The Fringe Benefits Tax (FBT) year ended on 31 March and for those providing benefits to employees it is now time to prepare the FBT return and calculate amounts that need to be included on employees’ income statements. A few of the hot spots for employers and employees are outlined below.
Important FBT issues
Assistance and benefits provided due to COVID-19
Many businesses are likely to have provided different types of benefits and assistance to their employees due to COVID-19. It can be quite challenging to work out whether FBT should apply. Just keep in mind that minor benefits should be FBT exempt where their individual cost is under $300 and it is reasonable to treat the benefit as minor, infrequent and irregular. Outside of this in many cases there are specific FBT concessions that could be available, but it is important to work through these concessions carefully.
Working from home
Office and site closures due to COVID-19 may mean that your employees worked from home for a portion of the FBT year. Many employers have provided their employees with work-related items to assist their employees during this period.
Emergency assistance
If your business provided emergency assistance to employees as a result of COVID-19, then fringe benefits tax is unlikely to apply. While we doubt anyone would be thinking about FBT during a crisis, it’s good to know that the tax system does not disadvantage your generosity.
Protective equipment
Many businesses increased their workplace health and safety processes and infrastructure in response to COVID-19 and these items will be exempt from FBT.
Motor Vehicle problem areas
Just because your business buys a motor vehicle and it is used almost exclusively as a work vehicle, that alone does not mean that the car is exempt from FBT. If you use the car for private purposes – pick the kids up from school, do the shopping, use it freely on weekends, garage it at home, your spouse uses it – FBT is likely to apply. The private use of work vehicles is firmly in the sights of the ATO and has been for some time.
Private use is when an employee (this includes directors) uses a car provided by the employer outside of travel for work related purposes (private travel includes travel between home and work for non-exempt vehicles).
Business assets personally used by owners and staff
Private use of business assets is an area that crosses across a whole series of tax areas: FBT, GST, Division 7A and income tax.
Not lodging FBT returns
The ATO is concerned that some employers are not lodging FBT returns or lodging them late to avoid paying tax.
While we hope the ATO understands that this was a difficult year for many businesses, it’s likely the ATO will still pay close attention to any employer that:
- Is registered for FBT but lodges late. If your business is likely to face delays in lodging the FBT return, it’s usually a good idea to get in touch with the ATO early and ask for an extension request; or
- Is not registered for FBT. If your business employs staff (even closely held staff such as family members), and is not registered for FBT, it’s essential you have reviewed your position and are certain that you do not have an FBT liability. If the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), provides employee discounts etc., then you are likely to be providing a fringe benefit. Make sure you have reviewed the FBT client questionnaire we sent you!
Salary sacrifice and superannuation guarantee
From 1 January 2020, new rules came into effect to ensure that an employee’s salary sacrifice superannuation contributions cannot be used to reduce the amount of superannuation guarantee (SG) paid by the employer.
Travelling or living away from home
Historically, travel allowances have caused confusion for many businesses. Also with the ATO recently finalising its key guidance on travel costs the ATO is likely to focus on benefits relating to transport, meals and accommodation.
If your business provides travel allowances to its employees, you will normally need to consider whether they are living away from home or just travelling overnight in the course of work.
The ATO has recently finalised its guidance in TR 2021/4 on when allowances should be classified as a travel allowances or a living away from home allowance. Helpfully, the ATO has also finalised a ‘safe harbour’ style approach in PCG 2021/3 which can used specifically for this purpose.
Retraining and reskilling benefits
Recognising that there is a change in the mix of skills required in the modern labour force, the Government has passed new rules that provide a specific FBT exemption for employers that provide retraining and reskilling benefits to their employees.
If the conditions are met, a FBT exemption is available for education or training benefits (such as course fees) provided by your business to your employees whose jobs are redundant (or soon to be redundant). Importantly, this FBT exemption can apply even if your employees are being redeployed to another part of your business.
The rules apply retrospectively to education or training benefits provided on or after 2 October 2020, which means it is relevant to the 2022 FBT year!
Housekeeping
It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time. If your business has cars you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.
Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, please contact our team.