ap_all01

Allowances, benefits, earnings, tips, director's fees, etc.

Allowances, benefits, earnings, etc but not fringe benefits

Some of the amounts which will be returned as allowances, etc

Receipts which accrue by virtue of a taxpayer's employment

Section 26 e of the Assessment Act -

You will now be aware that unless specifically exempted, any receipt, which would come within the accepted usage of the word 'income', will be included in assessable income

However there are provisions of the Act which nominate specific receipts which will be included in assessable income whether or not they would be considered to be within the meaning of that word, according to its general usage.

Sec 26(e) includes in assessable income the value to the taxpayer of ....

Allowances, gratuities, compensations, benefits, bonuses, premiums

given or granted

in respect of ..Or for ..Or in relation to

any employment ... Or services rendered

whether in the form of ...Money, goods, land, meals, sustenance, use of premises or quarters ...Or otherwise

Not being ...

(i) An eligible termination payment -

(ii) An amount to which sec 26AC or 26AD applies

(these are dealt with at items 4 & 5, and you can find out more about them there. Not to put too fine a point on it, they are payments received on leaving a job)

(iii) An amount that, under any provision of this Act, is deemed to be a dividend

(v) A fringe benefit within the meaning of the Fringe Benefits Tax Assessment Act 1986 (We will paraphrase this one to make it a bit more readable) ...

A benefit that would be a fringe benefit if it was not exempted from being a fringe benefit by the Fringe Benefits Act

Payments made voluntarily would not usually be considered to be income - for example - Christmas presents. Lets work through all that, taking as an example a Christmas hamper an employer gives to his staff members.

Is the hamper a gratuity - or gift of goods in relation to employment? YES!

allowances, gratuities, compensations, benefits, bonuses, premiums

given or granted in respect of ..Or for ..Or in relation to any employment or services rendered YES!

whether in the form of money, goods, land, meals, sustenance, use of premises/quarters or otherwise YES!

other than .....

....... A fringe benefit within the meaning of the Fringe Benefits Act 1986

We have an exception here!

Fringe benefit includes free or discounted property ... Sec 40 of the Fringe Benefits Act states ...

Where, at a particular time, a person ... Provides property ... To another person ..., The provision of the property shall be taken to constitute a benefit by the provider to the recipient at that time.
So the hampers would not be included in assessable income under sec 26e

The presence of some obligation to make the payment may suggest it is income.

However see if you can think of a voluntary payment which would be in the nature of income?

What about tips paid to a waiter?

They are considered to have the nature of income, because they accrue to waiter by virtue of his of his office or employment.

In other words, what must be considered is 'whether the receipt is the product, in a real sense, of any employment of, or services rendered by the recipient, or of any business, or indeed of any revenue producing activity carried on by him. (Refer Bowen CJ at 4249, FC of T v Harris 80 ATC 4238 - refer CCH Master Tax Guide para 10-010).

The waiter would not get them unless he was employed as a waiter in the first place. They arise from the activities performed as part of that employment.

Refer CCH Master Tax Guide para 10-070 for a discussion of this matter if you are interested.

Allowances, benefits, earnings, etc

but not fringe benefits

This item is the place to return the value to the taxpayer of any

allowance,

gratuity,

compensation,

benefit,

bonus or

premium

received in connection with employment or services rendered

In other words, anything you get from your employer, other than salary and wages, must be returned.... Unless ...It is an allowance or benefit subject to fringe benefits tax.

So, if your employer has paid fringe benefits tax on the allowance, it need not be returned here.

In fact section 23L exempts amounts upon which employers have paid fringe benefits tax.

So what are the allowances and benefits subject to fringe benefits tax? (paragraph numbers refer to CCH Master Tax Guide)

private use of a motor vehicle provided by your employer (35-140)

car parking benefits (35-252)

debt waiver benefits (35-310)

interest free or low interest loans (35-270)

payment or reimbursement of private expenses (35-320)

release from payment of a debt (35-310)

accommodation provided by an employer (35-370)

most living-away-from-home allowances (35-450)

air fare discounts provided to employees of airlines or travel agencies (35-620)

board (35-630)

entertainment provided by a tax exempt employer to benefit employee (35-640)

meal entertainment fringe benefits (35-617)

free or discounted goods or other property (35-480)

any other non-cash fringe benefit ... Including ... Services and use of property (35-560)

So what does that leave?

Allowances, etc, paid to employees, which are salary or wages for Pay As You Earn purposes (amounts from which tax instalment deductions must be made) are assessable under section 26e and not the Fringe Benefits Tax legislation.

A good rule of thumb is...

if it is a reimbursement of the exact amount of some expenditure, it will not be included in the assessable income of the taxpayer.

if it is described by one of the above categories, it may be a fringe benefit.

If it is a payment of some definite, predetermined amount to cover an estimated expense, regardless of whether the employee incurs the expense or not, it is included in assessable income by sec 26e

(Tax Ruling TR 92/15) - refer para 10-060 of the CCH Master Tax Guide

Some of the amounts which will be returned as allowances, etc

What amounts are caught by section 26e? Refer para 10-060 of the CCH Master Tax Guide

Cash allowances paid to employees such as overtime payments, travel allowances - refer tax ruling IT 2543), uniform allowances,

Payments as compensation for accelerated depreciation of personal and/or household effects as a result of relocation of employment (tax ruling IT 2614)

So called reimbursements of employee removal and storage expenses which do not require vouching, or allow the employee to retain the excess over the vouched amounts (IT 2614)

Housing allowance subsidy paid in respect of principle residence (TD 93/55)

Allowance for the cost of travel to and from work and vacation travel (Roads and Traffic Authority of NSW)

Compensation to an employee for the loss of a rostered day off (case Z9, 92 ATC 144)

Employee's suggestion award scheme prizes (case V76, 88 ATC)

Location allowances paid to attract employees to live and work in remote areas (case Y51, 91 ATC 453) - be careful not to confuse this with LIVING AWAY FROM HOME ALLOWANCES which are treated as FRINGE BENEFITS.

Tax Ruling TR 92/15 interprets exact reimbursements as FRINGE BENEFITS and a predetermined amount to cover estimated expenses as assessable under sec 26e. (Tax Ruling 2614 - CCH Master Tax Guide - para 10-060)