ATO ID 2005/210: Employee contributions: excess contributions used in a later FBT year
Date of decision: 9 March 2005
Year of income: Year ended 31 March 2005
Business line: Superannuation and Employer Obligations

Issue
If an employee makes contributions to an employer from after-tax salary income, that are in excess of the recipient's payment required to reduce the taxable value of a car fringe benefit to nil under subparagraph 9(2)(e)(i) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA), can those excess amounts be applied to a fringe benefit provided in a later FBT year?

Decision
Yes. Where there is a remuneration agreement in place between the employer and employee to make recipient's payments under subparagraph 9(2)(e)(i) of the FBTAA to the extent of the taxable value of the fringe benefit, excess amounts may be set aside for a later FBT year.

Facts
An employer has a salary sacrifice arrangement (SSA) in place with an employee, under which the employee is provided with the use of a car. The employer chooses to use the statutory formula method of calculating the taxable value of car fringe benefits for this car. Under a separate remuneration arrangement, the employee agrees to make recipient's payments, being from after-tax salary income, to the extent of reducing the taxable value of any car fringe benefits to nil. The employee makes contributions to the employer that are in excess of the amount required to reduce the taxable value of the car fringe benefits to nil. Under the remuneration arrangement the excess amount of contributions paid by the employee are held by the employer until the following FBT year, when they can be applied against the taxable value of the employee's car fringe benefits in that year.

Reasons for decision
Summary: Under subsection 9(1) of the FBTAA the taxable value of car fringe benefits calculated under the statutory formula method, can be reduced by the amount of the recipient's payment. Subparagraph 9(2)(e)(i) of the FBTAA then explains that the recipient's payment is the amount of the consideration paid to the employer by the employee in respect of the provision of the car fringe benefits. Where a remuneration arrangement entered into between an employer and employee requires that the employee makes contributions, from after-tax salary income, to the extent of reducing the taxable value of any car fringe benefits to nil, only these amounts can be regarded as consideration for the provision of the car fringe benefits, due to the remuneration agreement that is in place. Amounts that are paid to the employer in excess of these amounts are not recipient's payments in this year, and can be either refunded to the employee, or dealt with as agreed between the employer and employee, including being set aside for a later FBT year.

Legislative references: Fringe Benefits Tax Assessment Act 1986 subsection 9(1) paragraph 9(2)(e)
Subject references: FBT employee contributions Fringe benefits tax Recipients contributions Recipients payment