Burnt by the budget? Government invites submissions on budget changes to FBT on loans over jointly held assets

The Treasurer announced in the May 2008 Budget that the fringe benefits tax (FBT) law will be amended to ensure that a benefit that has been provided to both an employee and an associate in relation to a jointly held asset will be subject to FBT (see the report in the June edition of GuerdonNews® HERE).

This change will restore the established principle that income and deductions from jointly held assets should be allocated according to each owner’s legal interest in the asset and restore equity of treatment between taxpayers who incur expenses on jointly held investment properties.  It will overcome the decision in National Australia Bank v Federal Commissioner of Taxation 93 ATC 4919 (see http://law.ato.gov.au/atolaw/view.htm?locid=’JUD/93ATC4914’&PiT=20070725000001), which resulted in an anomaly with the “otherwise deductible” rule in the FBT law by allowing a spouse on a higher income to salary package 100% of the expenses on a jointly held asset and therefore effectively also claim the proportion of expenses related to the low income earning spouse.

This change will generally apply to new arrangements from 7.30 pm (AEST) on Budget night 13 May 2008.  Employers and employees have until the end of the current FBT year on 31 March 2009 to unwind existing salary sacrifice arrangements involving jointly held investment assets. 

Transitional arrangements will try to deal with the thousands of mainly mid level bank employees, as well as some executives, caught with subsidised housing cum investment loans in their packages.  With the imposition of FBT on these arrangements by April 2009 many employees may be negatively impacted in trying to rearrange their financial affairs, given the current housing market.

In a press release issued by Assistant Treasurer Chris Bowen (see HERE), the government is now inviting submissions on transitional arrangements that may be required in respect of employees with existing loans and, in particular, on whether there will be enough time to alter these arrangements by the current 31 March 2009 deadline. 

Submissions should be provided by 18 August 2008, to:

Philanthropy & Exemptions Unit
Personal & Retirement Income Division
The Treasury
Langton Crescent

or by email to FBTjointlyheldassets@treasury.gov.au

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