The 2022 Fringe Benefits Tax (FBT) ends on 31 March 2022, so it is a good time to start considering what you need to do to lodge and pay your FBT and refresh your understanding of FBT fundamentals. Get up to speed with some of the latest updates and developments post-COVID and ways to minimise your FBT expenditure.
FBT is a highly complex tax and can make preparing the annual tax returns complicated, especially for internal payroll and accounting teams.
Our Morrows Tax and Accounting advisors have prepared the below article that breaks it down to help understand the ins and outs.
Firstly, what is Fringe Benefits Tax, and when is it due?
A Fringe Benefit is a non-cash payment made to an employee, however, in a different form than a salary and wages. FBT exists to capture the tax on benefits provided to the employee that would otherwise have been taxed in their name as ordinary income.
Here are some common examples;
- allowing an employee to drive a work car for private use
- providing an employee with a discounted loan
- paying for an employee’s gym membership
- providing entertainment by way of free tickets to concerts or movies
- reimbursing an expense incurred by an employee, such as school fees
- giving benefits under a salary sacrifice arrangement with an employee
For the record, the following are not fringe benefits:
- salary and wages
- shares purchased under approved employee share acquisition schemes
- employer contributions to complying super funds
- employment termination payments (including, for example, the gift or sale at a discount of a company car to an employee on termination)
- payment of amounts deemed to be dividends under Division 7A
- benefits provided to volunteers and contractors
- exempt benefits such as certain benefits provided by religious institutions to their religious practitioners.
Employers pay FBT on a number of benefits that they provide to their employees. Employers pay FBT on:
- Every other benefit that is not already taxed
How has COVID-19 Impacted Fringe Benefits Tax?
As a result of COVID-19, we’ve seen several changes to FBT in the following areas:
Working From Home Support, are devices now exempt from FBT
Multiple devices and equipment such as laptops, portable printers, and other electronic devices are now exempt from FBT. Note, previously, an employer could only provide an employee with one FBT exempt portable electronic device per FBT year. However, for the 2022 FBT year and beyond, employers can provide multiple devices, provided the later item replaces the earlier item, or if the employer is a small business entity (with a turnover less than $50 million).
FBT Concessions for Retraining and Reskilling Staff
FBT exemption is also applicable when put towards retraining and reskilling staff, so long as the benefit provided took place on or after 2 October 2020 and if ALL of the following conditions are satisfied:
- The training benefit is provided in the year of the tax in respect of education or training undertaken by an employee.
- The employee has been made redundant or is soon to be made redundant
- The education or training is for the primary purpose of enabling the employee to gain or produce salary or wages in respect of any employment to which the education or training relates to.
Note, however, that there are also several exceptions or caveats to consider. These include:
- No salary-packaging
- Not applicable for spouses, children or related employees
- Not covered by Commonwealth-supported student assistance (such as HELP or HECS)
- It does not include the cost of primary or secondary school education
During COVID-19 many employees were encouraged to work from home, and as such many car parks were free or closed, therefore affecting the determination of whether a benefit is being provided). Below are the changes related to car parking;
- Car parking benefits are not provided if the work car park is closed or if the commercial car park within a 1km radius from the place of employment is closed.
- The lowest rate at commercial parking stations (within 1 km radius of the premises where the car is parked) has been lowered to the threshold of $9.25.
- Car parking is tested as at 1 April 2021 for all commercial stations with a 1km radius.
- The Small Business Aggregated Turnover Threshold increased from $10 million to $50 million, effective from 1 April 2021. In terms of the aggregated turnover, you need to check the turnover for the last income tax year before the full FBT year. Note that the car cannot be parked at a commercial parking station, and the Employer cannot be a government body, listed public company or subsidiary of a listed public company.
- The definition of the commercial car parking stations is expanded to include airports, shopping centres, hospital car parks and other similar types of car parks, effective from 1 April 2022. Hence it is time for clients to review the car parking arrangement and be aware of any potential car parking fringe benefit tax consequence.
What if my employees didn’t use their cars during the lockdowns?
The ATO has accepted that a car is not considered for private use and is exempt from FBT if:
- The employees who receive a car benefit keep the car at their residence and only drive the vehicle for maintenance throughout the FBT year.
- Note that this exemption is only applicable under Operating Cost method but not Statutory Formula method.
- Logbooks can still be relied on even if driving patterns changed through the COVID-19 period. The ATO will accept that there might be a change of business pattern, so you can adjust the business usage percentage as long as you have the odometer records as supporting document.
Expenses incurred to provide accommodation, food, and transport for COVID Relief
If an employee requires accommodation, food, and transport for immediate relief of COVID-19, the costs are not subjected to FBT.
Protection from COVID-19
Any items purchased to help protect employees from COVID-19 may be subject to FBT. However, there is an exemption if the items are used for emergency assistance.
Are businesses likely to get audited due to Fringe Benefits Tax liabilities?
Due to everything being digital, the ATO now, more than ever before, has access to data to help target employers not paying their fair share of taxes. No matter how diligent and honest, employers can still be subjected to an ATO audit. To ensure compliance, employers must structure their benefits correctly and report accurately.
To stay compliant, we highly recommend that clients keep accurate records relating to the fringe benefits provided, including how you calculated the taxable value of benefits, as these will come in very handy in the event of an audit.
What you need to do if you don’t have an FBT liability
An FBT return is only required if the employer has a fringe benefits taxable amount for the year. So, for example, where an employer’s FBT liability has been reduced to nil by employee contributions, the employer is not required to lodge an FBT return. However, if the employer is registered for FBT, it is recommended that they notify the ATO of this by Lodging a ‘Notice of Non-lodgement – Fringe Benefit Tax’ form (NAT 3094).
Fringe Benefits Tax Important Dates and Deadlines
- When did the 2022 fringe benefits tax (FBT) year end? 31 March 2022.
- What tax period will the FBT Liability fall? The FBT liability for fringe benefits provided to your employees (or their associates) will need to fall between 1 April 2021 and 31 March 2022.
- When is the FBT Liability due? If you have an FBT liability for the 2022 FBT year, your FBT return and payment is due by 23 May 2022.
How Morrows can help
If Fringe Benefits Tax wasn’t already complex, it has become more confusing than ever. Please reach out to your friendly Morrows Advisor to learn how the latest FBT changes relate to your business.