Private ruling: Otherwise deductible rule
Published: November 2014
Ruling period: 1 April 2014 to 31 March 2017.
Date scheme commenced: 1 April 2014.

Ruling: Q1: Is a reduction in taxable value available under the otherwise deductible rule pursuant to section 24 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986), for the expenditure incurred by an employee and reimbursed by the employer? | A1: Yes | Q2: Where the expenditure incurred by an employee and reimbursed by the employer consists of two separate components can the taxable value of the total expenditure be reduced by the otherwise deductible rule pursuant to section 24 of the FBTAA 1986? | A2: Not applicable

Relevant facts and circumstances: An employee has incurred expenses. The employer reimburses the employee for the expense incurred and includes the full amount as an expense payment fringe benefit in the relevant year's fringe benefits tax return. The employer treats the reimbursement of the advertising expenditure as fully taxable for FBT. The employer has an Expense Reimbursement Policy.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Section 24. | Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Summary: Under Section 24 of the FBTAA 1986 the taxable value of a benefit may be reduced by the amount an employee would have been entitled to claim as income tax deduction in their personal income tax return if the benefit was not paid for, reimbursed or provided by the employer. The employee has incurred expenses in the course of gaining or producing their assessable income. As the expenses have been incurred by the employee in gaining or producing their assessable income, these expenses would be deductible to the employee in their personal income tax return under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997), if the employer did not reimburse the expense. The employer reimburses the employee for the expense incurred. Therefore section 24 of the FBTAA 1986 applies to reduce the taxable value of the expenditure incurred by the employee and reimbursed by the employer.