24 Oct 13 FBT: otherwise deductible rules and Div 35 ITAA 1997 - TR 2013/6
On 23 October 2013, the ATO issued Taxation Ruling TR 2013/6 entitled "Fringe benefits tax: otherwise deductible rules and Division 35 of the Income Tax Assessment Act 1997".
It was previously released in draft form as TR 2013/D1.
The Ruling sets out the Commissioner's views on whether a 'once-only deduction' arises in calculating the taxable value of an 'external expense payment fringe benefit' under s 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA) where the expenditure associated with that fringe benefit would be subject to the loss deferral rule in s 35-10(2) of Division 35 of ITAA 1997. Division 35 of ITAA 1997 is concerned with the deferral of losses from non-commercial business activities.
Specifically, the Ruling considers:
- whether the terms 'deduction' and 'allowable' in both the definition of 'once-only deduction' in s 136(1) and in s 24 FBTAA refer to a deduction allowable under a specific provision or to a deduction taken into account in calculating taxable income under s 4-15 ITAA 1997; and
- whether expenditure - which, had it been incurred by the recipient of an external expense payment fringe benefit and not reimbursed, would have been affected by the loss deferral rule in s 35-10(2) ITAA 1997 - can ever give rise to a 'once-only deduction' (as defined in subsection 136(1) FBTAA).
In relation to the first issue, the Ruling states that "the terms 'deduction' and 'allowable' refer to amounts which qualify as deductions under s 4-15 ITAA 1997 in the calculation of the employee's taxable income."
In relation to the second issue, the Ruling states that "(e)xpenditure (including an employee's expenditure in respect of an external expense payment fringe benefit) that is hypothetically affected by the loss deferral rule in s 35-10(2) ITAA 1997...[will] never give rise to a 'once-only deduction', for the purposes of s 24."
Note that Taxation Determination TD 2013/20, issued on the same day, considers the effect of providing an expense payment fringe benefit under a salary sacrifice (or similar) arrangement on the 'income requirement' in s 35-10(2E) ITAA 1997, when applying the 'otherwise deductible rule' in s 24.