must be owned or leased by the employer. The provision of the car by, or on behalf of the employer to the employee or an associate, must be because of the employee’s employment. The employee must use the car for private travel, or the car must be available for private travel by the employee.

6.10.2.5 Exemptions

Infrequent, minor or irregular private use of a fringe benefit car by an employee, such as travel to and from work, is an exempt benefit, if that use is the only private use by the employee.

Private use of an unregistered car owned by an employer is exempt if the car is unregistered while it was under the control of the employee.

6.10.2.6 Example 1

6.10.2.7 Example 2

6.10.3 Housing Fringe Benefits

6.10.3.1 Definitions

"Housing" includes:

• a house, flat, town house or home unit,
• accommodation in a house, flat, town house or home unit,
• accommodation in a hotel, hostel, motel or guesthouse,
• accommodation in a bunkhouse or any living quarters,
• accommodation in a ship, vessel or floating structure, and
• a caravan or other mobile home.

6.10.3.2 When?

A housing fringe benefit arises when an employer, or an associate on behalf of an employer, grants an employee, or an associate, the right to occupy or use "housing" as a usual place of residence for more than one day. "Housing" covers any accommodation that is an employee’s usual place of residence for more than one day. Temporary accommodation that is not an employee’s usual place of residence is not included.

Another form of housing fringe benefit is when an employer, or an associate, makes rental, lease or mortgage payments, directly or indirectly, on behalf of the employee.

6.10.3.3 Example 1

6.10.3.4 Example 2

6.10.3.5 Conditions

There must be housing. There must be a right to occupy or use the housing. The provision of the housing by, or on behalf of, the employer must be because of the employee’s employment. The housing must be the employee’s usual place of residence for at least one day.

6.10.3.6 Exemptions

No fringe benefit arises in respect of live-in care provided by a government, religious institution or non-profit body for the elderly, mentally or physically handicapped, or other people in needy circumstances.

The provision of employment related travelling allowances by an employer to an employee is not a fringe benefit.

6.10.4 Low Interest Loan Fringe Benefit

6.10.4.1 Definition

A "loan" includes:

• an advance of money,
• the provision of credit or any other form of financial accommodation,
• the payment of an amount for, on account of, on behalf of or at the request of a person where there is an obligation (where expressed or implied) to repay the amount, and
• a transaction (whatever its terms or form) which in substance effects a loan of money.

There are two types of loans, housing and other. A housing loan is a loan to buy (including for investment purposes), renovate, extend, refurbish, etc an existing dwelling, or to build, erect or otherwise establish a new dwelling. Other loans include personal loans, bridging loans, overdrafts, etc.

6.10.4.2 When?

A loan fringe benefit arises where an employer, or an associate acting on behalf of an employer, provides a loan to an employee, or an associate, at the lowest publicly advertised rate of interest than the same loan would be provided to a member of the general public.

A loan fringe benefit also arises where an employer or associate allows a debt owed by an employee or associate to run past the due date for payment. There is a benefit for as long as any part of the loan remains unpaid.

6.10.4.3 Example 1

6.10.4.4 Example 2

6.10.4.5 Conditions

There must be a loan. The loan must be made by, or on behalf of, an employer to an employee or associate. It must be made because of the employee’s employment. The rate of interest on the loan must be lower than the rate of interest.

6.10.4.6 Exemptions

Some loans are exempt. A loan made by a money lender at a commercial rate of interest, or at least a rate of interest that is available to the general public, is exempt.

A loan to a serving employee to meet employment related expenses to be incurred within six months of the loan is exempt if it is not excessive and if the employee is required to account for it within six months.

A temporary advance to enable an employee to pay security deposits (such as rental bond or telephone, gas or electricity deposits) in connection with temporary accommodation arising from the employment is exempt if it is repayable within 12 months.

6.10.4.7 Example 1

6.10.4.8 Example 2

6.10.5 School Fees Fringe Benefit

6.10.5.1 Definitions

A "school" is a school, college or other educational institution that provides primary or secondary level courses.

"School fees" means tuition and boarding fees at a school.

6.10.5.2 When?

A school fee fringe benefit arises when an employer, or a third party on behalf of an employer, pays or reimburses school fees relating to an employee’s, or an employee’s partner’s, dependents including natural or adopted children, or other people (such as step children) who are substantially or wholly dependent on the employee or the employee’s partner.

6.10.5.3 Example

6.10.5.4 Conditions

The provision of the benefit must be because of the employee’s employment.

6.10.5.5 Exemptions

There are no exemptions.

6.10.6 Private Health Insurance Fringe Benefit

6.10.6.1 Definitions

"Private health insurance" means subscriptions to an insurance fund that indemnifies people for health and medical related expenses.

"Private health insurance fund" is an organisation that indemnifies people against health and medical related expenses.

6.10.6.2 When?

A private health insurance fringe benefit arises when an employer, or a third party on behalf of an employer, pays or reimburses the amount of private health insurance fund subscriptions in respect of an employee or an employee’s family members including partner, children or other dependants. Payment can be directly to the employee or indirectly to the fund or another third party.

6.10.6.3 Example

6.10.6.4 Conditions

The provision of the private health insurance benefit by an employer must be because of an employee’s employment.

6.10.6.5 Exemptions

There are no exemptions.

6.10.7 Expense Payment Fringe Benefit

6.10.7.1 Definitions

Some of the most common types of expense payment include, but are not limited to, the following:

• telephone expenses;
• holiday expenses;
• medical or hospital expenses;
• union dues/professional association membership fees;
• fuel and/or power expenses, including electricity, gas, oil, firewood;
• entertainment;
• grocery bills;
• credit card accounts;
• sporting or social club fees; and
• child care or education expenses.

The amount may be for the use of the employee, his/her partner or a dependent child of the employee or his/her partner irrespective of whether it was received in Australia or overseas.

6.10.7.2 When?

An expense payment benefit arises when an employer, an associate of the employer or a third party under an arrangement with an employer pays to, or on behalf of, an employee an amount for the employee’s private, but not employment related use.

6.10.7.3 Example

6.10.7.4 What is the Value

The value of the expense benefit is the actual amount of the payment made by the employer or third party.

6.10.7.5 Exemptions

An expense benefit is exempt when the employer reimburses only employment-related expenses or where the employer enforces a policy that benefits only be used for employment related expenses.

6.10.8 Cash Management Trust and Financial Investment Fringe Benefit

6.10.8.1 Definitions

A cash management trust is a unit trust, and is usually a three-way arrangement between:

• a unit holder, who invests money by buying units in the trust;
• a trustee, who holds all the trust’s assets and receives all income from these assets; and
• a manager, who makes all investment decisions and is responsible for administration of the trust.

Unit holders’ funds are pooled with the funds of other unit holders, providing access to the short-term money market which individuals would otherwise find difficult to access.

The term ‘other financial investments’ refers to arrangements which may exist as an alternative to cash management trusts.

The amount may be for the use of the employee, his/her partner or a dependent child of the employee or his/her partner irrespective of whether it was received in Australia or overseas.

6.10.8.2 When?

A cash management trust and/or other financial investment benefit arises where an employer, an associate of the employer or a third party under an arrangement with an employer pays for, reimburses or provides, units in a cash management trust and/or other financial investment.

6.10.8.3 Cash Value

The value of the cash management trust and/or other financial investment benefit is the cash value of the benefit at the time the employee receives the benefit.

6.10.8.4 Exemptions

Employer superannuation contributions are not considered to be ‘other financial investments’.

6.10.9 Valuing Fringe Benefit

6.10.9.1 Definitions

There is a two stage approach to valuing fringe benefits for income testing purposes. Employees have the option of giving a self assessed value of their fringe benefits using the methods outlined below, or of submitting a statement from their employer giving the value used for fringe benefits tax purposes. Clients are able to value benefits on whichever basis suits them, either their assessment of the value or employer statements. They are permitted to swap between self assessment for some benefits and employer statements for others.

A fringe benefits tax year runs form 1 April to 31 March. Where clients elect to give an employer statement of the value of their fringe benefits, the relevant fringe benefits tax year is the one completed in the relevant year of income. So, for example, for a 2001 ABSTUDY assessment, the relevant year of income will ordinarily be 1999/00. The relevant fringe benefits year will be the one that ended on 31 March 2000.

6.10.9.2 Cars

A car fringe benefit must be valued according to the matrix at 6.10.10

6.10.9.3 Example

6.10.9.4 Housing

A housing fringe benefit can be valued according to the matrix or by an employer statement of the FBT value. This, for simplicity, takes no account of the exact location of the housing or local rental market conditions.

6.10.9.5 Is Housing in a Metropolitan, Non-Metropolitan or Special Location?

In the matrix, housing fringe benefits are valued according to the size and location of the housing. Housing in a metropolitan location is given a higher value than housing in a non-metropolitan location. Housing in a special location is granted more concessional treatment than either metropolitan or non-metropolitan.

6.10.9.6 What is a "Special Housing Location"?

Housing provided by employers to employees in special housing locations (ie remote) is valued concessionally in recognition of the hardship experienced by people required to live in relative isolation.

Generally, a special housing location is either a town that is in a particular location and of a particular population size, or somewhere that is a certain distance from an ‘eligible urban area’. Specifically, a location is a special housing location if it is:

• an urban centre described in Schedule 2 to the Income Tax Assessment Act 1936 (ie in Zone A or Zone B) and with a census population of less than 28,0000; or
• an urban centre not in Schedule 2, (ie not in Zone A or Zone B) and with a census population of less than 14,000; or
• more than 40 kilometres from the nearest eligible urban area with a census population of less than 130,000; or
• less than 100 kilometres from the nearest eligible urban area with a census population of more than 130,000.

6.10.9.7 Definitions: "Urban Centre" "Census Population" and "Eligible Urban Areas"

An "urban centre" is a location called an "urban centre" or "bounded locality" in the results of the Census of Population and Housing taken by the Australian statistician on 30 June 1981.

"Census population" in relation to an urban area means the census count on an actual location basis as published by the Australian Statistician on 30 June 1981.

An "eligible urban area" is either:

• an "urban centre" in Zone A or Zone B as specified in Schedule 2 of the Income Tax Assessment Act 1936 with a "census population" of 28,000 or more, or
• an "urban centre" with a population of 14,000 or more that is not located in Zone A or Zone B.

6.10.9.8 What Places Are in Zone A or Zone B?

You should contact your local branch of the Australian Taxation Office or Centrelink if you need an idea of locations within your area or region that are in Zone A or Zone B.

6.10.9.9 Value to be Reduced Because of Employee Contributions

The value of a housing fringe benefit is to be reduced by the amount of an employee’s contribution towards rent or other housing related costs.

For example, assume an employee gets a housing fringe benefit in a metropolitan area valued at $140 per week according to the table of housing values. The employee has agreed to pay $50 per week to the employer to cover house maintenance costs incurred by the employer. The value of the housing fringe benefit to be added to income will be $90 per week (ie $140 - $50).

The same employee gets the same housing fringe benefit but, in this example, pays the employer $70 per week rent. The value of the housing fringe benefit to be added to income will be $70 per week (ie $140 - $70).

6.10.9.10 Example

6.10.9.11 Australian Defence Force Housing Fringe Benefits

The Australian Defence Force (ADF) provides housing by direct leasing of houses to ADF personnel, or by subsidising an ADF family’s rental in the private market. Both of these are housing fringe benefits for ABSTUDY fringe benefits purposes.

From 9 June 1994 all Defence Force Housing is deemed to be in a "special" housing location regardless of the actual location of the housing. The value of this housing in a "special" location is $80 per week.

Defence Force families paying $80 per week or more for their ADF provided housing are deemed to receive no employer provided housing fringe benefit as their contribution is equal to, or greater than, the value of the benefit contained in 6.10.9 Valuing Fringe Benefits.

Defence Force families paying less than $80 per week for their ADF provided housing are deemed to receive a fringe benefit valued at the difference between the amount they pay and the value of the fringe benefit in the matrix. For example, a family paying $70 per week for ADF provided housing would be deemed to have a fringe benefit valued at $10 per week (ie $80 less the employee contribution of $70 per week).

6.10.9.12 Loans

The value of a low interest loan fringe benefit is calculated by reference to the difference between the "benchmark" rate of interest and the actual rate of interest applicable to the loan (where the rate of interest applicable to the loan is below the benchmark rate).

6.10.9.13 Loan Fringe Benefit Calculation

The value of a low interest loan fringe benefit can be calculated by the following formula:

[(b-a) x c] x t, where –

b = the benchmark interest rate;

a = actual interest rate paid, or being paid

c = outstanding balance of loan at start of the fringe benefit tax year; and

t = proportion of the fringe benefits tax year the client has the loan

If a fringe benefit loan starts after 1 April in the relevant year the actual interest rate and the outstanding balance to be used in the formula are the actual figures on the day on which the loan starts.

If the formula does not yield a suitable valuation, clients can choose to provide an employer statement of the FBT value.

For the purposes of the loan fringe benefits measure, the benchmark interest rates are set at 1 April each year. This coincides with the start of the fringe benefits tax year and the date on which the loan balance is taken for calculation purposes.

The benchmark interest rate is the lowest commercially available (eg. ANZ, NAB, Westpac and Commonwealth Bank) rate for the loan type.

6.10.9.14 Example

6.10.9.15 School Fees and Health Insurance

The value of a school fees and private health insurance fringe benefit is to be the actual amount paid by, or reimbursed by, the employer in respect of the school fees or private health insurance. Ordinarily, these will be provided by an employer statement. If this is not the case, ABSTUDY will accept other valuation evidence provided by the employee, such as the school’s invoice of the insurance fund’s renewal notice or invoice.

6.10.10 Matrix of Car Values

 

Size of car – up to 2851cc and over
Age of car (up to)	Period of use (months)
	1	2	3	4	5	6	7	8	9	10	11	12
1 Year	354	708	1063	1417	1771	2125	2479	2833	3188	3542	3896	4650
2 Years	327	656	984	1313	1641	1969	2297	2625	2953	3281	3609	3938
3 Years	302	604	906	1208	1510	1813	2115	2417	2719	3021	3323	3625
4 Years	276	552	828	1104	1380	1656	1932	2208	2484	2760	3036	3313
5 Years	250	500	750	1000	1250	1500	1750	2000	2250	2500	2750	3000
6 Years	224	448	672	896	1120	1344	1568	1792	2016	2240	2464	2688
7 Years	198	396	594	792	990	1188	1385	1583	1781	1979	2177	2375
8 Years	172	344	516	688	859	1031	1203	1375	1547	1719	1891	2063
9 Years	146	292	438	583	729	875	1021	1167	1313	1458	1604	1750
10+ Years	120	240	359	479	599	719	839	958	1078	1198	1318	1438

6.10.11 Matrix of Housing Values

 

Type of Accommodation
Location	3 or more bedrooms	1 or 2 bedrooms	Any other unit of accommodation
Metropolitan	$140 / week	$120 / week	$85 / week
Non-metropolitan	$100 / week	$90 / week	$70 / week
Special Housing	$80 / week	$80 / week	$25 / week
Outside Australia	$140 / week	$120 / week	$85 / week

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