Fringe Benefits Tax (FBT)
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    Uber travel expenses not FBT-exempt

    The ATO has clarified that any benefit arising from travel by taxi, and not a ride-sourcing service, by an employee is exempt from fringe benefits tax (FBT) if the travel is a single trip beginning or ending at the employee’s place of work.

    In particular, the exemption is limited to travel in a vehicle licensed by the relevant state or territory to operate as a taxi. It does not extend to ride-sourcing services provided in a vehicle that is not licensed to operate as a taxi, such as Uber.

    Any benefit arising from taxi travel by an employee is also an exempt benefit if the travel is:

    • a result of sickness of, or injury to, the employee, and
    • the whole or a part of the journey directly between any of the following:
      • the employee’s place of work
      • the employee’s place of residence, and
      • any other place that it is necessary, or appropriate, for the employee to go as a result of the sickness or injury.

    If you have any questions regarding the above matters, please do not hesitate to contact us.

    Norman Ruan
    Accountant
    T: 02 9984 7774
    E: normanr@northadvisory.com.au

    Read more about business tax.

    Taxation Determination TD 2019/7 sets out the amounts that the Commissioner considers reasonable under s 31G of the Fringe Benefits Tax Assessment Act 1986 for food and drink expenses incurred by employees receiving a living-away-from-home allowance (LAFHA) fringe benefit for the FBT year commencing on 1 April 2019.

    Where the total of food and drink expenses for an employee (including eligible family members) does not exceed the amount the Commissioner considers reasonable, those expenses do not have to be substantiated under s 31G. If an employer wants to reduce the taxable value of an employee’s LAFHA fringe benefit by the exempt food component, the expenses must be either:

    • equal to or less than the amount the Commissioner considers reasonable under s 31G(1)(b), or
    • substantiated in accordance with s 31G(2).

    If the total of an employee’s food or drink expenses exceeds the amount the Commissioner considers reasonable, the substantiation provisions under s 31G will apply.

    Reasonable amount for food and drink — in Australia

    Table 1 below sets out the weekly amounts the Commissioner considers to be reasonable food and drink amounts for a LAFHA paid to employees living-away-from-home within Australia for the FBT year commencing on 1 April 2018. These amounts are for the total of food or drink expenses and include any amounts that may have been allowed for home consumption.

    Table 1: Reasonable food and drink amounts — in Australia

    Per week ($)

    One adult

    269

    Two adults

    404

    Three adults

    539

    One adult and one child

    337

    Two adults and one child

    472

    Two adults and two children

    540

    Two adults and three children

    608

    Three adults and one child

    607

    Three adults and two children

    675

    Four adults

    674

    Note: “Adults” for this purpose are persons who had attained the age of 12 years before the beginning of the FBT year.

    In relation to larger family groupings, the Commissioner accepts the reasonable food and drink amount based on the above figures plus $135 for each additional adult and $68 for each additional child.

    Reasonable food and drink amounts — overseas

    Tables 2 to 4 of TD 2019/7 set out the weekly amounts the Commissioner considers to be reasonable food and drink amounts for a LAFHA paid to employees living-away-from-home outside Australia for the FBT year commencing on 1 April 2019.

    Table 2 sets out the cost group to which a country has been allocated. Please refer to TD 2019/7 for Table 2.

    Table 3 sets out the reasonable amount for food and drink expenses for each cost group. If the employee lives away from home in a country that is not shown in Table 2, the employee can use the amount for cost group 1 in Table 3.

    Table 3: Amounts by cost group

    Cost Group

    Food and drink for one adult

    1

    $137

    2

    $201

    3

    $273

    4

    $328

    5

    $437

    6

    $537

    Where the employee is accompanied by other family members while overseas, the reasonable food and drink amount per week for the family is worked out by multiplying the amount shown in Table 3 by the relevant factor in Table 4 below.

    Table 4: Factors to apply for family groups — overseas

    Family group

    Factor

    Two adults

    1.5

    Three adults

    2.0

    One adult and one child

    1.25

    Two adults and one child

    1.75

    Two adults and two children

    2

    Two adults and three children

    2.25

    Three adults and one child

    2.25

    Three adults and two children

    2.5

    Four adults

    2.5

    In relation to larger family groups, the Commissioner accepts the reasonable food and drink amounts can be increased:

    • for each additional adult, by a further 50% of the relevant single adult rate in Table 3, and
    • for each additional child, by a further 25% of the relevant single adult rate in Table 3.

    If you have any questions about claiming reasonable amounts for food and drink expenses as a tax deduction, please do not hesitate to contact us.

    Norman Ruan
    Accountant
    T: 02 9984 7774
    E: normanr@northadvisory.com.au

    Read more about business tax.

    Mr Scott Morrison, the Federal Treasurer, handed down his third Budget at 7.30 pm (AEST) on 8 May 2018. Mr Morrison said the Budget is focused on further strengthening the economy to “guarantee the essentials Australians rely on” and “responsibly repair the budget”. With a deficit of $18.2b in 2017/18 and $14.5b in 2018/19, the Budget is forecast to return to a balance of $2.2b in 2019/20 and a projected surplus of $11b in 2020/21.

    The government is proposing a three-step, seven-year plan to make personal income tax “lower, fairer and simpler”. The Budget also contains additional measures to counter the black economy, particularly in response to the final report from the Black Economy Taskforce, including expanding the taxable payments reporting system. Additionally, the Budget contains a range of measures intended to ensure the integrity of the tax and superannuation system.

    The tax and superannuation highlights are set out below.

    Individuals

    • A seven-year Personal Income Tax Plan will be implemented in three steps, to introduce a low and middle income tax offset, to provide relief from bracket creep and to remove the 37% personal income tax bracket.
    • The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2017/18 income year.
    • The 2017/18 Federal Budget measure to increase the Medicare levy from 2% to 2.5% of taxable income from 1 July 2019 will not proceed.
    • Supplementary amounts (such as pension supplement, rent assistance and remote area allowance) paid to a veteran, and full payments (including the supplementary component) made to the spouse or partner of a veteran who dies, are exempt from income tax from 1 May 2018.
    • Schemes to license a person’s fame or image to another entity such as a related company or trust to avoid income tax will be curtailed.
    • The ATO will be provided with $130.8m from 1 July 2018 to increase compliance activities targeting individual taxpayers and their tax agents.

     

    Income tax

    • Significant changes to the calculation of the R&D tax incentive will commence for income years beginning on or after 1 July 2018. Additionally, a maximum cash refund will also apply for some entities.
    • The $20,000 instant asset write-off will be extended for small businesses by another year to 30 June 2019.
    • Amendments to Div 7A will strengthen the unpaid present entitlements (UPE) rules from 1 July 2019.
    • The start date of targeted amendments to Div 7A will be deferred from 1 July 2018 to 1 July 2019.
    • Deductions for expenses associated with holding vacant land not genuinely used to earn assessable income will be denied.
    • The small business capital gains tax (CGT) concessions will not apply to partners alienating rights to future partnership income.
    • Payments to employees and contractors are no longer deductible where any amounts that are required to be withheld are not paid, from 1 July 2019.
    • The definition of a “significant global entity” (SGE) will be broadened to include more large multinational groups, from 1 July 2018.
    • The thin capitalisation rules will be amended, effective 1 July 2019, to require entities to align the value of their assets for thin capitalisation purposes with the value included in their financial statements.
    • The thin capitalisation rules will be amended, effective 1 July 2019, to treat certain consolidated groups and multiple entry consolidated groups as both outward and inward investment vehicles for thin capitalisation purposes.
    • Tax exempt entities that become taxable after 8 May 2018 will not be able to claim tax deductions that arise on the repayment of the principal of a concessional loan.
    • The 50% capital gains discount for managed investment trusts (MITs) and attribution MITs (AMITs) will be removed at the trust level.
    • A specific anti-avoidance rule that applies to closely held trusts engaging in circular trust distributions will be extended to family trusts.
    • The concessional tax rates for the income of minors from testamentary trusts will not be available for trust assets unrelated to the deceased estate.
    • A five year income tax exemption will be provided to a subsidiary of the International Cricket Council (ICC) for the ICC World Twenty20 to be held in Australia in 2020.
    • The list of countries whose residents are eligible to access a reduced withholding tax rate of 15% on certain distributions from Australian managed investment trusts (MITs) will be updated.
    • Six more organisations have been approved as specifically-listed deductible gift recipients.

     

    Superannuation

    • The maximum number of allowable members in SMSFs and small APRA funds will be increased to six from 1 July 2019.
    • The annual audit requirement for self managed superannuation funds will be changed to a three-yearly requirement for funds with a history of good record keeping and compliance.
    • Individuals whose income exceeds $263,157, and have multiple employers, will be able to nominate that their wages from certain employers are not subject to the superannuation guarantee (SG) from 1 July 2018.
    • Individuals will be required to confirm in their income tax returns that they have complied with “notice of intent” requirements in relation to their personal superannuation contributions, effective from 1 July 2018.
    • An exemption from the work test for voluntary contributions to superannuation will be introduced from 1 July 2019 for people aged 65–74 with superannuation balances below $300,000, in the first year that they do not meet the work test requirements.
    • Insurance arrangements for certain superannuation members will be changed from being a default framework to being offered on an opt-in basis.
    • A 3% annual cap will be introduced on passive fees charged by superannuation funds on accounts with balances below $6,000, and exit fees on all superannuation accounts will be banned.
    • The financial institutions supervisory levies will be increased to raise additional revenue of $31.9m over four years, from 2018/19.

     

    Black economy measures

    • A package to reform the corporations and tax laws to deter and disrupt illegal phoenix activity and the black economy will be introduced.
    • The taxable payments reporting system for payments to contractors will be expanded to include security services, road freight transport and computer system design industries, effective from 1 July 2019.
    • Business seeking to tender for Australian government contracts above $4m (including GST) will need to provide a statement of compliance with their tax obligations, from 1 July 2019.
    • Businesses can no longer receive cash payments above $10,000 for goods and services, from 1 July 2019.

     

    Indirect taxes

    • Offshore sellers of hotel accommodation in Australia will be required to calculate their GST turnover in the same way as local sellers from 1 July 2019.
    • The luxury car tax on cars re-imported into Australia, following a refurbishment overseas, will be removed from 1 January 2019.
    • Alcohol excise refund scheme cap increased from $30,000 to $100,000 per financial year from 1 July 2019, and lower excise rates will apply for smaller beer kegs.
    • Measures to combat illicit tobacco in Australia, including collecting tobacco duties and taxes upon importation and creating a multi-agency task force, will be introduced.
    • Customs tariffs from placebos and clinical trial kits that are imported into Australia will be removed from 1 July 2018.
    • Access to refunds of indirect tax, including GST, fuel and alcohol taxes under the Indirect Tax Concession Scheme has been extended.

     

    How can we help?

    If you have any questions or would like further clarification in regards to any of the above measures outlined in the 2018-19 Federal Budget, please feel free to contact Martin van der Saag or Norman Ruan on (02) 9984 7774. Read more Financial Industry articles.

    It sounds strange, but the FBT law is full of exemptions and concessions. The FBT law was introduced way back in 1986 with the intention to tax non-cash fringe benefits. But in doing so, the law has allowed for exclusions, concessions, reductions and exemptions. Many employers are not fully aware of the extent of the FBT Exemptions, the opportunities these may present as part of remuneration, reward, policy or salary packaging strategies. Many employers do not fully understand the rules and requirements involved.

    1. Facts on FBT Returns lodged for 2017
      • 30% of FBT returns reviewed externally prior to lodgement
      • Most challenging benefit is Entertainment
      • Other challenging benefits were LAFHA, expense payments, and parking
      • Challenging aspects includes gathering data, analysing data and applying the FBT technical rules
    2. FBT Exempt and Rebatable Employers
      • Don’t assume that your organization is Exempt or Rebatable because it always has been. Confirm your FBT status
      • Substantiation is required, it is not acceptable to just deduct a set amount pre-tax each fortnight or monthly pay period
      • If your salary packaging provider or fleet manager makes a mistake, then it is the employer that needs to manage the issue / interact with ATO if necessary
      • Amendments can’t be made prospectively
    3. Car Fringe Benefits
      • A car is a motor vehicle (motor powered road vehicle) designed to carry less than 1 tonne and less than 9 passengers
      • Hire cars are included if the hire period exceeds 12 continuous weeks
        Motor cycles and vehicles carrying more than 1 tonne or 9+ passengers are not covered by car fringe benefits, but may fall under residual benefit provisions
      • Exempt cars include panel vans or utility trucks designed to carry less than 1 tonne, or all other road vehicles carrying a load of more than 1 tonne that aren’t principally designed to carry passengers if:
        • Private use limited to home to work travel
        • Other private travel is minor, infrequent or irregular
      • If an exempt vehicle is used for private travel more than this, then it us subject to normal car FBT rules.
      • If log book method is selected and there is no log book, then 100% private usage is assumed
      • Don’t assume exemption applies
      • Review usage of fleet
      • How would you go in an ATO audit?
      • For over 1 tonne vehicles, without logbook records, there is no FBT parachute position available
      • ATO FBT audits are primarily targeted on motor vehicles
    4. FBT Audit Considerations on Car Fringe Benefits
      • Onus of proof is on the employer
      • Does the vehicle meet the requirements for exemption?
      • Has there been any private use?
      • What records are available to prove no private use?
      • What policy is in place? Is it available and current?
      • Is the employee prohibited from using the vehicle privately?
      • Are toll records available? (toll usage on weekends)
      • Are fuel records / receipts available? (filling up in Byron Bay over Christmas break)
      • Has the employee received any speeding fines or other infringements? (whilst in Bryon Bay over Christmas break)
      • If the employee/s take the car home, do they have their own car for after hours and weekend usage?
      • Does the car have a tow bar? Does the employee own a boat or caravan or indulge in off-road motor sports or other adventure activities?
      • Are there baby / child seats installed?
      • Have the employee’s completed declarations?
      • What instructions or guidance accompanies the declaration?
      • Have the declarations been reviewed / verified?
    5. Car Parking Fringe Benefit
      • Car is parked at premises that are owned, leased or otherwise under the control of the employer
      • Commercial Parking Station that charges more than the annual threshold ($8.66 for 2018) for all day parking is located within 1 km of the parking facility on the first day of the FBT Year (ie 1 April 2017) – all day parking refers to a continuous period of at least 6 hours between the hours of 7am and 7pm
      • Car parked in the vicinity of primary place of employment
      • Employee has a primary place of employment
      • Other daily conditions for car parking fringe benefit to apply:
        • Car is parked for a total aggregate period of more than 4 hours between 7am and 7pm on any day. Best to keep records of parking space usage to reduce the FBT liability
        • The car travels between the employee’s home and primary place of employment on that day (1 way trip is required to satisfy this test)
      • If the parking space lease is in the employee’s own name, the parking is then not provided by the employer and it becomes an expense payment reimbursement fringe benefit. The difference can be substantial, highlighting why car parking is a concession benefit.
    6. Living Away from Home Allowance (LAFHA)
      • Eligibility for LAFHA concessions include
        • Required to maintain a home in Australia whilst living away from it – home must always be available (ie can’t sublet)
        • Duration capped at 12 months for any one location
        • Fly In Fly Out/Drive In Drive Out (FIFO/DIDO) employees not restricted by above restrictions
      • Substantiation required (includes FIFO/DIDO arrangements)
        • Accommodation – rental agreement, receipts/evidence of payment
        • Food – if amount exceeds ATO reasonable limits, then must substantiate in full or excess subject to FBT (statutory food amounts subject to FBT)
        • Employee Declarations regarding employees who maintain a home in Australia and employees who fly-in fly-out or drive-in drive-out
    7. Meal Entertainment
      • Can use 50/50 method or actual method
      • In-house property exemption is available under actual method only and exempts food or drink consumed on business premises by current employees on a working day
      • Meal Entertainment does not include sustenance
      • FBT will apply to associates, they are not eligible for in-house property exemption
    8. Minor Benefit Exemptions:
      • Threshold is <$300 incl. GST, but is not exempt if salary packaged
      • Onerous conditions – minor, infrequent or irregular
    9. Portable Electronic Devices Exemption and considerations
      • Includes laptops, ipads, PDAs, mobile phones
      • Limited to one type per FBT year per employee (except from 01/04/2016 for SBEs)
      • Primarily used for work purposes – more than 50%
      • ATO reasonableness test
      • Test is made at the time of provision
      • To what use or purpose is the device applied?
      • Can salary package
      • Mobile phone bills – is apportionment necessary?
    10. Exempt Travel:
      • Compassionate Travel
      • Travel to attend medical appointment
      • Taxi travel when employee is unwell
      • Taxi travel that begins or ends at the workplace (24 hours)

    If you have questions on any of the above issues raised, please do not hesitate to contact us.

    Kim Edwards
    Accountant
    T: 02 9984 7774
    E: kime@northadvisory.com.au

    Read more about business tax.

    A motor vehicle designed to carry a load of more than one tonne may still be a reportable fringe benefit for an employee. The ATO has confirmed in a recent Private Binding Ruling any consistent use of these vehicles is a residual fringe benefit.

    With the fringe benefits year fast approaching, it is important that your claims are accurate. Even though there are exemptions for vehicles such as utilities, some fringe benefits may be counted as a residual benefit.

    For the purposes of FBT, the following trips are exempt for utilities:

    • travel undertaken in the course of producing assessable income
    • travel of the employee between home and work, and
    • for private travel, trips that are minor, infrequent and irregular.

    We recommend that you keep a record of all the trips that aren’t in these categories. For example, if you make regular private trips. An example of this may be a regular family-related trip, or regular weekend trips.

    Our firm would be pleased to chat with you if you require any further clarification on this matter. Please do not hesitate to give us a call.

    Norman Ruan
    Accountant
    T: 02 9984 7774
    E: normanr@northadvisory.com.au

    Martin van der Saag
    Director
    T: 02 9984 7774
    E: martinv@northadvisory.com.au

    Read more about business tax.