With the Fringe Benefits Tax (FBT) year-end just around the corner, employers need to start thinking about where they may be providing fringe benefits to employees that will require them to lodge an FBT return by 31 March 2021.
To assist, we have developed a handy checklist that can be used as a general guide to identify the most common forms of fringe benefits and summarises some of the common situations where FBT may apply.
Meal entertainment can be provided in many circumstances including in connection with business trips, conferences, social functions and promotional events. Meal entertainment can be provided to employees, associates, clients and independent contractors.
In addition to meal entertainment, employers may incur expenditure on entertainment such as recreational and leisure type activities.
It is important for employers to be familiar with the taxation law as it applies to meal entertainment and the provision of food and drink, as FBT, income tax and GST consequences generally differ according to whether entertainment is provided.
Generally, entertainment is not tax deductible and GST credits are not available unless the entertainment is subject to FBT.
It is also important for employers to understand when valuing meal entertainment using the 50/50 split method, the minor fringe benefit exemption and on premises property exemption cannot be applied to reduce the taxable value of meal entertainment.
A car fringe benefit arises where a car is made available for the private use of an employee or their associate. A car is treated as being available for private use if it is garaged at or near the employee’s residence.
However, employers should also consider when a car is not available for the private use of an employee as this can reduce the car’s taxable value.
A car is not available for private use where the employer has control of the keys to the vehicle. Examples of a car not being available for private use include where the car has been garaged at the employer’s premises and the employer has locked the keys in a safe, or where the vehicle was in for repair for a period of time and the employee could not drive the car for a full day during this time. However, it is important to note a car is treated as being available for private use on the days in which a car is either dropped off or collected from the mechanic.
Where an employee enters a salary sacrifice arrangement with their employer, it is important to distinguish between pre-tax and after tax contributions and how these impact the FBT payable.
Pre-tax contributions cannot be applied to reduce the taxable value of a fringe benefit. However, after tax contributions can be applied by the employer to reduce the taxable value of the benefit.
A fringe benefit may be provided by the employer when they reimburse their employees’ personal expenses. These may include but are not limited to telephone expenses, insurance, school fees, internet and credit card repayments.
The employer should consider whether any reimbursements were in relation to business matters (e.g. business calls on a telephone account) which would have been tax deductible to the employee had they been paid by the employee. Further, the employer should consider whether the employee can substantiate the business portion of these expenses.
Join me at 1pm AEDT on Tuesday 23 March 2021 for a one-hour webinar where we will discuss the current COVID-19 landscape and how it directly affects your business.
During the webinar, we will provide an update of the latest FBT developments and discuss the implications of COVID-19 measures on the 2021 FBT year-end process.