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Issue 121 - March 2019 Special Edition



Fringe Benefits Tax (FBT)

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 changes to FBT laws and guidelines for the FBT year ending 31 March 2019, these are detailed below: 

  1. Changes to Exemption for Commercial Vehicles
  2. The ATO has finalised its guidelines involving "minor, infrequent and irregular" use of Fringe Benefit Tax (FBT) exempt motor vehicles, with some notable changes from the previously released draft guidelines. These rules apply to taxis, panel vans or utes designed to carry a load of more than one tonne and any vehicle designed for more than 8 passengers with private use that is minor, infrequent and irregular.

    Generally, a fringe benefit arises where an employer makes a vehicle they hold available for the private use of its employee. However, a fringe benefit is an exempt benefit where the private use of eligible vehicles by current employees is limited to work-related travel, and other private use that is 'minor, infrequent and irregular'. 

    Employers can rely on the exemption from FBT provided under this guideline, if:

    • they provide an eligible vehicle (eg. utes,  panel vans) to a current employee,
    • the vehicle is provided to the employee for business use to perform their work duties,
    • the vehicle had a GST-inclusive value less than the luxury car tax threshold ($57,581 as at 1 July 2018) at the time the vehicle was acquired,  
    • the vehicle is not provided as part of a salary packaging arrangement and the employee cannot elect to receive additional remuneration in lieu of the use of the vehicle,
    • the employer has a policy in place that limits private use of the vehicle and obtain assurance from its employee that private use is limited to use as outlined below, 
    • your employee uses the vehicle to travel between their home and their place of work and any diversion adds no more than 2km to the length of that trip; and
    • for journeys undertaken for a wholly private purpose (other than travel between home and place of work), the employee does not use the vehicle to travel:  
      • More than 1,000km in total (this was 750km in the draft guideline), and
      • A return journey that exceeds 200km.

    Where employers choose to rely on the guideline:

    • they do not need to keep records about their employee's use of the vehicle that demonstrates that the private use of the vehicle is minor, infrequent and irregular, and
    • the Commissioner will not devote compliance resources to review that the employer can access the car-related exemptions for that employee. 

    However, employers will need to check that they continue to meet the requirements of the guideline in each year they provide the vehicle.

  1. Proposed Changes to FBT and Division 7A
  2. 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 2019.

    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. Utilities, 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.

Please find below a questionnaire designed to check if you have provided any of the following fringe benefits during this FBT year (1 April 2018 to 31 March 2019). 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.

We recommend that all motor vehicles provided (even by way of novated lease) have an odometer reading taken as at 31 March 2019.

Yes

 

 

 

 

No

 

 

 

Car Parking

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

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)?

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 $8.83 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)?

Is the rate of interest being charged less than 5.20%?

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.

Yes

 

 

  

No

 

 

  

Goods Provided

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

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.

Yes

 

No



Entertainment

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

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. 

Yes

No

 

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)?

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

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)?

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

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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