In his 2012/13 Mid-Year Economic and Fiscal Outlook (MYEFO)
review released on Monday 22 October 2012, the Treasurer Hon. Wayne
Swan announced the removal of concessional fringe benefits tax
(FBT) treatment for 'in-house' fringe benefits where it is
accessed by way of a salary sacrifice arrangement.
In-house fringe benefits arise when employees receive goods or
services from their employer that are identical or similar to those
offered to members of the general public in its ordinary course of
Structured appropriately, the employer could access a fringe
benefits tax (FBT) concession where by the taxable value of
in-house fringe benefits is 75% of the lowest price the identical
benefits sold to the general public or under an arm's length
transaction. Further, the taxable value of the in-house fringe
benefits could also be reduced by a further $1,000 upon meeting
Employers administering programs involving in-house fringe
benefits would typically incorporate salary sacrifice arrangements
with the view of maximising the benefits to employees at minimal
As part of an overall response to falling government revenue,
the Federal Government expects that the proposed measure would
raise $445 million in revenue, as well as an increase in GST
payments to the States and Territories of $85 million, over the
forward estimates period of 4 years.
It has been proposed that the measures would apply from 22
October 2012 for salary sacrifice arrangements entered into
subsequent to the announcement, or from 1 April 2014 for salary
sacrifice arrangements entered prior to the announcement.
In making the announcement, the Federal Government has trumpeted
that such measures reflect "Labor values" and are aimed
at protecting low and middle-income earners.
However, it is our view the proposed measures are at best,
short-sighted and misguided. There is also a lack of clarity
surrounding how pre-existing salary sacrifice arrangements will be
Moore Stephens has provided advice in this area and administered
in-house benefits programs for employers. It is evident that such
programs are most beneficial and especially popular amongst
employees with taxable income range that would be subject to
marginal tax rates of 20.5% and 34% (including Medicare Levy)
– purportedly the exact class of employees the Federal
Government seeking to "protect".
Rather than furthering their interests, it is our suggestion
that pursuit of such a policy will have adversely impact low and
middle-income earners and devastate employers who are already
struggling for sale in this tough economic climate.
The income tax treatment of any property lease incentive will vary, depending on the nature of the inducement provided.
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