Improving the fairness of ‘meal entertainment’ benefits

Generous  fringe  benefits  tax (FBT) exemptions  or rebates are available for not-for-profit  and public health sector workers. In addition, these employees have been able to salary package a range of benefits not available to other taxpayers. These ‘meal entertainment’ benefits include holidays, cruises, weddings, and meals and alcohol in restaurants. The benefits are not capped and not reportable for FBT or for other government  tax and transfer payment income tests. These benefits will now be subject to a new reportable grossed-up exemption cap of $5,000, which improves fairness in the taxation system.

The overall FBT exemptions for these employees will remain more generous than other employee groups.

Better targeting the Zone Tax Offset (ZTO)

Fly-in  fly-out  (FIFO) and drive-in drive-out workers will no longer be eligible for the ZTO. The ZTO was originally introduced to compensate residents for the disadvantages of an uncongenial climate, isolation and high cost of living in remote areas.

Excluding workers whose normal residence is not in these areas will better target the ZTO to the taxpayers who have taken up genuine residence within these zones. For example, someone who lives with their family in Perth but has a FIFO job in the Pilbara will no longer be eligible to claim the ZTO.

Non-resident tax treatment for working holiday makers

The Government will change the tax residency rules to treat most working holiday makers temporarily in Australia as non-residents for tax purposes. Therefore, they will no longer be able to access the tax-free threshold.

This will ensure that these people are taxed at 32.5 per cent from their first dollar of income up to $80,000.

The 2015 Budget includes measures to improve our personal income tax system by reforming the salary sacrificed ‘meal entertainment’ benefits, Zone Tax Offset and tax residency rules