As the year speeds by and March 31 approaches, employers and business owners need to consider yet another tax. A payment to an employee that is not wages or superannuation, cash or otherwise, will be considered a fringe benefit and subject to ‘Fringe Benefits Tax’ (FBT), unless it is exempt. That is, 47% (2021) of the taxable value of the benefit.
Did you provide them with a vehicle for private use? Did you assist your employees with setting up a home office this year? Some other common benefits provided are reimbursements of private expenses (such as school fees), tickets to shows/concerts or other forms of entertainment (like that huge Christmas party you were going to have) and car parking.
So, what’s different in 2021? The ATO have acknowledged the impact of the COVID-19 pandemic on normal business operations and how this may have unintended consequences for FBT.
One of the largest impacts has been on employee vehicle arrangements. Due to lockdowns and restricted travel, the work-related use of employer provided vehicles has fallen significantly for most employees. To assist with this, the ATO have provided a handy fact sheet that you can access from the bottom of this article.
If COVID-19 has impacted employee driving patterns AND they/you have maintained a logbook in a previous year, the ATO have stated this logbook can still be relied on, if certain factors apply. However, if an employee has maintained a new logbook during the year it may be to an employer’s benefit if COVID-19 has in fact increased the business use % of a vehicle. (i.e. if private trips were reduced due to the lockdowns and closures). Keeping in mind, the logbook period (a continuous 12-week period) must be indicative of the use throughout the whole year.
If you have been required to store a business vehicle in an employee’s home garage, provided the vehicle has only been driven for the purposes of maintaining the vehicle then the ATO will accept that no fringe benefit has been provided. You must keep odometer records for the period to prove the minor use. If the car has been for a trip up to the north coast for a family weekend away – then you have provided a fringe benefit and the taxable value will need to be calculated.
For general information regarding FBT and motor vehicles see this article here.
Working from Home
You may have provided employees with the necessary items to allow them to work from home (or other location). We have an exemption for work-related portable electronic devices. This covers mobile phones, laptops, tablets etc. Essentially, provided the devices are mainly used for the employee’s employment they are exempt from FBT. For small businesses, from 1 April 2016, there is also no limit on the number of devices you can provide to one employee.
Other items you have provided for their home office setup (Monitors, keyboard, stationery, internet bill) may fall into the ‘Minor Benefits Exemption.’ This exemption applies to minor, infrequent, and irregular benefits under $300. The dollar limit applies per item/benefit provided.
If you provided more substantial setups, you still have access to the ‘Otherwise-deductible Rule.’ This allows employers to reduce the taxable value of the benefit to the extent that the employee could claim a deduction personally. (i.e. 50% work-related use)
Did you have an extravagant Christmas party planned and COVID-19 restrictions came along and shut you down? Have no fear, you will not have to pay FBT if you incurred non-refundable costs for cancelled events your employees were due to attend.
You have not provided the fringe benefit as the employee never attended the event. Unfortunately, if you required your employees to contribute to their attendance at the event, and have since reimbursed them, you have incurred an expense payment fringe benefit. FBT would then apply.
If you would like any assistance with this, please get in touch with one of the team and we will be more than happy to discuss this further with you.
FBT returns are due for lodgment by 25 June 2021 if electronically lodged by a tax agent.
ATO Fact Sheet: COVID-19 and Car Fringe Benefits
Full List of ATO Measures