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DRAFT Recovery of Fringe
Benefits Tax arising from Salary Sacrifice
Policy Directive
Version No.: 2.0 Approval date: xxxxx
Policy Classification: SENSITIVE: LEGAL-I2-A1 Policy No: xxx xxxx
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SENSITIVE: LEGAL-I2-A1
Contents
1. Policy Statement ................................................................................................................... 3 1.1. Scope ............................................................................................................................. 3
2. Roles and Responsibilities ................................................................................................... 3 2.1. SA Health Taxation Services ........................................................................................... 3 2.2. Third Party Provider (Maxxia) .......................................................................................... 4 2.3. Employees ...................................................................................................................... 4 2.4. Shared Services SA – Payroll ......................................................................................... 4
3. Policy Requirements ............................................................................................................. 5 3.1. FBT shortfall ................................................................................................................... 5 3.2. FBT recovery .................................................................................................................. 5 3.3. FBT shortfall thresholds .................................................................................................. 7 3.4. Payroll recovery options .................................................................................................. 7
4. Implementation and Monitoring ........................................................................................... 7 5. National Safety and Quality Health Services Standards ..................................................... 8 6. Definitions ............................................................................................................................. 8 7. Associated Policy Directive/Policy Guidelines and Resources ......................................... 9 8. Document Ownership and History ....................................................................................... 9
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Recovery of Fringe Benefits Tax arising from Salary Sacrifice Policy Directive
1. Policy Statement
The purpose of this policy directive is to explain that employees who engage in salary
packaging arrangements are liable for, and must pay, any Fringe Benefits Tax (FBT) shortfall
that arises when the capped FBT exemption amount has been exceeded.
1.1. Scope
This policy directive applies to all SA Health employees, current and former, who have
engaged in salary packaging arrangements under South Australian Government Salary
Sacrifice Arrangements (SAGSSA).
Employees under the old Medical Officers Specific Salary Sacrifice Scheme (MOSSSS) are
not included in this policy directive as that scheme is no longer available to new entrants. All
new Medical Officer Employees will utilise the SAGSSA for their salary packaging
arrangements; and under this arrangement, this policy directive is applicable.
2. Roles and Responsibilities
2.1. SA Health Taxation Services
Taxation Services is responsible for:
ensuring Maxxia is required to perform certain tasks and responsibilities, as outlined
in accordance with this policy directive and the Service Level Agreement (SLA)
being the contact and providing information to employee enquiries relating to FBT
shortfalls
reviewing employee queries and disputes regarding the calculation of an FBT shortfall
arising from salary packaging
ensuring an FBT shortfall is recovered from an employee where required
following up an FBT shortfall which is a result of incorrect information provided by
Maxxia, or due to an incorrect process that has been applied
determining whether financial hardship cases result in modified payment amounts
sending Payroll Deduction forms to Shared Services SA (SSSA)-Payroll to
commence deductions for current employees and monitoring and liaising with SSSA-
Payroll to resolve queries
organising a post-tax invoice through SSSA-Accounts Receivable for former
employees, when required
presenting site Chief Finance Officers (CFO) / SAAS Finance Director with a list of
employees with an FBT shortfall over $100 for their review, prior to sending them to
Maxxia for initial contact
requesting Maxxia to automatically deduct small shortfalls between $3 and up to $100
from employee’s salary packages after first giving staff an opportunity to query the
deduction
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resolving residual cases and non-responders referred back to it by Maxxia or
employees directly, and
providing monthly updates to SSSA-Payroll to add flags in CHRIS 21 to indicate
unacknowledged FBT shortfalls, to put measures in place to reduce the risk of
employees leaving employment with a debt owed to the SA Government.
2.2. Third Party Provider (Maxxia)
Maxxia, as SA Health’s third party provider, will be responsible for:
ensuring, that all tasks and responsibilities, as outlined in the SLA between the SA
Government and Maxxia, are performed as per the Agreement
ensuring that all FBT it collects is provided to SA Health in a timely manner, and
advising Taxation Services when payments are made
automatically deducting shortfalls between $3 and up to $100 from employee’s salary
packages, after initially advising employees of the expected deduction date and
amount to be deducted
providing verbal and written notice to employees requiring FBT recovery, resulting
from SAGSSA salary packaging as required, within the specified timeframe
sending payroll deduction forms to employees with FBT shortfalls over $100
sending returned forms to Taxation Services, and
providing non responders’ details or employees with a further dispute back to
Taxation Services for resolution.
2.3. Employees
Employees are responsible for:
ensuring they take into account employer provided fringe benefits when undertaking a
salary sacrifice arrangement
acknowledging their FBT shortfall formally, in writing, within 21 days
reimbursing their FBT shortfall within the required timeframe
negotiating with Taxation Services for an increase in the timeframe to pay their FBT
shortfall, if they can demonstrate financial hardship
negotiating directly with Maxxia where the disputed FBT shortfall is a result of
information provided by Maxxia, or by a process followed by Maxxia, and
advising Taxation Services if they are leaving SA Health and have an FBT shortfall.
2.4. Shared Services SA – Payroll
SSSA – Payroll are responsible for commencing a fortnightly deduction from the
employee’s pay upon receipt of an excel file feed from Taxation Services, after it has
obtained a signed Deed Poll or approval to recover under Section 70 of the Public
Sector Act 2009
SSSA – Payroll are responsible for refunding any excess deductions made from an
employee’s pay in a timely basis, and
SSSA – Payroll are responsible for adding and removing the shortfall Flags indicator
in CHRIS 21 after receiving a monthly update from Taxation Services.
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3. Policy Requirements
This policy directive is for employees who have entered into a Salary Sacrifice Agreement
(SSA), under the SAGSSA, and are required to repay an amount of FBT to the employer.
3.1. FBT shortfall
All FBT shortfalls must be recovered.
Under the SAGSSA, employees are liable to meet the cost of any taxation liability,
including FBT, resulting from their salary packaging arrangement. This generally occurs
where a public hospital or public ambulance service employee, who is eligible for the
Grossed Up Taxable Value (GUTV) capped FBT exemption, exceeds that cap; resulting in
an FBT shortfall.
Where an FBT shortfall for an employee is identified before 30 June, Maxxia will be
informed. Maxxia will notify employees of the FBT shortfall, and will refer any cases to
Taxation Services where they are not able to collect the money. Where an FBT return
amendment occurs, and it identifies employees with a FBT shortfall, Taxation Services will
notify those employees.
Current employees must formally acknowledge their FBT shortfall, and thereby authorise
its recovery, in writing within 21 days to Maxxia.
Employees can request Taxation Services to review the reasons for, and the calculations
of, their FBT shortfall. However, in accordance with the SAGSSA Customer Advocate
Process, where the FBT shortfall is being disputed as a result of information received by,
or from a service performed by Maxxia, employees must contact the provider directly to
discuss and resolve any issues with a Panel Member.
If the employee can demonstrate that financial hardship would result directly from the
application of this policy directive, an application may be made to Taxation Services to
request an extension to pay. This application must include a specific reason and any
supporting information.
3.2. FBT recovery
FBT recoveries will be based on the principles outlined in the Recovery of Employees
Fringe Benefits Tax Salary Sacrifice Benefits procedure.
3.2.1. Professional Development
Under various Enterprise Bargaining Agreements, the entitlements for Professional
Development (PD) are inclusive of FBT. That is, any FBT resulting from PD
reimbursements will form part of the PD entitlement available to the employee.
Where a PD reimbursement, plus FBT, exceeds the PD balance available, the employee
will repay the excess to the employer.
3.2.2. Government Salary Sacrifice Arrangements (SAGSSA)
Employees in this scheme are liable for the cost of any FBT resulting from salary
packaging. On the SSA form, which both the employer and employee need to sign, it is
agreed by the employee to pay any cost arising from salary packaging, including any FBT
liability. Clause 9.5 of the SSA states that the employee indemnifies their employer
against this FBT liability, any other taxation liability, and the Maxxia administration fee.
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Any FBT liability repayments may be deducted by the employer from pre-tax earnings in
accordance with the SSA clause 2.3 (b), which states: “all liability including any FBT
liability incurred by the employer, including outside of SAGSSA, in respect of the
employee may be deducted by the employer from the employee’s total annual earnings”.
Further, pursuant to clause 3 of the SSA, employers have the power to cease access to
salary package, should an employee not settle their liability to its satisfaction, and this
may result in disqualification from any further participation in salary packaging
arrangements. Clause 9.7 continues the liability obligation by employees to repay the FBT
liability; even upon the termination of the SSA.
SA Cabinets’ approval for salary packaging is on the condition of no cost to the employer.
It has been decided that:
where there are fringe benefits which attract FBT provided by the employer outside
of a salary sacrifice arrangement, these are allocated towards the FBT exempt
threshold. This has the effect of further reducing the amount that is available for the
employee to salary sacrifice on an FBT exempt basis.
if an employee salary sacrifices up to the capped FBT exemption limit, any employer
provided benefits (such as HECS reimbursements, taxable employee rewards,
home/work use of a government car, private component of overseas travel etc.)
would result in the exemption limit being exceeded.
any FBT from salary sacrificing over the capped FBT exemption is payable by the
employee to the employer.
Therefore, in the FBT Return, the capped FBT exemption must first be utilised by other
employer provided fringe benefits (apart from PD), with salary packaged benefits applied
against the remainder of the exemption cap; after these employer provided benefits have
been accounted for.
3.2.1. Executives with SA Government cars packaged as part of their Total
Remuneration Package Value (TRPV)
Executives (ie, who are employed under a SAES or EX contract) are able to salary
package fringe benefits concurrently, under two different schemes:
A motor vehicle from Leaseplan as part of their executive employment contract. The
cost of the car (including a charge for FBT) is deducted from the TRPV; and/or
Other fringe benefits through SAGSSA, as administered through Maxxia.
Under the Fringe Benefits Tax Assessment Act 1986, there is a capped FBT exemption
for employees employed in, or providing services exclusively to a public hospital or public
ambulance service. The executive’s Leaseplan car, and other SAGSSA benefits, are both
applied towards the capped FBT exemption, along with employer provided fringe benefits.
3.2.2. Employees with specific approval
There may be limited cases where approval has been given for the employer to pay the
FBT on employer provided benefits, without affecting an employee’s salary package ie the
full capped FBT exemption is allowed for salary packaged benefits, in spite of other
employer provided benefits. For these cases, approval must be obtained either from the
Director, Corporate Services or the Chief Executive, SA Health.
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3.3. FBT shortfall thresholds
There are four shortfall thresholds, and each threshold requires a different recovery
management process. Management of these shortfalls are addressed in the Recovery of
Employees Fringe Benefits Tax Salary Sacrifice Benefits procedure.
Less than $3
Shortfalls from $3 to $20
Shortfalls greater than $20 and up to $100
Shortfalls greater than $100.
3.4. Payroll recovery options
For current employees, four recovery options are possible:
1. If an employee has sufficient funds available in their Maxxia salary packaging
account, they can elect for the full amount to be paid from this account.
2. Where the FBT shortfall is less than 10% of the employee’s gross pre-tax
fortnightly salary, or they elect to repay the full amount in one pay, the full amount
of the FBT shortfall may be deducted from the employee’s pre-tax salary in his/her
next pay.
3. Where the FBT shortfall is 10% or more of the employee’s gross pre-tax fortnightly
salary, then an amount not greater than 10%, of his/her gross pre-tax fortnightly
salary may be deducted from pre-tax salary each pay, and continuing until the FBT
shortfall has been extinguished.
4. Financial hardship may be considered where the available options will cause an
individual financial difficulty. This will result in a lower agreed amount being repaid
upon evidence of the financial hardship.
Where a current employee does not acknowledge their FBT shortfall after receiving the
final notice, the amount may be referred for recovery as an auto payroll deduction under
s70 of the Public Sector Act 2009.
For employees leaving SA Health, on termination of employment, any remaining FBT
shortfall will be deducted from any pre-tax amounts payable to the employee. Should
insufficient funds be available, or the employee has left before this can occur, the
employee will be invoiced for any remaining FBT shortfall.
4. Implementation and Monitoring
Taxation Services is responsible for monitoring any FBT shortfalls that arise, and reporting
these to Maxxia by 17 July each year. FBT shortfalls will be identified and endorsed by Health
Units to recover, with each employee contacted within specific timeframes. This enables
Maxxia to contact all employees by 31 July with a shortfall over $100. Small shortfalls up to
$100 may not be contacted until up to 31 August.
Maxxia will provide Taxation Services with a regular status update of each shortfall. Maxxia
will return all cases it is unable to obtain acknowledgement to Taxation Services by 31 August
for larger shortfalls and 30 September for smaller shortfalls. Taxation Services will monitor this
in its monthly FBT Recovery liability account reconciliation.
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5. National Safety and Quality Health Services Standards
N/A
6. Definitions
In the context of this document:
capped FBT exemption is available to employers to use for fringe benefits provided to its
employees, who are working exclusively in (or exclusively in connection with) a public
hospital or predominantly for SA Ambulance Service. The $17,000 FBT cap is a grossed
up taxable value which effectively allows these employees to salary package up to $9,010
of benefits tax free. However, any employer provided fringe benefits would access this
cap first, reducing the amount which is available for salary packaging. Additionally, a
secondary cap of up to $5,000 grossed up taxable value can be applied to salary
sacrificed meal entertainment and entertainment facility leasing expenses (EFLE) for
employees eligible for the primary cap. It effectively allows $2,650 of meal entertainment
or EFLE to be packaged tax free, on top of the first cap. If either of these caps is
exceeded then the benefits would incur FBT and then be recoverable from an employee.
Fringe Benefits Tax (FBT) is a benefit provided in respect of employment. This
effectively means a benefit is provided to an employee (or their associate) because they
are an employee. Benefits can be provided by the employer, or they can be provided by a
third party under an arrangement with SA Health. Generally, benefits provided to
volunteers and contractors do not attract FBT. Benefits include rights, privileges and
services.
Examples include:
the use of a work car for private purposes
reimbursing a private expense such as reimbursing non-business related telephone
calls
repayment of a salary overpayment over an extended period of time
dual purpose travel
recreational entertainment (e.g. golf day or dinner/dance) or
HECS fees paid on behalf of an employee.
‘Grossed up’ Taxable Value (GUTV) means increasing the taxable value of a benefit to
reflect the gross salary an employee would have to earn at the highest marginal tax rate,
including the Medicare Levy, to purchase that benefit using after-tax dollars. The gross up
factor depends on whether the benefit is subject to Goods and Services Tax (GST) or not.
Maxxia is the sole salary packaging provider for SA Government; and is also referred as a
Service Provider or Third Party Provider.
Medical Officers Specific Salary Sacrifice Scheme (MOSSSS). For employees in
MOSSSS, the employer pays all FBT on all salary packaged benefits within the scheme,
without any recovery from the employee under an historical Enterprise Bargaining
Agreement, which is now closed to new members. Employees in the old scheme are
identified with a standard category code yz MOSSSS Salary Sacrifice to distinguish them
from other salary packaged benefits, and to enable them to be isolated from other
employees who are not in the old scheme.
Panel Member (from your Service Provider) is to assist employees in resolving issues
and problems.
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salary packaging arrangements is a term used to refer to the inclusion of employee
benefits in an employee remuneration package in exchange for giving up part of a
monetary salary.
third party providers (or service provider) are used when certain financial functions
and responsibilities can be outsourced, e.g. Maxxia, Shared Services SA (SSSA) etc...
Where this occurs, a Service Level Agreement (SLA), or similar, must be negotiated, as
this will define the responsibilities that have been agreed and allocated between the public
authority and the service provider for the key tasks, activities and controls associated with
the outsourced financial management functions.
7. Associated Policy Directive/Policy Guidelines and Resources
Fringe Benefits Tax Assessment Act 1986
Fringe Benefits Tax Public Hospital Exemption and Salary Sacrifice Policy Directive
Maxxia Dispute Resolution Process
Professional Development and Fringe Benefits Tax Policy Directive
Public Sector Act 2009
Recovery of Employees FBT Salary Sacrifice Benefits Procedure
Salary Sacrifice information provided by Maxxia for SA Government employees
Treasurer’s Instruction 5 Debt Recovery and Write Offs
Treasurer’s Instruction 25 Taxation Policies
For any further specific taxation queries, contact Taxation Services via
[email protected] or telephone 8463 6776.
8. Document Ownership and History
Document developed by: Policy and Compliance Corporate Finance Services, Finance
File / Objective No.: 2015-10396 | qA420847 | TAX-P7011
Next review due: 30/11/2021
Policy history: Is this a new policy? N
Does this policy amend or update and existing policy? Y
If so, which version? V1.0
Does this policy replace another policy with a different title? Y / N
If so, which policy (title)?
Approvals
Approval
Date
Version Who approved New/Revised
Version
Reason for Change
xx/xx/xxxx 2.0 Policy Committee Scheduled review
05/04/2016 1.0 Portfolio Executive Original version
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Endorsements
Approval
Date
Version Endorsed by Position Title
xx/xx/xxxx 2.0 Danny DeCesare Director, Corporate Finance Services, Finance and Corporate Services Division
14/02/16 1.0 Danny DeCesare Director, Corporate Finance Services, Finance and Corporate Services Division
By virtue of this document displaying an email date, it identifies that approval has been obtained by the appropriate delegated officer.
Contributors
Name
Document Owner Manager, Taxation Services, Financial Accounting, Finance and
Corporate Services
Contributors Director Financial Accounting, Finance and Corporate Services Division
Assistant Director, Financial Accounting and Taxation Services, Financial
Accounting
Site Chief Finance Officers / SAAS Finance Director
LHN/SAAS Financial Business Managers, Local Health Networks
Site Workforce Directors
Senior HR Managers
General Manager, Policies and Procedures, Account Management &
Compliance, Finance and Corporate Services Division
Principal Taxation Accountant, Taxation Services, Financial Accounting
SAGSSA Principal Contract Manager, Office for the Public Sector
Payroll Manager, Shared Service SA
Assistant Payroll Manager and Customer Engagement, Shared Services
SA
Anne Battmans, Maxxia
Regional Workforce Directors Industrial Liaison Committee
Manager Policies and Procedures, Corporate Finance Services
Manager, Strategic Support Unit, Finance
© Department for Health and Wellbeing, Government of South Australia. All rights reserved.
TAX
DRAFT Recovery of Employees
Fringe Benefits Tax Salary Sacrifice Benefits
Procedure
Version V2.0
SA Health Finance
Recovery of Employees FBT Salary Sacrifice Benefits Procedure
For Official Use Only-I2-A1 Page 2 of 15
Document control information
Document owner Andrew Jackson, Manager, Taxation Services, Financial Accounting
Contributors Assistant Director, Financial Accounting and Taxation Services, Financial
Accounting
Site Chief Finance Officers / SA Ambulance Service Finance Director
Site Local Health Networks (LHN)/SAAS Financial Business Managers
Site Workforce Directors
Senior HR Managers
SAGSSA Principal Contract Manager, Office for the Public Sector
Principal Taxation Accountants, Taxation Services, Financial Accounting
SAGSSA Principal Contract Manager, Office for the Public Sector
Payroll Manager, Shared Services SA
Assistant Payroll Manager and Customer Engagement, Shared Services SA
Industrial Liaison Committee
Anne Battams, Maxxia
Manager, Policies and Procedures, Corporate Finance Services
Manager, Strategic Support Unit, Finance
Document location Oracle Assist
Document classification FOUO-I2-A1
Reference TAX_PR_7011.1
Version V2.0
Valid from November 2018
Review date November 2021
Document history
Date Author Version Change reference
09/11/2015 Andrew Jackson, Manager Taxation Services, Finance and Corporate Services
V1.0
Rebecca Bonython, Manager, Policies and Procedures, Corporate Finance Services
V2.0 Scheduled review
Endorsements
Date Endorsed by Position title
21/03/2016 Courtney Tasker General Manager Policies & Procedures, Account Management &
Compliance (PPAMC), Finance and Corporate Services
Courtney Tasker General Manager PPAMC, Finance and Corporate Services
Approvals
Email Date Approved by Position title
Recovery of Employees FBT Salary Sacrifice Benefits Procedure
For Official Use Only-I2-A1 Page 3 of 15
22/03/2016 Steven Gerassimou Director, Financial Accounting, Finance and Corporate Services
Steven Gerassimou Director, Financial Accounting, Finance and Corporate Services
By virtue of this document displaying an email date, it identifies that approval has been obtained by the appropriate delegated officer.
Recovery of Employees FBT Salary Sacrifice Benefits Procedure
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Table of contents
1. Procedure Statement .............................................................................................................................. 5 2. Background ............................................................................................................................................. 5 3. Definitions ................................................................................................................................................ 5 4. Procedure Detail...................................................................................................................................... 6
4.1. Professional development recovery ................................................................................................ 6 4.2. Salary sacrifice recovery.................................................................................................................. 6
4.2.1. Government salary sacrificing arrangements ........................................................................ 6 4.2.2. Executives with SA Government cars packaged as part of their Total Remuneration Package Value (TRPV) ...................................................................................................................... 6 4.2.3. Employees with specific approval ......................................................................................... 6
4.3. FBT shortfall thresholds ................................................................................................................... 7 4.3.1. Shortfalls up to $3.................................................................................................................. 7 4.3.2. Shortfalls between $3 and $20 .............................................................................................. 7 4.3.3. Shortfalls greater than $20 and up to $100 ........................................................................... 7 4.3.4. Shortfalls greater than $100 .................................................................................................. 7
4.4. Loan fringe benefits ....................................................................................................................... 10 4.5. Dispute resolution .......................................................................................................................... 10
4.5.1. Dispute with FBT shortfall calculation ................................................................................. 10 4.5.2. Dispute with a panel member .............................................................................................. 12 4.5.3. Refusal to acknowledge/repay FBT shortfall ....................................................................... 12
4.6. FBT implications ............................................................................................................................ 12 5. Applicability ........................................................................................................................................... 12 6. Responsibilities..................................................................................................................................... 13
6.1. Taxation Services .......................................................................................................................... 13 6.2. Maxxia............................................................................................................................................ 13 6.3. Employees ..................................................................................................................................... 13 6.4. SAAS Finance Director/site CFO and DHW Executive Directors................................................. 14 6.5. Site Workforce Directors ................................................................................................................ 14
7. References/Related Documents .......................................................................................................... 14 8. Procedure Sponsor ............................................................................................................................... 14 Appendix ........................................................................................................................................................ 15 A Examples ............................................................................................................................................... 15
Recovery of Employees FBT Salary Sacrifice Benefits Procedure
For Official Use Only-I2-A1 Page 5 of 15
1. Procedure Statement
The purpose of this procedure is to outline the methodology to recover Fringe Benefits Tax (FBT) owed
by current and former employees, as a result of their salary packaging arrangements.
2. Background
Under the South Australian Government Salary Sacrifice Arrangements (SAGSSA), employees are
liable to meet the cost of any taxation liability, including FBT, resulting from salary packaging. This
generally occurs where a SA Health Hospital Services, public hospital or public ambulance service
employee who is eligible for the capped FBT exemption limit, exceeds that cap, resulting in an FBT
shortfall.
An FBT shortfall is usually as a result of the employee not taking into account employer provided
benefits when developing a salary package (e.g. use of a Government car for private use or the
reimbursement of Commonwealth supported courses or loans) with their Salary Sacrifice Provider. An
FBT shortfall is not a salary overpayment, consequently, they are not captured under Determination 6:
Recovery of Overpayments, issued by the Commissioner for Public Sector Employment.
This procedure outlines the steps to be taken to recover the FBT shortfall from the employee.
3. Definitions
Capped FBT exemption is available to employers to use for fringe benefits provided to its
employees, who are working exclusively in (or exclusively in connection with) a public hospital or
SA Ambulance Service. The $17,000 FBT cap is a grossed up taxable value which effectively
allows these employees to salary package up to $9,010 of benefits tax free. However, any
employer provided fringe benefits would access this cap first, reducing the amount which is
available for salary packaging. Additionally, a secondary cap of up to $5,000 grossed up taxable
value can be applied to salary sacrificed meal entertainment and entertainment facility leasing
expenses (EFLE) for employees eligible for the primary cap. It effectively allows $2,650 of meal
entertainment or EFLE to be packaged tax free, on top of the first cap. If either of these caps is
exceeded then the benefits would incur FBT and then be recoverable from an employee.
Deed Poll is a legal document that binds a single party to a particular course of action
Fringe Benefits Tax (FBT) is a benefit provided in respect of employment. This effectively means
a benefit is provided to an employee (or their associate) because they are an employee. Benefits
can be provided by the employer, or they can be provided by a third party under an arrangement
with SA Health. Generally, benefits provided to volunteers and contractors do not attract FBT.
Benefits include rights, privileges and services.
Examples include:
the use of a work car for private purposes
reimbursing a private expense such as reimbursing non-business related telephone calls
repayment of a salary overpayment over an extended period of time
dual purpose travel
recreational entertainment (eg. golf day or dinner/dance) or
HECS fees paid on behalf of an employee.
‘Grossed up’ Taxable Value (GUTV) means increasing the taxable value of a benefit to reflect
the gross salary an employee would have to earn at the highest marginal tax rate, including the
Medicare Levy, to purchase that benefit using after-tax dollars. The gross up factor depends on
Recovery of Employees FBT Salary Sacrifice Benefits Procedure
For Official Use Only-I2-A1 Page 6 of 15
whether the benefit is subject to the Goods and Service Tax (GST) or not.
Maxxia is the sole salary packaging provider for SA Government. In the context of this document,
it can also be known as a Service Provider or Third Party Provider.
Panel Member (from your Service Provider) is to assist employees in resolving issues and
problems.
Salary packaging arrangements is a term used to refer to the inclusion of employee benefits in
an employee remuneration package, in exchange for giving up part of a monetary salary.
4. Procedure Detail
After the end of each FBT year, Taxation Services will identify details of fringe benefits provided and
related FBT shortfalls for each employee. Taxation Services will then identify whether FBT is to be
recovered from employees as a result of salary packaging and, if so, forward this information to Maxxia
to seek recovery within a specified time frame. The following recovery procedures should be followed
4.1. Professional development recovery
Where a PD reimbursement, plus FBT, exceeds the PD allowance available, the excess is to be
repaid to the employer, by the employee. These benefits appear in reports under the standard
category code zzz Professional Development. Employees should be advised by the PD Office
when these amounts have been deducted from their entitlement.
If the amount of FBT recoverable exceeds the accumulated balance of the employee PD
entitlement, the excess is to be recovered from the employee, via pre-tax salary deduction.
For further information refer to Professional Development and Fringe Benefits Tax Policy Directive.
4.2. Salary sacrifice recovery
4.2.1. Government salary sacrificing arrangements
Under the standard category code z Salary Sacrifice, any FBT attached to this will be recovered
from the employee from pre-tax salary deductions; unless the employee has terminated
employment. Where the employee has terminated employment, the amount is recovered from post-
tax payments.
4.2.2. Executives with SA Government cars packaged as part of their Total Remuneration
Package Value (TRPV)
The standard category code will separately show FBT for zz Executive Cars, which is applied to
the FBT cap after any SAGSSA benefits. If there is an amount showing as FBT payable, this cost
will be met by the employer and not recharged to the executive.
If the employee has any FBT payable under the standard category code of z Salary Sacrifice, then
this is to be recovered from the executive in the same manner as other employees.
To prevent executives being overcharged FBT where they salary package under both of the above
schemes:
executives can access the full capped FBT exemption on their salary package through
Maxxia, without adjusting for FBT recoveries where a Leaseplan car is taken
the notional FBT already charged to the executive, as part of their TRPV, can be regarded as
full payment towards any FBT resulting from the use of the car.
4.2.3. Employees with specific approval
There may be limited cases where an approval has been given for the employer to pay the FBT on
employer provided benefits, without affecting an employee’s salary package ie. the full capped FBT
exemption is allowed for salary packaged benefits, in spite of other employer provided benefits.
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For example there may be circumstances where it may not be appropriate for the recovery of FBT
from the employee where it is caused by home-work travel in government cars.
This may be the position where:
there is specific employer approval and direction to garage a government car at home for
security reasons, or
there is a specific entitlement or approval under an employee remuneration arrangement to
provide a car without recouping FBT.
However, consideration will not be given to circumstances where FBT has been incurred as a
result of failure to correctly maintain a log book. Such approval must have been obtained either
from the Director, Corporate Services or the Chief Executive, SA Health.
4.3. FBT shortfall thresholds
There are four shortfall thresholds, and each threshold involves a different recovery management
process.
4.3.1. Shortfalls up to $3
Requiring no investigation, shortfalls up to $3 may be written off on approval by the Chief
Executive, SA Health.
4.3.2. Shortfalls between $3 and $20
All FBT is to be recovered where possible and an attempt must be made to recover the debt.
However, in some circumstances, approval will be sought from the Chief Executive, SA Health to
waive the minor FBT shortfall, ie. those which are up to $20 in value.
4.3.3. Shortfalls greater than $20 and up to $100
In accordance with Treasurer’s Instruction 5 Debt Recovery and Write Offs, any FBT shortfall
greater than $20 and up to $100 will have an attempt made to recover the FBT from the employee;
except if there is a known approved FBT cap reallocation. This will be:
via Maxxia deducting the amount from employees with an active salary packaging account, or
via the PD Office automatically deducting the amount from the staff member with a current PD
balance where it is a PD FBT shortfall.
Maxxia will first contact employees in writing to advise them of the shortfall amount incurred and
the date that Maxxia will automatically deduct the funds from their accounts. The letter (sent by
email where possible) will contain contact details should the employee want to query the shortfall.
Unless the employee disputes the shortfall and states they do not want Maxxia to deduct the funds
from their account, an automatic deduction will take place on a nominated date.
Where an amount cannot be recovered through this initial phase, the employee will be contacted
by Taxation Services to arrange for the repayment of their FBT shortfall.
4.3.4. Shortfalls greater than $100
In accordance with Section 70 of the Public Sector Act 2009:
where shortfalls are greater than $100, and
an employee does not respond to the original contact from Maxxia, or the subsequent Final
Notice sent by Taxation Services acknowledging their outstanding FBT shortfall,
their name will sent to their site Workforce Director for authorisation to commence an automatic
payroll deduction from the employee.
PD Offices will automatically deduct PD amounts from staff with a current PD balance.
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Current employees
The FBT shortfall must be recovered from the employee’s pre-tax gross salary as follows:
1. Maxxia must provide written notice to the employee of the outstanding FBT shortfall, within a
specified time frame. The written notice will include:
details of the benefit and the amount of the FBT shortfall
a statement that the amount is recoverable from the employee after they have formally
acknowledged the FBT shortfall
a form enabling the employee to acknowledge the FBT shortfall and payment options
details of the SA Health Recovery of FBT arising from Salary Sacrifice Policy Directive
the deadline for disputes relating to FBT shortfalls, and
Taxation Services’ contact details for any queries.
2. The employee must formally acknowledge their FBT shortfall (and thereby authorise
recovery) in writing within 21 days of being advised.
3. Where an employee has sufficient funds available in their Maxxia salary packaging account,
they can elect for the full amount to be paid from this account. If the employee does not provide
this acknowledgement to Maxxia within the specified timeframe, or has a request for financial
hardship, their case will be referred back to Taxation Services.
4. Where the employee has insufficient funds in their Maxxia salary packaging account, or they
prefer to have the amount recovered through payroll deductions, Maxxia will arrange for the
employee to elect one of the available payroll deduction options.
5. Upon receipt of the Acknowledgement of FBT Shortfall declaration form, Taxation Services will
initiate the process of commencing fortnightly deductions through SSSA-Payroll for current
employees.
6. Taxation Services will ensure all avenues of recovery are considered (including automatic
payroll deductions) and will notify Shared Service SA (SSSA) - Payroll to record any
outstanding FBT shortfall for all non-responders. If no payment is made, then the matter should
be referred to the Crown Solicitor’s Office for recovery as a final option (see 4.5.3. below).
The payroll recovery options are provided in a Deed Poll form advising as follows:
1. If the FBT shortfall is less than 10% of the employee’s gross pre-tax fortnightly salary,
the full amount of the FBT shortfall will be deducted from the employee’s pre-tax salary
in his/her next pay after he/she has formally acknowledged the FBT shortfall.
2. If the FBT shortfall is 10% or more of the employee’s gross pre-tax fortnightly salary,
then an amount not greater than 10%, of his/her gross pre-tax fortnightly salary, will be
deducted from pre-tax salary each pay, (commencing after the employee has formally
acknowledged the FBT shortfall) and continuing until the FBT shortfall has been
extinguished.
3. In accordance with a formal request for financial hardship, that has been submitted and
approved in writing by the SA Health, Manager, Taxation Services, a lower fortnightly
amount may be deducted pre-tax each pay until the FBT shortfall has been fully repaid.
The final deduction will become the closing balance when the regular fortnightly
deduction amount becomes higher than what is still owed at that time. This option will
only be valid if a copy of the request for financial hardship endorsed with the approval of
the SA Health, Manager, Taxation Services is attached to the acknowledgement form.
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7. If the employee does not provide acknowledgement of the FBT shortfall, Taxation Services will
initially send a Reminder Notice. (It should be noted that as the recovery will be from pre-tax
salary, employees will not be worse off when they are repaying 10% of their gross salary, as
this would amount to the same result in their net salary as if they were making post-tax
payments of 10% of their net pay. Consequently, they will pay off their FBT shortfall much
quicker, and at a lower cost to them.)
8. If a current employee does not acknowledge their FBT shortfall after the Reminder Notice, a
Final Notice will be issued.
9. Should they fail to acknowledge, after receiving the Final Notice from Taxation Services, the
amount may be referred for recovery as an automatic payroll deduction under Section 70 of the
Public Sector Act 2009.
10. Should further dispute arise, or they are not contactable, then the matter may be referred to the
Crown Solicitor’s Office for recovery.
Leaving SA Health
11. Employees are to advise Taxation Services if they are leaving SA Health and will need to make
arrangements for any outstanding FBT shortfall to be repaid. This may include completing an
Acknowledgement of FBT Shortfall Declaration form.
12. On termination of employment, any remaining FBT shortfall will be deducted from any
pre-tax amounts payable to the employee.
Where the remaining FBT shortfall amount is greater than the amount the employee will
receive upon termination or the deduction has not occurred, an invoice will be raised by
Taxation Services which will be paid as a post-tax amount.
If the employee remains a SA Health employee, but changes their employer (e.g.
transfers from Flinders Medical Centre to Royal Adelaide Hospital), the FBT shortfall
can still be paid to SA Health through a payroll deduction. A journal will occur to transfer
the amount between the respective employers.
If they switch employment to another SA Government agency, the employee will follow
the Former Employees’ process outlined below, but must still comply with Treasurer’s
Instruction 5 Write Offs.
If the employee leaves SA Government, section 4.2 Former Employee applies.
Former employees
Former employees are those employees who are no longer an SA Health employee. In these
instances, the FBT shortfall cannot be repaid from pre-tax salary deductions, as it is not legally
possible unless they have an outstanding unpaid employee entitlement. In these instances, they
will receive an invoice for the amount they owe, which will be arranged by Taxation Services.
Where the individual involved is a former employee, the recovery process should be as follows:
1. Taxation Services will remove any former employees it identifies from the list of recoveries.
This list is sent to Maxxia to contact. Additionally, some employees may become former
employees after Maxxia has been provided with a list of current employees, but before they
acknowledge their FBT shortfall.
2. Taxation Services will submit to SSSA a Tax Invoice Request form and, where required, an SA
Health Employee Creation Amendment form. SSSA will raise an invoice and return the invoice
to Taxation Services.
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3. Once the invoice is received, Taxation Services will forward it to the former employee, along
with written notice to the employee regarding the outstanding FBT shortfall. The written notice
will include:
details of the benefit/s and the amount of the FBT shortfall
details of the Recovery of FBT Arising from Salary Sacrifice Policy Directive and
Procedure, and
Taxation Services contact details for any queries.
4. The individual must formally acknowledge the FBT shortfall by payment of the invoice.
5. Should the former employee dispute the invoice, the employee must contact Taxation Services
within 21 days.
6. If the individual does not provide payment, or disputes the amount or is not contactable, this
will be followed up through the normal SA Health non-employee debt management procedures.
7. Disputes may require the matter to be treated under the Dispute Resolution process below and
may ultimately need to be referred to the Crown Solicitor’s Office for recovery (see 4.5.3.
below).
8. The amount to be repaid will be post-tax, as the employee is no longer a current employee of
SA Health.
4.4. Loan fringe benefits
When an employee takes an extended period of time to repay their FBT shortfall, a loan fringe
benefit will occur. The value of the loan is the notional interest that could have been earned on that
money by the employee when not repaying it to their employer.
In most cases, these FBT shortfalls will be a minor fringe benefit and not incur additional FBT.
The loan may not be considered a minor fringe benefit and will attract further FBT, depending on
other factors occurring, such as:
the actual value of the FBT shortfall or
time taken to repay or
where there are prior year FBT shortfalls still being repaid or
salary advances and salary overpayments that may be occurring concurrently with the FBT
shortfall loan.
Should the loan not be considered a minor fringe benefit, then it is to be considered as an employer
provided fringe benefit. It will therefore count towards an employee’s FBT cap, before salary
packaging for future FBT years, until it has been repaid in full.
Where this occurs, it may lead to a subsequent FBT shortfall if the employee has not considered
this as part of their prospective salary packaging arrangements. If uncertain, employees should
contact Maxxia to adjust, or discuss, their salary package.
4.5. Dispute resolution
4.5.1. Dispute with FBT shortfall calculation
Where the employee (or former employee) is dissatisfied with the calculation of the FBT shortfall
amount, the following procedure should apply:
1. The employee will contact Taxation Services to obtain further details about the recovery and
the reasons for the FBT shortfall.
2. A Principal Taxation Accountant or Senior Taxation Accountant will review the FBT shortfall
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calculation and will notify the employee with the outcome of the review.
3. If the employee remains dissatisfied with the calculation, the employee can make a written
request to the Manager, Taxation Services for a formal review.
4. If the employee remains dissatisfied after this formal review, and is of the view that they should
not be liable to pay their FBT shortfall on reasonable grounds, the employee can partake in the
Grievance Process as follows:
a) Taxation Services will provide the employee with an Employee FBT Reallocation Request
template, which will be completed by the employee
b) The employee must write a formal request for reallocation to their SAAS Finance
Director/site CFO or the Director, Financial Accounting in the Department for Health and
Wellbeing (DHW) using the template provided by Taxation Services
c) The employee will send a copy of their letter to their pertinent SAAS Finance Director/site
CFO AND another copy to Taxation Services, via the Taxation Services’ Helpdesk
d) Taxation Services will prepare an internal memorandum to the pertinent SAAS Finance
Director/site CFO or DHW Executive Director advising them of the calculation and any
other facts relevant to their decision
e) Taxation Services will classify the reallocation request to determine whether it is simply
the reallocation of the FBT cap by the employer, which can be endorsed by the Director,
Corporate Services, DHW or the Chief Executive SA Health, or, if it will need to be
ultimately referred to the Treasurer for approval.
(For DHW employees only, the Director, Financial Accounting, will review the FBT
assessment undertaken by Taxation Services, and send a copy of the assessment,
along with any other relevant facts regarding the FBT shortfall, to the relevant
Executive Director of the employee.)
f) The respective delegate will consider the reallocation request letter received from the
employee, in conjunction with the internal memorandum from Taxation Services.
Where the Director supports the employee’s request:
The Director will prepare an internal brief from the Chief Executive Officer (CEO),
LHN/SAAS or the Executive Director within DHW, to the Director, Corporate
Services requesting SA Health reallocate the employee’s FBT shortfall; attaching
information supplied by the employee in making their reallocation request.
Where the Director does not support the employee’s request:
the Director will notify the employee of the outcome of their request in writing; and
provide a copy of this letter to Taxation Services for its records and action.
g) The Director, Corporate Services, DHW will notify the respective Executive Director/ CEO
of the outcome of the reallocation request.
h) Once a final decision has been made by the Director, Corporate Services, the respective
Executive Director, should advise the employee of the decision, along with Taxation
Services.
i) Where Treasurer approval is required, the request must be initially sent to the Chief
Executive, SAH rather than to the Director, Corporate Services.
j) Where the Chief Executive, SA Health support such a request, it will be included in a
combined submission to the Treasurer for all such cases. If such a case is supported
outside of the reallocation of the FBT cap, it may constitute a debt waiver fringe benefit
and incur additional FBT. This would occur in cases where debt recovery actions have
already commenced for current employees.
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4.5.2. Dispute with a panel member
Where it is determined that the FBT shortfall is the result of incorrect/inaccurate information or
from services rendered by Maxxia, the employee must contact Maxxia directly in order to
resolve the matter with Maxxia, in accordance with the Maxxia Dispute Resolution Process.
It is important to follow the instructions given to ensure the desired outcome. Maxxia has its
own Employee Ombudsman, who is independent and can review cases without fear or favour,
and it will provide an independent view as to whether an error has been made.
4.5.3. Refusal to acknowledge/repay FBT shortfall
Where a current employee either:
refuses to acknowledge the FBT shortfall after being notified or
refuses to repay all, or part, of the FBT shortfall amount or
is not contactable, after a Final Notice is issued by Taxation Services,
an application will be made to their site Workforce Director for authorisation to commence an
automatic payroll deduction from the employee, in accordance with Section 70 of the Public
Sector Act 2009.
Further disputes, or disputes with former employees, may require the matter to be referred via
Legal and Governance, to the Crown Solicitor’s Office together with:
details of the FBT shortfall and how it arose
copies of all correspondence with the individual including contact details
any reason why the individual is refusing to acknowledge the FBT shortfall/repay the FBT
shortfall, and
a request for advice.
4.6. FBT implications
The recovery of FBT is purely exercising a contractual requirement contained within the
employee’s Salary Sacrifice Agreement (SSA) that states ”all liability including any FBT liability
incurred by the employer in respect of the employee may be deducted by the employer from the
employee’s total annual earnings”. In practice, the amount salary packaged needs to be inclusive
of any FBT, and any shortfall that results from the provision of benefits under a SSA is required to
be met by the employee.
5. Applicability
This procedure applies to all employees (including Medical Officers) entering into Salary Packaging
Arrangements with the SAGSSA.
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6. Responsibilities
6.1. Taxation Services
Taxation Services are responsible for:
calculating the amount of FBT shortfall an employee has incurred and forwarding this
calculation to the Maxxia
reviewing FBT shortfall calculations, when requested by an employee
negotiating non-standard payment arrangements of any FBT shortfall, including the issuing of
application forms for requests for financial hardship and assessing their merit
providing the Employee FBT Reallocation Request template, where requested by an
employee seeking a reallocation of their FBT shortfall
notifying Payroll Services to commence payroll deductions for employees who have
acknowledged their FBT shortfall
making necessary amendments to FBT shortfalls, reportable fringe benefits amounts and the
FBT Return, as required
arranging for a tax invoice (post tax) to be raised for the FBT shortfall amount in the name of
the employee
requesting Section 70 of the Public Sector Act 2009 to be invoked on non-responders through
their site Workforce Director, and
seeking advice via Legal and Governance from the Crown Solicitor’s Office in circumstances
where an employee refuses to acknowledge liability, or to repay the FBT shortfall, after all
other avenues have been exhausted.
6.2. Maxxia
Maxxia are responsible for, in accordance with their SLA:
commencing the recovery of FBT shortfalls from current employees, by contacting the
employee and discussing the value of the shortfall, how it occurred and options available for
the employee to repay the FBT shortfall (including information on the financial hardship option
process)
where the employee cannot be contacted via phone, Maxxia will send an email outlining the
value of the shortfall, how it occurred and options available for the employee to repay the FBT
shortfall
sending written correspondence to employees, along with the FBT Shortfall Acknowledgement
and Repayments Authority form
sending employee acknowledgments to Taxation Services to commence payroll deductions to
recover the FBT shortfall, and
sending a list of employees who have not acknowledged the FBT shortfall to Taxation
Services for action and subsequent follow up actions.
6.3. Employees
Employees are responsible for:
repaying any FBT shortfall incurred, as a result of a Salary Packaging arrangement
negotiating directly with the Maxxia if they believe they have provided incorrect salary
packaging data, or the process conducted by the Service Provider has led to the provision of
incorrect salary packaging data upon which the FBT calculations were made
requesting Maxxia or SA Health Taxation Services to provide forms for financial hardship
claims and submitting the required information for the Manager, Taxation Services
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providing a formal written request for a reallocation, using the template provided by Taxation
Services and to provide:
one copy to their respective SAAS Finance Director/site CFO, and
one copy to Taxation Services via the Tax Helpdesk;
advising Taxation Services when they are leaving SA Health, to ensure the necessary
arrangements are made for any outstanding FBT shortfall.
6.4. SAAS Finance Director/site CFO and DHW Executive Directors
SAAS Finance Directors/site CFO and DHW Executive Directors are responsible for:
ensuring staff complete a formal written request for reallocation of any FBT
assessing the request based on information received from the employee and Taxation
Services
forwarding supported cases to the Director, Corporate Services, DHW for a decision (or the
Chief Executive, SA Health, should the matter require further escalation to the Treasurer), and
advising employees whether their request has been approved or rejected.
6.5. Site Workforce Directors
Site Workforce Directors are responsible for signing automatic payroll deduction forms to
commence FBT recovery.
7. References/Related Documents
Commissioner of Public Employment Determination 6: Recovery of Overpayments
Recovery of FBT arising from Salary Sacrifice Policy Directive and Procedure
Public Sector Act 2009
FBT Public Hospital and Public Ambulance Service Exemptions and Salary Sacrifice Policy
Directive
Salary Sacrifice information provided by the Office for the Public Sector
Maxxia Customer Feedback Process
Treasurer’s Instruction 5 Debt Recovery and Write Offs’
Treasurer’s Instructions 25 Taxation Policies
SA Health Vendor Creation or Amendment Form
For any further specific taxation queries contact Taxation Services via [email protected] or telephone no. 8463 6776
8. Procedure Sponsor
Director, Financial Accounting, Finance and Corporate Services Division
Recovery of Employees FBT Salary Sacrifice Benefits Procedure
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Appendix
A Examples
Margaret, John, Mary and Ishmael have incurred FBT shortfalls from their salary package, by not allowing for the private usage of a blue plated motor vehicle they all use to drive home on alternate nights, whilst on call.
Each of them has a $1,000 FBT shortfall and SA Health Taxation Services has provided the advice to Maxxia, for it to request payment of the FBT shortfalls from the employees.
1. Margaret, upon contact from Maxxia, has sufficient funds in her salary packaging account to cover the FBT shortfall, so she advises Maxxia to deduct the full amount from her salary packaging account.
2. John was not aware this would affect his salary package and requests more information, so he is referred back to SA Health Taxation Services for further investigation. SA Health Taxation Services confirms the benefit was calculated correctly and follows up all queries John has about his FBT shortfall and he agrees to acknowledge the FBT shortfall with Maxxia.
John doesn’t have sufficient funds in his salary packaging account to cover the FBT shortfall.
He selects the option to have payroll deductions of 10% of his gross fortnightly deductions
made until the FBT shortfall is fully repaid and returns the appropriate form to Maxxia.
Maxxia then submits the form to SA Health Taxation Services along with the other forms it
has received at the end of August.
SA Health Taxation Services instructs Shared Services SA in September to commence
payroll deductions in the next available pay run.
3. Mary is willing to repay her FBT shortfall, but due to extreme financial difficulties, cannot afford 10% of her gross fortnightly salary. Maxxia refers her to SA Health Taxation Services to discuss the case and she is provided with a form to complete to demonstrate her financial hardship.
Upon review, the Manager, Taxation Services supports Mary’s request for a varied amount and provides her with approval for a specified amount to be paid each fortnight, until the FBT shortfall is repaid in full.
Mary returns the acknowledgement form and approval for modified payments to Maxxia.
Maxxia then submits the form to SA Health Taxation Services, along with the other forms it
has received, at the end of August.
SA Health Taxation Services instructs Shared Services SA in September to commence
payroll deductions in the next available pay run.
4. Ishmael has followed a similar process to John; however, unlike John is still in dispute regarding the FBT shortfall. The case is not referred back to Maxxia and Ishmael is provided with an Employee FBT Reallocation Request template.
Ishmael completes the Employee FBT Reallocation Request template with his reasons for
dispute and submits his request to his site based Finance Director, plus provides a copy to
SA Health Taxation Services.
Following a fair and formal process, Ishmael’s case is considered by the appropriate
delegate, but his request to have the FBT shortfall reallocated is not supported. He is
advised in writing by his employer of the decision and SA Health Taxation Services sends
him a Final Reminder, requesting he acknowledge the FBT shortfall within 21 days.
As the case no longer involves Maxxia, Ishmael returns his acknowledgement form back to
SA Health Taxation Services and elects for 10% of his gross fortnightly salary to repay his
FBT shortfall.
SA Health Taxation Services then sends the form to Shared Services SA and payroll
deductions commence in the next available pay run.