Private ruling: Written agreement under subsection 135X(3) of the Fringe Benefits Tax Assessment Act 1986
Date of advice: 23 December 2020
Published: March 2021
Ruling period: This agreement applies for the FBT year ended 31 March 20XX and subsequent years in which the previous employers would have been able to use the relevant records.

Ruling: Q1: Will the Commissioner enter into an agreement with a state government and the relevant statutory authorities in respect of the matters listed in subsection 135X(3) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA)? | A1: Yes

Relevant facts and circumstances: A number of employers underwent a reorganisation and their employees were transferred to other nominated State or Territory bodies and/or statutory authorities. As the change in employer will affect the calculation of the taxable value of certain fringe benefits, the state government is seeking to enter into a written agreement under subsection 135X(3) of the FBTAA to enable these employers to: 1. treat a year which would have been a log book year of tax for the previous employer as a log book year for the purpose of using section 10 of the FBTAA to calculate the taxable value of a car fringe benefit 2. treat a year of tax that would have been a base year of tax for the previous employer as a base year for the purpose of calculating the taxable value of a housing fringe benefit under section 26 of the FBTAA 3. treat a register that would have been a valid register for the previous employer as a valid register for the purpose of using the 12 week record keeping method in Subdivision D of Division 10A of the FBTAA to calculate the taxable value of car parking fringe benefits 4. treat a benefit relating to the relocation of an employee that would have been an exempt benefit for the previous employer under sections 58B, 58C or 58D of the FBTAA as an exempt benefit 5. treat a benefit relating to trainees engaged under the Australian traineeship system that would have been an exempt benefit for the previous employer under section 58S of the FBTAA as an exempt benefit 6. use the end date that would have been used by the previous employer for the purpose of calculating the amortisation of the taxable value of fringe benefits relating to a remote area home ownership scheme under section 65CA of the FBTAA, and 7. use a recurring fringe benefit declaration which would have applied if the employer had not changed under section 152A of the FBTAA.

Relevant legislative provisions: Fringe Benefits Tax Assessment Act 1986 Section 135S | Fringe Benefits Tax Assessment Act 1986 Section 135U | Fringe Benefits Tax Assessment Act 1986 Section 135X

Reasons for decision: Summary: The Commissioner agrees to enter into an agreement with the state government and the relevant statutory authorities to enable the nominated State or Territory bodies and statutory authorities to treat: • a year of tax currently being treated as a log book year by the previous employers as a log book year for the purposes of calculating the taxable value of a car fringe benefit using the cost basis • a year of tax currently treated as a base year of tax by the previous employers as a base year for the purpose of calculating the taxable value of a housing fringe benefit • a register kept by the previous employers in relation to the value of car parking fringe benefits as a valid register • a benefit currently being treated by the previous employers as an exempt benefit as a result of the relocation of an employee as an exempt benefit • a benefit currently being treated by the previous employers as an exempt benefit in relation to trainees engaged under the Australian traineeship systems as an exempt benefit • a fringe benefit currently being treated by the previous employers as an amortised fringe benefit relating to remote area home schemes as an amortised fringe benefit, and • a benefit as covered by a recurring fringe benefit declaration which would have been applied if the employer had not changed. | Detailed Reasoning - Detailed reasoning: Section 135X of the FBTAA enables the Commissioner to enter into a written agreement with a State or Territory regarding the application of certain provisions in certain circumstances. Paragraph 2.45 of the Explanatory Memorandum to Taxation Laws Amendment Act (No. 2) 2001 , which inserted section 135X into the FBTAA, states that the section had two objects, being to: • ensure the calculation of certain fringe benefits is not affected as a result of a break in the continuity of certain record keeping requirements solely because of a 'transitional event', and • preserve the character of certain benefits where the character would otherwise be lost solely because of a 'transitional event'. Subsection 135X(2) of the FBTAA states a 'transitional event' occurs if: (a) a State or Territory makes a nomination under section 135S; or (b) a State or Territory varies a nomination under section 135S; or (c) a State or Territory revokes a nomination under section 135S; or (d) a nominated State or Territory body ceases to exist. Technically, a transitional event under subsection 135X(2) of the FBTAA does not occur when employees transfer from one existing nominated State or Territory body to another or when employees transfer from a nominated State or Territory body to a statutory authority or between statutory authorities. Nevertheless, it is accepted that the changes occur as part of Machinery of Government changes that are similar to those technically covered by subsection 135X(2) of the FBTAA. Additionally, subsection 135U(4) of the FBTAA states that any right that would be conferred, or obligation that would be imposed, on the nominated State or Territory body resulting from a change in employer, instead be conferred or imposed on the State or the Territory. Therefore, regardless of the transfer of employers, the ultimate legal entity responsible for the employees, the state government, has remained unchanged. Further, there is nothing to indicate that the taxable values will differ provided the records that are kept are the same as the records that would have been kept if the transfer had not occurred. Consequently, it is considered appropriate for an agreement to be entered into in relation to the matters listed in subsection 135X(3) of the FBTAA. However, it is expected that the nominated bodies and/or statutory bodies to which the employees were transferred ensure their notional tax for the 20XX FBT year includes the notional tax that would otherwise be paid by the original nominated bodies and/or statutory bodies if a change had not occurred.