As we begin the 2021 Fringe Benefit Tax Year, it is important for SME businesses to continue to maintain their tax obligations – staying current and compliant during this especially unique time.
During this period, many employers will be considering their FBT reporting obligations and potential strategies to minimise their liability, possibly reducing their employee’s reporting Fringe Benefit disclosure.
We’ve outlined a number of the recent FBT developments, and highlighted the key audit targets by the Australian Tax Office to be aware of throughout the course of the 2021 Fringe Benefit Tax Year.
Car Fringe Benefit
As outlined in our last month’s Vehicle Odometer Reading FBT Reminder, the ATO has announced the COVID-19 concession, which states an employer isn’t holding a car of the purposes of providing Fringe Benefits to an employee where a work-car has not been driven at all during the period it has been garaged at home, or has only been driven briefly for maintenance purposes.
Provided that the employer elects to use the Operating Cost Method and maintains odometer records, the employer will not have an FBT liability for the car during this period. Operating costs for the car during the period covered by the COVID-19 FBT concession can be reduced, which include:
- any fuel and oil costs incurred during the period;
- repairs and maintenance costs incurred during that period;
- insurance and registration that is attributable to that period;
- lease payments incurred during that period;
- deemed interest and depreciation is not required to be included with respect to that period; and
- auto club fees (e.g. NRMA and RACQ) incurred during that period
Without electing to use the Operating Cost Method or not having odometer records, the Statutory Formula Method applies and an FBT liability will arise as the car garaged at the employee’s home is taken to be available for private use.
If you are already using the logbook method and have an existing logbook in place, you can still rely on this logbook. However, you must keep odometer records for the year to show how much the car has been driven, including any lockdown period.
Car Parking Fringe Benefit
Following an initial draft release in late 2019, the ATO has announced new guidelines to Tax Ruling 2019/D5 pertaining to car parking Fringe Benefits provided to employees from an employer.
Deferred until 1 April 2022 (being the 2023 FBT Year), the Ruling outlines where staff car parking facilities are both in the vicinity of the employers business and within one kilometre of a car park which offers all-day parking as a ‘commercial’ car park, for FBT purposes, you may have to pay Fringe Benefits Tax on the value of the employee’s car space.
Examples of car parks which have been highlighted under the Ruling include:
- shopping centres;
- sports stadiums;
- hotels; and
It is important to note that a car parking benefit will be eligible for the FBT exemption, where all of the following conditions are met:
- the car is not parked at a commercial parking station;
- the employer is not a public company;
- the employer’s income for the year-ending most recently before the start of the relevant FBT Year is less than $50 million, or the employer is a small business entity
FBT Benefits provided to staff working from home
The ATO has also outlined guidance on FBT benefits provided to staff, where working from home due to the pandemic.
During the periods of temporary working from home arrangements due to COVID-19, the provision of office equipment will be exempt from FBT if it is:
- property that is ordinarily located on your business premises;
- wholly or principally used directly in connection with your business operations
Office equipment is considered ‘ordinarily located on your business premises’ if:
- the home use of the equipment by your employee is temporary;
- there is an expectation that the equipment will be returned to your business premises when the temporary WFH arrangements ceases
Additionally, the equipment does not need to have been physically located on your business premises prior to entering into a working from home arrangement to meet the test, provided it is an item that is expected to be returned to the premises.
Emergency COVID-10 Support
Also covered under FBT for 2021 is relief for employers providing emergency assistance to employees during COVID-19.
The benefits exempted from Fringe Benefit Tax for employers include:
- providing protective equipment;
- provision of meals and/or temporary accommodation to an employee who is required to self-isolate;
- provision of travel-related benefits connected with COVID-19;
- short-term loan to assist with a COVID-19 matter;
- provision of healthcare on the employer’s premises to an employee affected by COVID-19; and
- payment of hotel quarantine
ATO Audit Areas for 2021
The ATO has confirmed that compliance enforcement has officially recommenced following COVID-19 restrictions.
As part of this, spotlight will be heavily focused on employers that apply the otherwise deductible rule to reduce the value of expense Fringe Benefits. The view from the ATO surrounds concern that some employers are failing to obtain the appropriate documentation and declarations from employees to support the reduction (e.g. for mobile phones or internet).
Additionally, the ATO will show heavy focus on record keeping pertaining to the application of the Minor Benefits Exemption across the FBT Year – especially in regards to entertainment expenditure. It is important that detailed records are kept and held, highlighting the number of employees and identification of employees who attend events.
For More Information
For more information on managing your tax commitments, minimising future FBT liabilities, and details on the potential ATO audit targets for 2021, please contact the Archer Gowland Redshaw office on (07) 3002 2699 | (07) 3221 4004 or via ‘email@example.com’.