Tax update: Fringe Benefits Tax Returns

Upcoming Lodgement Due Dates via Tax Agents:

tax dates

 

21 April - Quarterly PAYG instalment activity statement
21 April - March 2011 monthly activity statement
15 May - 2010 income tax returns
21 May - April 2011 monthly activity statement
26 May - Quarterly activity statement
28 May - Fringe benefits tax annual return

Fringe benefits tax (FBT) Time 2011

Do you provide company cars to your employees? Do you provide entertainment and/or meals as a way of rewards? If you do, you may have fringe benefit tax obligations in 2011. Generally speaking, a fringe benefit is any form of benefit (not salary and wage) provided to employees or their family members because of the employment relationship.

Car Fringe Benefit

A Car Fringe Benefit arises if an employer provides its employees with a car (either owned or leased) for their private use.  For FBT purposes, a car does not actually need to be used for private purposes, as long as it is available for private usage.

Car Fringe Benefits tax can be reduced or avoided entirely where employees provide a contribution towards their private use of the motor vehicles.

It is important to note that even though Car Fringe Benefits can be reduced through employee contributions, proper records (i.e. logbooks) and documentary evidence of the expenditures still need to be maintained during the year to substantiate the cost of running the car.

Meal Entertainment Fringe Benefits

Common meal entertainment examples include business lunches at a café or restaurant, Friday night drinks at the office, food and drink consumed at a social function held on or off the business premises, a Christmas party, food and drink consumed in a corporate box /marquee or at corporate sporting day, meals at a restaurant for business networking meeting and any meals with alcohol being consumed.

Generally speaking, only the staff portion of the meals and entertainment expenses attracts FBT. Meals and entertainment provided to customers/clients does not attract FBT and is not tax deductible. Additionally, in-house light meals and refreshments do not give rise to FBT and are tax deductible.

Three different methods are available to employers to work out the most advantageous outcome for meal entertainment fringe benefits, either the actual expenditure method, the 50/50 split method or by using a 12 week register method.

Effective Salary Packaging for work related items

Employees are often keen on undertaking salary packaging arrangements to increase their after-tax disposable income. However, in most circumstances, the burden of tax is actually shifted to the employers at the top marginal tax rate of 46.5% and is therefore not advantageous to the employer.

However, certain work related items can actually give a win-win solution to both employers and employees under an effective salary sacrifice agreement. This is because these work related items are regarded as exempt items for FBT purposes. Moreover, it allows employers to claim the full deduction for some expenses upfront (e.g. laptop) rather than depreciating these assets over their effective life. 

Popular work-related items for salary packaging include mobile phones (including smart phones), laptops, briefcases, personal digital assistants and iPads.

FBT legislation allows multiple work related items to be exempted per employee per FBT year if these items do not have identical functions (i.e. each employee can be provided one laptop, one mobile phone and an ipad in the same year without paying FBT).

Insights to the ATO 2011 FBT Audit Activities

In 2011, the ATO will be using data matching intelligence from income tax returns and FBT returns to target:

  • Employers who fail to lodge FBT returns
  • Businesses with car fringe benefits with a value of $10,000 or greater.

For more information on FBT issues contact our expert team.

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Azure Group
Azure Group

Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

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