Fringe Benefit Tax - What you need to know

The annual fiscal period for Fringe Benefit Tax (FBT) ends today, the 31st March 2014. The due date for lodgement of the 2014 FBT returns is the 28th May 2014. Employers have obligations to declare the value of benefits provided to employees during the period from 1 April – 31 March annual. In order to lodge an FBT return the employer’s business entity must be registered for FBT with the Australian Taxation Office.

FBT Exemptions – work related items 

When reviewing fringe benefits provided to employees there are exemptions that may apply. In particular and common is the exemption for eligible worked related items under section 58X of the act which applies for one item per annum per employee.  Eligible work related items include portable electronic devices such as laptops, a calculator, an electronic diary, a PDA or similar and a mobile phone. The other items on list include computer software, protective clothing, briefcase and tools of trade. However in order to obtain this exemption the employer must document and ensure that the work use test is satisfied, that is the work related item(s) must be for “primary for use in the employee’s employment”. It is also essential for the employer to properly document the reason the item was provided to the employee, the type of work performed by the employee and how the item relates to the employees employment duties. This can be referenced back to the employee’s job description and duty statement or the business human resource policies such as private usage restrictions.

There are minor benefit exemptions that may also apply for benefits, which are one off in nature and less than $300 per benefit provided.

Motor vehicle fringe benefits

Statutory Formula Methodology

As of this FBT year, for cars travelling up to 40,000 kilometres the statutory percentage used in calculating car fringe benefits will be 20%, and 17% thereafter, as seen in the table below:

Logbook Methodology

An employer’s estimate of a car’s business kilometres, and hence business use percentage, must take into account all relevant factors, including the following:

• Any log book records, odometer records or other records maintained by or on behalf of the employer; and
• Any variations in the pattern of use of the car.

To that end, the ATO has made it abundantly clear that employers must ensure that their estimate of a car’s business use percentage takes into account ‘any variations in the pattern of the use of the car’ during the FBT year.

Living Away from Home Allowance

There has been changes to the living away from home allowance (LAHFA) benefits. In order to claim any FBT exemptions or reductions in LAFHA benefits, the following requirements must be met:

• Employees are required to live away from home for employment purposes
• Employees must usually reside in Australia
• Employees or their spouse must have an ownership interest (rent or own) in an Australian-based home in which they live
• Employees must maintain their Australian home for personal use, meaning they cannot rent out their home whilst living away for work
• The concession only applies for a maximum of 12 months per location
• The employee must substantiate their actual accommodation and food expenses.

Airport car parking benefits

Under the statutory formula method, a car benefit arises when a car is available for private use by an employee. A car is deemed to be available for private use of an employee (or their associate) where the car is ‘garaged or kept at or near a place of residence of the employee or of an associate of the employee’.

Class Ruling 2013/10 provides a concession to this rule, reducing the days a car is available for private use for employees parked at the airport. The main qualifier to look out for here is that the car parking operator has removed “custody and control” (as in the keys) to the car.

This article is intended to provide general information only, and is not to be regarded as legal or financial advice. The content is based on current facts, circumstances, and assumptions, and its accuracy may be affected by changes in laws, regulations, or market conditions.  Accordingly, neither Azure Group Pty Ltd nor any member or employee of Azure Group or associated entities, undertakes responsibility arising in any way whatsoever to any persons in respect of this alert or any error or omissions herein, arising through negligence or otherwise howsoever caused. Readers are advised to consult with qualified professionals for advice specific to their situation before taking any action.