Issue
Whether an employer who pays the income tax liability of an expatriate employee is able to treat the employee's income tax refund as a "recipient's contribution" under subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986 (FBTAA).
Decision
No. A refund of the expatriate employee's income tax, paid by the employer, is not a "recipients contribution" under subsection 136(1) of the FBTAA. However, the refund will reduce the taxable value of the residual fringe benefit that arose from the payment of the employee's income tax under section 50 of the FBTAA.
Facts
The employer was the host entity of a number of expatriate employees.
The expatriate employees were remunerated on a net salary basis with the host entity paying the employee's income tax obligations.
A formal agreement with the expatriate employees provided for income tax refunds to be returned to the host entity.
No tax instalments were deducted from salary paid to the expatriate employee, but provisional tax instalments were paid.
The employer received an income tax refund from the final income tax return lodged by the expatriate employee.
Reasons for Decision
The term "recipients contribution" is defined in subsection 136(1) of the FBTAA as the amount of any consideration paid to the employer in respect of the provision of the recipients benefit.
A refund resulted from the lodgement of the final income tax return of the employee as the provisional tax instalments paid exceeded the employee's income tax liability for the year. The refund does not constitute consideration paid by the employee to the employer, so it will not be a "recipients contribution".
However, the income tax refund will reduce the taxable value of the residual fringe benefit that arose from the payment of the employee's income tax liability under section 50 of the FBTAA.
Amendment History
Date of Amendment Part Comment 24 April 2026 Note at start of ATO ID Updated to remove the reference to tax treaties because they are not mentioned in the reasoning for this ATO ID. 24 April 2026 Business line Updated to SEO 6 April 2018 Title, Issue Minor punctuation and formatting amendments
Date of Amendment | Part | Comment
24 April 2026 | Note at start of ATO ID | Updated to remove the reference to tax treaties because they are not mentioned in the reasoning for this ATO ID.
24 April 2026 | Business line | Updated to SEO
6 April 2018 | Title, Issue | Minor punctuation and formatting amendments