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April 2020 | Special Edition

Fringe Benefits Tax (FBT) Edition

Once again it is that time of year when businesses need to consider if any Fringe Benefits have been provided to employees or their associates. An associate of an employee is their spouse, children, other family members, a related trust or company. 

There have been several proposed changes to FBT laws and guidelines, these are detailed below:

1) Proposed Changes to FBT Car Parking Benefits

The ATO has recently withdrawn their previous FBT car parking taxation ruling (TR96/26), and is currently in the process of finalising the replacing ruling. The original ruling stated that a parking facility that had a primary purpose other than providing all day parking in order to make a profit was not considered to be a commercial parking station. Therefore, excluding this type of parking arrangement as a fringe benefit.

Under the new ruling, a facility that offers all day car parking regardless of its primary purpose may now be considered as a commercial parking station if it satisfies the following requirements:

  • The facility is permanent.
  • Allows all day parking to members of the public in exchange for a fee.
  • Offers parking that is off the street.
  • Offers parking in the ordinary course of its business. If a parking facility intends to repeatedly offer all day parking to the public, then this requirement will be satisfied under the new ruling.

The ATO has the intention to apply their new view on what constitutes a commercial parking station from 1 April 2021.

2) Proposed Changes to FBT and Division 7A

Division 7A of the Income Tax Assessment Act (1936) is under review by the Government, and proposed changes with its integration to FBT are currently drafted to come into effect from 1 July 2020. 

The purpose of Division 7A is to prevent shareholders and their associates from receiving tax-free distributions from private companies. It achieves this by ensuring any profits or assets paid out to shareholders or their associates are either treated as a 7-year loan with interest payable, or as an unfranked dividend. Currently, however, if a shareholder is also an employee, and the payment is made to them in their capacity as an employee, the payment would not be subject to Division 7A (though it may be subject to FBT). This has meant that exempt benefits (i.e. minor benefits, laptops) provided to shareholder-employees for use in their employment have not previously been subject to Division 7A or FBT.

The proposed changes seek to exclude payments from Division 7A in these shareholder-employee situations only where they are subject to FBT. If passed, this would mean that any exempt fringe benefits provided to these shareholder-employees would either be deemed a loan (with interest payable) or an unfranked dividend, with no tax deduction available to the company.

3) Proposed Changes to FBT Taxi Travel Exemption

The FBT taxi travel exemption applies if the travel is:

  • a single trip beginning or ending at the employees place of work; or
  • a result of sickness or injury to the employee and at least part of the journey is directly between the employee's workplace, their residence or any other place that is necessary for the employee to go as a result of the sickness or injury.

Under the current FBT legislation, the vehicle is required to be licensed  by the relevant state or territory to operate as a taxi. 

FBT Questionaire

Please find below a questionnaire designed to check if you have provided any of the following fringe benefits during this FBT year (1 April 2019 to 31 March 2020). Please note that this is not an exhaustive list but covers the most common types of fringe benefits provided to employees.

Motor Vehicles

Do you provide motor vehicles that are available for personal use by staff (or their associates)? This includes driving to and from work.

Yes   

No     

We recommend that all motor vehicles provided (even by way of novated lease) have an odometer reading taken as at 31 March 2020.

Car Parking

Did your organisation provide car parking facilities to an employee (or their associates) at a commercial parking station?

Yes   

No     

Did your organisation provide car parking facilities to an employee (or their associates) at, or in the vicinity of, your business premises and is the income of your business more the $10 million (GST exclusive)?

Yes   

No     

If yes, is there a commercial parking station located within 1km of your premises and does the commercial car parking station charge members of the public more than $8.95 for all day parking, and is the car parked on the premises for more than 6 hours between 7am and 7pm?  (Some employers such as charities, public educational institutions, government bodies may be exempt.)

Yes   

No     

Loans

Did your organisation lend any money to an employee (or their associate)?

Yes   

No     

Is the rate of interest being charged less than 5.37%?

Yes   

No     

Some examples include: advances of money, the provision of credit or the payment of an amount where there is an obligation to repay the amount.

Goods Provided 

Did your organisation provide goods to an employee (or their associate) for free or less than market value?

Yes   

No     

Some examples are: gift baskets, goods produced by your organisation and gift vouchers.  Also laptops, software, or tools of trade if not provided primarily for the employee's employment.

If the items are provided infrequently, irregularly and are valued at less than $300 (GST inclusive), you may be entitled to an exemption.  

Eligible work related items provided to employees and used by that employee primarily for employment related purposes are exempt from FBT.  

The ATO has previously disallowed the exemption for eligible work related items on any further items provided during the FBT year with substantially identical functions to a previously provided exempt item (unless the original item was lost, stolen, destroyed, or outdated due to technological developments).  

This exemption is now being expanded to allow more than one portable electronic device to be provided to employees of Small Business Entities (with grouped turnover of less than $10 million per annum) per FBT year, even if the items have identical functionalities.

Entertainment

Do you provide any form of entertainment to an employee (or their associate)?

Yes   

No     

Some examples are: business lunches and drinks, staff social functions such as Christmas parties, Friday night drinks, tickets to sporting events and theatre, accommodation and travel in connection with entertaining clients, games of golf or similar leisure activities. 

If the entertainment is provided infrequently, irregularly and valued at less than $300 (GST inclusive), you may be entitled to an exemption.  

If food or drink is provided to and consumed by a current employee on a working day on the employer's business premises (e.g. Friday night drinks), you may be entitled to an exemption.

The following items are not entertainment:

  • Tea, coffee and other such amenities provided on business premises.
  • Light refreshments on business premises such as morning/afternoon teas or meals (not including alcohol) in connection with meetings, training sessions, or overtime work.
  • Food and drink provided during a conference and accommodation for a conference.

Other

Did your organisation provide any other type of benefit to an employee (or their associate) which has not been disclosed above (e.g. any assets available for private use or services provided)?

Yes   

No     

Did your organisation provide accommodation to an employee (or their associate)? 

Yes   

No     

Did your organisation pay an allowance to any employee as compensation for living away from home? 

Yes   

No    

Did your organisation pay for any expense (e.g. fuel, subscriptions to clubs, rent on accommodation, private telephone) on behalf of an employee (or their associate)?

Yes   

No    

Did your organisation reimburse an employee (or their associate) for any private expenses (e.g. restaurant meals)? 

Yes   

No    

If you answered YES to any of the above, please contact our office so we can assist in determining if you have provided any fringe benefits.

If you are already registered for FBT we will be sending out our customised checklists shortly.

If you would like to print this information please click here for PDF format.

Disclaimer
The information provided in this questionnaire does not constitute advice. The information is of a general nature only and does not take into account your individual circumstances. We recommend that you contact Brentnalls SA to discuss your particular requirements or circumstances.
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