FBT 2021: Tax & Employee Benefits

With the FBT  year ending on 31 March, we look at the key issues.

What is exempt from FBT?

Certain benefits are excluded from the FBT rules if they are provided primarily for use in the employee’s employment.  These include:

  • Portable electronic devices (e.g., laptop, ipad, printers, GPS etc.,). Larger businesses are limited to the purchase or reimbursement of one portable electronic device for each employee per FBT year;
  • A handbag, briefcase or satchel to carry items you are required to use and carry for work, such as laptops, tablets, work papers or diaries.
  • Tools of trade.

Also, if the item or service provided to the employee is less than $300 and is a one-off, it’s generally classed as a minor benefit and exempt from fringe benefits tax.

 

COVID-19 & FBT

The ATO has changed how it will approach FBT compliance this year because of the impact of COVID-19 on work patterns and conditions.

 

Emergency assistance such as flights and accommodation – emergency assistance to provide immediate relief to employees because the employee is at risk of being adversely affected by COVID-19 will generally not be subject to FBT.

For fly-in-fly-out workers, this includes temporary accommodation and meals where they were unable to return home because of border or travel restrictions.

 

Health care – Providing flu vaccinations to employees is generally exempt from FBT because it is work-related preventative health care.

 

Company cars – a company car garaged at an employee’s home will generally attract FBT.  The ATO has stated that for employers using the operating cost method, if the “car has not been driven at all during the period it has been garaged at home, or has only been driven briefly for the purpose of maintaining the car, we will accept that you don’t hold the car for the purpose of providing fringe benefits to your employee.”  But, you will need to maintain odometer readings that show the car has not been used.

 

Logbooks – COVID-19 is likely to have impacted on driving patterns and the ATO have made some concessions where the 12 week log book period was interrupted.

 

ATO ‘red flags’

Common problem areas include;

Entertainment deductions with no corresponding fringe benefit – Entertainment expenses are generally not deductible and no GST credits can be claimed unless the expenses are subject to FBT.

 

Employee contributions reduce fringe benefits tax but not recognised in income tax return – Where employee contributions reduce the amount of fringe benefits tax payable, a corresponding amount needs to be recognised in the income tax return of the employer.