Claiming input credits for mobile phones provided as fringe benefits
22 February 2006
In an FBT/GST ALERT issued earlier this month, we brought your attention to a letter being circulated by a telephone provider containing information to the effect that employers were NOT entitled to claim input credits in certain circumstances. Specifically, this letter suggested that employers were not entitled to claim input credits where the benefits were exempt from FBT and where an employee made a recipient’s contribution for the private portion of the mobile phone usage.
The correct position is that employers ARE entitled to input credits in these circumstances.
The ‘confusion’ has arisen from an interpretation of a single paragraph contained in a public ruling (GSTR 2001/3 – The GST consequences of providing fringe benefits).
Paragraph 15 of that ruling explains what constitutes a fringe benefit for the purpose of claiming input credits. The paragraph reads:
‘ 15. For GST purposes, fringe benefit 'has the meaning given by section 995-1 of the ITAA 1997 but includes a benefit within the meaning of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 that is an exempt benefit for the purposes of that Act. The FBTAA specifically excludes exempt benefits from the definition of 'fringe benefit' in that Act. In this Ruling, unless otherwise indicated, 'fringe benefit' means a fringe benefit as defined in the GST Act.’
Our view is that this paragraph clearly indicates that for the purpose of claiming input credits, exempt fringe benefits are included in the concept of fringe benefits. By virtue of this inclusion, employers can claim input credits, irrespective of the fact that the benefit is an exempt benefit.
The authors of the letter, on the advice of their advisors took the view that ‘exempt benefits’ such as mobile phones are NOT fringe benefits for the purposes of GSTR 2001/3 and the FBT/GST areas of interaction generally. Their view was that:
“Paragraph 15 of GST 2001/3 makes it clear that for the purposes of the ruling the ATO takes its definition of "fringe benefit" from the FBT Act. Under section 136 of the FBT Act "exempt benefits" are expressly not "fringe benefits".
We believe this to be an incorrect interpretation.
This issue will be discussed at the upcoming FBT seminar series. Subscribers may of course, pose questions through the normal web procedure. We would welcome any views you may hold.