The purpose of this Circular is to alert employees to changes to fringe benefits tax (FBT) arrangements.

Recent changes to FBT require employers to collate and distribute certain fringe benefits on a per employee basis. Where the taxable value of the benefits for an employee exceeds $1,000 for the fringe benefits year (1 April to 31 March) the "grossed up" value is to be shown on the employee's next Group Certificate. The "grossed up" value is currently the taxable value of the benefits times 1.94175. This factor allows for the income tax that would have been paid had the employee received cash salary.

The Australian Taxation Office has advised that these changes improve the equity of the tax and social security systems. Previously, employees with access to salary packaging could avoid certain surcharges, levies and other obligations and/or gain access to Government benefits provided for low income earners.

Employers are still liable for payment of FBT. No additional income tax is payable by employees. However, the amount shown on the Group Certificate, known as the "Reportable Fringe Benefits Amount", will be used to determine an employee's:

deductions and rebates for personal superannuation contributions;
liability to superannuation, medicare levy and termination payment surcharges;
entitlement to income tested government benefits and concessions; and
obligations under the child support and higher education contribution schemes.
The changes are effective from 1 April 1999. Therefore, Group Certificates for the 1999/2000 income year will be affected.

 To assist those Departments and agencies that have not already alerted employees to the implications of the changes, an information sheet for distribution to employees is attached. Where appropriate, translation into relevant ethnic languages should be arranged.

To facilitate the management of these changed procedures, the Treasury has provided training and information sessions to FBT and payroll personnel within agencies forming part of the State employer under the legislation. Further technical details concerning FBT will be the subject of future Treasury Circulars.

Any enquiries on the employee relations aspects of these changes to FBT can be directed to your Public Sector Management Office, Employee Relations Division, Client Contact Officer.

C. Gellatly
Director-General