This alert outlines some of the major benefits and key developments over the last year concerning COVID-19.
The following dates should be noted –
- Employers providing motor vehicle benefits need to take the odometer reading on the 31st March 2022.
- If the FBT return is lodged electronically and registered with a tax agent, the due date for lodgement and payment is 25 June 2022.
- If you lodge by paper, the FBT return due date is 21 May 2022 and the FBT payment is due on this date.
COVID-19 Developments
1. Working from home
You may have provided employees with items to allow them to work from home (or from another location) due to COVID-19.
Some items will usually be exempt from FBT if they are primarily used by your employees for work. The items include:
- Laptops
- Tablets
- portable printers
- other electronic devices
- Computer software
- Tools of trade
This is a defined list and does not include a desktop computer.
The exemption is limited to just one of each of these items where it carries out a substantially identical function.
If any significant private benefits are provided, they may have an FBT impact and details of should be forwarded to DFK BKM for consideration.
The “otherwise deductible” should also be considered. Under this rule the taxable value for certain benefits may be reduced by the amount that the employee would be entitled to claim as a deduction in their income tax return had they incurred the expense themselves.
The minor benefits exemption may apply for minor, infrequent and irregular benefits under $300, but these minor benefits do not provide a tax deduction or allow a claim on GST input credits.
2. Motor Vehicle benefits
Where a car isn’t being driven at all, or is only being driven for maintenance purposes, the ATO accept that you aren’t holding the car for the purposes of providing fringe benefits.
Where a car has not been driven at all during the covid-19 lockdown and it has been garaged at home, or has only been driven briefly for the purpose of maintaining the car, the ATO will accept that you don’t hold the car for the purpose of providing fringe benefits to your employee. In these situations, provided you elect to use the operating cost method, there will be a nil taxable value for the car and no FBT liability.
3. COVID-19 testing
Whether FBT applies to COVID-19 testing depends on how and where the tests are provided and their frequency and purpose.
A work-related medical screening exemption applies if specific requirements are met, ie testing is carried out by, or on behalf of a legally qualified medical practitioner or nurse, and is available to all employees. An employer simply providing rapid antigen tests (RATs) to an employee would not normally fall within this exemption.
Minor benefits exemption will only apply if RATs are provided on an infrequent or irregular basis, and the total value of the tests provided to an employee during the year does not exceed $300.
4. Car parking
i. Closure of work car park
If, on a particular day, your office is closed due to COVID-19 and therefore the work car park is also closed, you will not have provided a car parking benefit as there will be no car space available for use by your employee for more than four hours between 7.00am and 7.00pm on that day.
The time during which the work car park is closed will not form part of the availability periods used to calculate the taxable value of a car space under the statutory method.
ii. Closure of nearby commercial parking stations
If all of the commercial parking stations within a 1km radius of your business premises are closed on a particular day due to COVID-19, there will be no car parking benefits provided.
5. Flu vaccinations for employees working from home
Providing flu vaccinations to employees is generally exempt from FBT because it is work-related preventative health care.
You will not have to pay FBT for providing your employees with a voucher or reimbursement for getting the flu vaccine from a GP or chemist as long as it is available to all employees.
If only some of your employees choose to receive the flu vaccine, the voucher or reimbursement is still exempt from FBT as long as it is offered to all employees.
6. Entertainment
Lower levels of entertainment than normal are expected because of the continued impact of COVID-19 over the past year. The 50:50 split method may not be the suitable method to calculate the entertainment benefit and consideration must be given to the actual cost method.
Depending upon the nature and frequency of the entertainment benefit that has been provided, minor benefits exemption may minimise benefits provided.
7. Cancelled events
You will not have to pay FBT if you are required to pay non-refundable costs for cancelled events your employees were due to attend. This is because:
- the arrangement was between you and the event organisers, not your employees, and
- you have not provided any fringe benefits to your employees as they did not get to attend the event.
However, you may have to pay FBT if your employees were required to pay for their attendance at the cancelled event and you reimbursed them. This would be an expense payment fringe benefit – unless the otherwise deductible rule applies.
Major Benefits to consideration in determining your FBT obligations for 2021/22
1. Motor vehicle benefits
As a result of the ATO’s continuing and elevated level of attention on car fringe benefits, cars often represent the biggest risk area for employers.
The provision of a workhorse vehicle to an employee can be exempt from FBT, but it is not an automatic exemption. Rather, it is an employer’s ability to claim an FBT exemption with respect to a workhorse vehicle ultimately depends on the extent of the employee’s private use of the vehicle and meeting the “not designed for the principal purpose of carrying passengers test”.
2. Retraining and reskilling benefits.
Employers who provide training or education to employees who are redundant, or soon to be made redundant, may be exempt from fringe benefit tax.
Retraining and reskilling benefits are exempt from FBT where the:
- Employer provides a benefit in respect of training or education to a redundant, or soon to be redundant, employee
- Employer has complied with all obligations under the Fair Work Act 2009 that relate to the employee’s redundancy, and
- Education or training that is provided is
- Not related to the employee’s current job role, and
- For the primary purpose of helping that employee gain new employment.
3. Benefits provided to employees by third parties.
It is increasingly common for employers to allow their employees (and/or their associates) to receive non-cash benefits from third parties (e.g., clients, suppliers and contractors). The types of
benefits typically provided by a third party to an employer’s staff often involve entertainment based benefits (e.g., attendance at a corporate box, a meal or attendance at a third party’s
Christmas or end-of-financial year party).
Unfortunately, many employers incorrectly believe that an FBT liability does not, and cannot, arise in these circumstances, presumably because the benefit is not provided by the employer. It is important to be aware however, that the FBT Act contains rules, referred to as the ‘arranger provisions’, that can apply to create an FBT liability for an employer in respect of a benefit provided
to their employee (or associate), by a third party (referred to as a ‘third-party benefit’).
4. Car parking benefits
Car parking benefits represent one of the most commonly provided types of fringe benefits, of which the benefit provisions are extremely complex, and many employers have made errors when applying these rules.
As a result of the many errors made in this area, the ATO has embarked on a very public audit campaign targeting employers that provide car parking benefits to their employees.
5. Property benefits
Was any property provided (free or at a discount) in respect of an employee’s employment? Property includes all tangible and intangible property. Examples of property are goods, shares and real property. The ATO considers the provision of Bitcoin to be a property fringe benefit.
6. Residual fringe benefits
A residual fringe benefit may arise when you provide an employee with any benefit (including a right, privilege, service or facility) that doesn’t fall into one of the specific categories of fringe benefits.
Examples of residual fringe benefits:
- use of employer’s property, such as a video camera or television
- provision of a service, such as advice given by a solicitor
- private use of a motor vehicle that is not a ‘car’ for fringe benefits tax (FBT) purposes, such as a one-tonne utility.
7. Travel benefits
Fringe benefits tax (FBT) may apply if your business pays for or reimburses your employees for their travel expenses. Certain exemptions and concessions may apply to reduce your FBT liability. For example, your business may not have an FBT liability if it reimburses an employee for their travel expenses to attend a work conference, which the employee would have been able to claim as an income tax deduction if you hadn’t reimbursed them.
You will be liable for FBT if your employee extended their travel for private purposes and you reimburse the employee for these private costs. If your business provides benefits to your employees, you may need to obtain some records from the employee. For further information you may wish to contact us or review TR 2021/4 “Income and FBT: tax treatment of employee expenses and allowances for accommodation, food and drink, travel and LAFH” as per the following link.
https://www.ato.gov.au/law/view/document?DocID=TXR/TR20214/NAT/ATO/00001&PiT=99991231235958
