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FBT Exemptions and Concessions

Posted by Northadvisory on March 26, 2018

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