Reasonable benefit limits (RBL): RBL Determination

Are various allowances received by the taxpayer 'salary' within the definition of that term for the purposes of regulation 47 of the Income Tax Regulations (ITR), and therefore included in the calculation of the Highest Average Salary (HAS) of the taxpayer in determining the taxpayer's transitional RBL?

Only the 'allowances' which would have been included in the taxpayer's assessable income, if they had been paid in Australia, are 'salary' for the purposes of regulation 47 of the ITR. Other allowances, which would have been classified as fringe benefits had the payments been made in Australia, are not 'salary' for the purposes of calculating the HAS.

The taxpayer worked overseas for three consecutive years. During the three year period the taxpayer received several 'allowances' from the employer some of which would have been included in the taxpayer's assessable income if they had been paid in Australia (e.g. a resettlement allowance). Some of the other allowances would have been classified as fringe benefits if they had been paid in Australia (e.g. reimbursement of private motor vehicle expenses).

Subregulation 47(1) of the ITR defines 'salary' to include salary, wages, commissions, bonuses, fees, allowances or gratuities, and also to include benefits to which sections 57, 57A or 58 of the Fringe Benefits Tax Assessment Act 1986 (FBTAA 1986) apply. Paragraph 47(1)(d) of ITR further provides that the term 'salary' also includes, in the case of a person who is an Australian citizen or a resident of Australia, any amounts paid to the person from a source outside Australia that would fall within the definition if they had been paid from a source in Australia. Paragraph 47(1)(f) of ITR excludes from the definition of 'salary' allowances covering expenses incurred on behalf of the person's employer or business, that is, reimbursements.

The definition of 'salary' in subregulation 47(1) ITR differentiates between 'allowances' and 'benefits' to only allow specific fringe benefits to be included in the scope of the term 'salary'. The benefits covered by sections 57, 57A and 58 of the FBTAA 1986 cover benefits paid to employees of religious institutions, public benevolent institutions and other organisations that care for the aged and disadvantaged. Other fringe benefits are not included in the meaning of the term 'salary' for RBL purposes.

This interpretation of the definition of 'salary' for the purposes of subregulation 47(1) of the ITR for HAS purposes is further supported by provisions of the Occupational Superannuation Standards Regulations (OSSR) which are similar in effect to the ITR. The Explanatory Statement to the OSSR highlights the fact that fringe benefits, (other than the fringe benefits covered by sections 57, 57A and 58 of the FBTAA 1986), are not to be included in 'salary' for RBL purposes.