Businesses should now be planning to ensure their documentation is in place to accurately prepare and lodge their FBT returns on time.
With COVID-19 having a major impact on the 2022 FBT year, employers may need additional focus to ensure the correct exemptions are being applied and FBT is calculated correctly this year.
The first thing businesses should check is whether they are registered for FBT. Many business owners, particularly those who have recently set up a business, don’t think that they will provide their employees with fringe benefits, and therefore don’t register. But as the year progresses, they may realise that an FBT return is necessary.
If the business isn’t registered, registration forms can be accessed on the ATO website. Alternatively, contact our KMT tax agent as we can process this registration for you.
Lodgement and payment dates
Where businesses lodge their own FBT returns, the final date for lodgement of their 2022 FBT return and payment of any outstanding FBT is 23 May 2022.
If the 2022 FBT return is lodged by a tax agent, the lodgement due date is 27 June 2022 for electronic lodgement (and 23 May 2022 for paper lodgement).
The statutory due date for payment under the tax agent lodgement program has now been extended to 25 June for FBT returns lodged electronically, noting that a few additional days are provided if the due date falls on a weekend. However, for FBT returns that are lodged by paper, the payment due date will remain as 21 May.
Businesses who are registered and do not provide any fringe benefits during the year must still fulfil their lodgement obligations by submitting a ‘notice of non-lodgement’ with the ATO to avoid follow up action.
If businesses are liable to pay FBT for the FBT year or have paid FBT instalments for the year, a Fringe Benefits Tax (FBT) return must be lodged.
Major changes – 2021 & 2022 years
Windfall for cars stored at an employee’s home during COVID-19
The ATO released the factsheet: ‘COVID-19 and car fringe benefits’ in which a concession was outlined that will allow employers to reduce their FBT exposure for cars garaged at an employee’s home as a result of the COVID-19 pandemic.
Generally, a car is deemed to be available for the private use of an employee if the car is garaged or kept at or near a place of residence of an employee or associate. However due to COVID-19, if the operating cost method is used to calculate the car fringe benefits, and the employer’s car was garaged at the home of the employee and not driven, or only driven briefly for the purpose of maintaining the car, during the COVID-19 lockdown periods, then there will not be any deemed private use of the car for this period. This means that no FBT will apply for this period and the vehicle is not being driven during the COVID-19 lockdowns. Businesses will need to maintain odometer records to show that, during the period, the car was in fact garaged and had not been driven.
Parking benefit changes for 2022 FBT Year (TR 2021/2)
In June 2021, the ATO finalised their tax ruling to replace their longstanding view concerning Car Parking benefits. The update applies from 1 April 2022, for the FBT year ending 31 March 2023. The update now includes many parking stations that were previously considered non-commercial, therefore no FBT, under the old TR 96/26.
Businesses that provide parking to their employees, and within 1km from where the employee’s car is parked, a commercial parking station (now specifically including shopping centres, hotels, hospitals, universities and airports) charges more than ~ $9.25* (the car parking threshold) on 1 April 2022 could now be subject to FBT.
Please note that for most businesses with an aggregated turnover of less than $50 million, where the parking provided to the employee is not provided at a commercial parking station, the car parking exemption could apply in most circumstances.
*At time of writing the Parking Threshold applying from 1 April 2022 (for the FBT year ending 31 March 2023) had not been provided. However, the parking threshold for the 2022 FBT year beginning 1 April 2021 was $9.25.
Parking exemption thresholds extend to businesses with turnover below $50mil
For most businesses from 1 April 2021, (the 2022 FBT year), the car parking FBT exemption has been extended to those with turnover below $50 million, up from $10 million. This means that more businesses will be exempt from being taxed on car parking fringe benefits going forward.
As long as the parking provided to employees is not provided at commercial parking, and the business’ aggregated turnover is less than $50 million, the parking FBT exemption could apply in most circumstances.
ATO updated guidance regarding deductibility of transport and other travel costs
The ATO have finalised their tax rulings dealing with transport costs, TR 2021/1, and employee accommodation and tax treatment of Living Away From Home Allowances (LAFHA), TR 2021/4, help in determining if relevant costs paid by an employer would be deductible or would be subject to FBT.
One of the key differences between the finalised rulings and the drafts previously issued relating to accommodation expenses is that an employee would not be considered as ‘travelling’ for work purposes when they do not stay overnight. This means when an employee completes a day trip between capital cities, any meals provided would not be considered travel expenses, and the employer would need to consider FBT impacts, or even the ‘minor benefit exemption’.
FBT treatment of expenditure incurred by an employer in relation to a cancelled staff event
The ATO’s COVID-19 and fringe benefits tax factsheet states that an employer will generally not have an FBT exposure when a non-refundable expenditure has been incurred for a cancelled staff event. In this case, the employer has not provided any fringe benefits to its employees.
However, where an employer reimburses an employee for an attendance fee or ticket that was previously paid by the employee for an event that has been cancelled, FBT may still apply where the employer reimburses the employee for their loss as the reimbursement is categorised as an expense payment benefit.
Where a hamper is provided in lieu of a staff event, the minor benefit exemption may apply if the notional value of the benefit is less than $300 (inclusive of GST).
COVID-19 testing expenses
The government announced in February 2022, that it will ensure that COVID-19 expenses are tax deductible for testing taken to attend a place of work. This translates to no FBT applying for employers providing COVID-19 tests to employees for the purpose of testing to attend a place of work. As this is not legislated at time of writing, it is suggested that a record should be kept for COVID-19 testing expenses incurred for this purpose. The government announcement suggests that this will be applicable from 1 July 2021.
There are some employee benefits which are exempt from FBT and could be considered as part of a salary package arrangement for employees. Generally speaking, these benefits must be primarily used for work purposes, or to enable staff to do their job more efficiently. These exempt benefits include:
- Mobile phones
- Laptop computers
- Membership expenses, items such as a subscription to a trade, professional body or even an airport lounge membership
- Other work related items or tools of trade (e.g. power drill)
The employer can generally only provide each item ‘once’ to an employee per FBT year to take advantage of the FBT exemption. For example, the employee can receive both a laptop computer and mobile phone in the one FBT year.
These benefits do not need to be recorded on the FBT return as they are ‘exempt’ benefits and are also not reported fringe benefits included on the employee’s PAYG Payment Summary. They are also not counted as wages for payroll tax and work cover purposes.
Further, the ATO also provided additional guidance relating to employers providing employees with equipment to allow them to work from home due to COVID-19. The ATO has stated that some items would usually be exempt from FBT if the equipment’s use is primarily for your employee’s work. This could include items such as:
- Portable Printers
- Other Electronic Devices
The ATO also advises that the Minor Benefits Exemption or otherwise deductible rule may apply for other items that may be provided to employees to work from home, such as:
- Monitor, mouse, keyboard or other equipment they otherwise use in the workplace
- Stationary, computer consumables and potentially a portion of the telephone and internet costs where a logbook of usage can be supplied by the employee.
Otherwise deductible rule
The Otherwise Deductible Rule applies to reduce the amount of FBT payable by an employer where a benefit provided to an employee would ordinarily be deductible in their name.
That is where an employee is provided with a fringe benefit (such as paying their professional membership fees), and the benefit provided to the employee would be an item or expense that would be tax deductible by the employee if they were to claim a deduction in their personal tax return (such as membership fees required for their employment), the otherwise deductible rule would apply. For an employer, this means that the FBT taxable value would be reduced by the portion of the expense that is otherwise deductible by the employee.
As an employer you would want to seek a signed employee declaration to confirm that your treatment is correct before lodgement or the due date of your FBT return. The Fringe Benefit would still need to be reported in the company’s FBT return, however the deductible portion would be used to reduce the FBT taxable value in the FBT return.
Contact KMT accountants now if you need advice or assistance with FBT Return lodgement!
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.