Publication date: 10 Mar 98 |
Source: THE TAX INSTITUTE
The Taxation Institute of Australia has recommended the Federal Government abolish the
fringe benefits tax which has eroded small business confidence since its introduction in the
mid 1980's and replace it with workable income tax law on employee benefits.
This recommendation forms an integral part of a submission on overall tax reform put
forward by the Taxation Institute to the Gibson Committee titled Tax Reform in Australia.
"Fringe benefits tax is without doubt the most unpopular tax introduced in the last 20 years. It
also has unreasonably high costs of compliance, representing 10.5% of revenue collected
from the tax," said Taxation Institute of Australia Tax Technical Director, Ms Annamaria
"The legislation is incredibly detailed including over 100 pages of definitions and other
interpretive provisions which have led to these high compliance costs and some ludicrous
cases of taxable benefits," she said.
Some of these examples include the case of an employee working (unpaid) on a weekend who
might use lavatory facilities at their workplace. The employee's consumption of toilet paper
and soap is subject to FBT in this situation. Another example is a salesman who is given a
laptop computer, printer and modem so that he can work 'on the road'. In this situation, FBT
will be payable on the printer and modem, even though the provision of the laptop computer is
"The repeal of this hated fringe benefits tax would certainly go a long way toward restoring
small business confidence," said Ms Carey.
The Taxation Institute advocates an income tax law which taxes employees on benefits
received from employment with the following features:
- simple readable law which is not overly prescriptive;
- taxes specific benefits only - those which might be loosely termed 'salary packaging'
such as cars, non-remote housing and personal expenses such as telephone bills and
- all specifically taxed items would appear on an employee's PAYE group certificate;
- reasonable living-away-from-home allowances paid in cash would be exempt from tax;
- all other benefits from the employer would be tax free; and
- employees take responsibility for their own income (both cash and non-cash) and have
a full understanding of how they are taxed.
"This model is an equitable basis upon which to rebuild the taxation of employee benefits," Ms
"The Taxation Institute strongly recommends that the Government seriously considers this
proposal. Only bold action will restore sense to this already too complex but very important
area of the law," she said.