31 March marks the end of another Fringe Benefits Tax (FBT) year and there have been several significant law and policy updates throughout the year that could greatly impact your obligations.
While there are always nuances to navigating the complex landscape of FBT lodgement, this article will outline the key updates which could impact how you calculate the taxable value of your fringe benefits for 2023.
Electric Vehicles Exemption
Following the Treasury Laws Amendment (Electric Car Discount) Bill 2022, employers are now no longer required to pay FBT on eligible electric and plug-in hybrid cars or their associated expenses.
However, this exemption only applies to ‘cars’ (vehicles designed to carry a load less than one tonne and fewer than nine passengers) that meet the following conditions:
- The car cannot have been used or been made available for use before 1 July 2022
- The car must be a zero or low-emission vehicle capable of receiving electricity from an external source
- The car cannot exceed the current luxury car tax threshold of $84,916 for the 2022/23 income year
- The car must be used or available for use by a current employee or their associates
This FBT exemption has also made eligible electric vehicles a great option for salary packaging arrangements built around leasing vehicles. In addition to encouraging environmental action, employers can offer substantial tax reductions to employees.
Important Note: As of 1 April 2025, plug-in hybrid vehicles will no longer be considered zero or low-emission vehicles. However, the exemption will still apply to these use of the vehicles prior to 1 April 2025, or if you entered a financially binding commitment to continue providing the use of a plug-in hybrid vehicle before 1 April 2025 that extends past this date.
Changes to Car Parking
Taxation Ruling TR2021/2 has had a significant impact on calculating FBT liability for car parking this year, broadening the definitions of:
- What constitutes a 'commercial parking station'
- What is considered an employee's 'primary place of employment'
Another challenge is understanding FBT obligations regarding car parking for employees working from home. Given the greater ability for employees to work from home, employers need to revisit the way they calculate car parking benefits. Employees who choose to work from home will be parking at work less frequently, therefore the previous method of calculating car parking benefits may no longer provide the best outcome.
The new definition of 'commercial parking stations' now includes any purpose-built complex designed for parking that has either an initial free period or low hourly rate but discourages all-day parking with penalties, such as hotels, hospitals, and shopping centres. As a result, it is important to review all current parking arrangements and consider whether this new definition now recognises any commercial parking stations within a one-kilometre radius of any work car park used by an employee.
The new definition of an employee's 'primary place of employment' is no longer limited to just the business premises, or associated premises, of the employer, and now includes any place where an employee performs the duties of their employment on a given day.
Important Note: Small businesses who recorded less than $50 million in turnover during this income year may be exempt from paying FBT on car parking benefits, if the parking they provide is not located within a commercial car park.
Work From Home Arrangements
Throughout the year, more Australian businesses made an effort to offer flexible and remote working arrangements to their employees. The challenge with these arrangements is understanding the FBT obligations regarding any benefits they may provide their employees to support working from home. Some specific work-related items and expenses may exempt from FBT, including:
- Portable electronic devices
- Computer software
- Protective clothing
- Tools of trade
Each of these must be used primarily for work purposes and there is a limit of one item per employee within each FBT year, unless it is a replacement item.
In addition to these items, the minor benefits exemption or otherwise deductible rule may apply for infrequent and irregular benefits under the $300 threshold if you provide employees with general office stationary and equipment that they would have access to in the workplace or pay for their phone and internet access.
What does this mean for your business?
- Electric vehicles eligible for FBT exemption are a great option for novated lease agreements, and businesses looking to introduce electric vehicles into their fleet could potentially benefit from considerable tax reductions.
- The broader definitions of 'commercial parking station' and 'primary place of employment' may lead in increased FBT costs for businesses. If you offer car parking arrangements, carefully review any new inclusions within one kilometre of anywhere a company car is parked.
- Some of the benefits supplied to employees to support work from home arrangements may be exempt from FBT. If you have made the move to offer more flexible working arrangements this year, make sure you know which items and expenses must be included in your FBT obligations.
Regular policy updates and new tax rulings like these have made identifying and valuing reportable fringe benefits highly technical and complex. In order to avoid some of the common FBT end-of-year mistakes, we recommend seeking expert advice to discuss both the value of benefits you currently offer your employees and those you want to offer in the future.
Azure Group can guide your business through the FBT lodgement process. Our dedicated team of experienced tax specialists are always up to date with the latest legislations, rulings, and Australian Tax Office (ATO) data-matching processes to ensure that your business remains compliant.
Have you noticed our #FridayExpertTips... here's one that relates to Fringe Benefits Tax
"If the proposed legislation to make electric and plug-in hybrid cars exempt from Fringe Benefits Tax (FBT) is passed, all employers should consider offering their staff the ability to salary sacrifice a car to reduce employees' tax. Get in touch to learn more."