Key developments to consider when preparing your 2022 FBT return

With the 2022 Fringe Benefits Tax (FBT) return deadline approaching, it’s time to start working with your tax consultant to consider your FBT obligations for 2022.

To help your preparations, we have provided a summary of the latest key developments that might impact your 2022 FBT return, such as COVID-19 considerations.

COVID-19 and carparking

The Commissioner has determined that a carparking fringe benefit will not be provided due to COVID-19 if:

• On a particular day, the office and work car parks are closed or all commercial parking stations within a one-kilometre radius of such premises are also closed because of COVID-19.
• On 1 April 2020, the lowest fee charged by all commercial parking stations within a one-kilometre radius of the premises where the car is parked, is less than $9.15 for all-day parking.

In addition, the Commissioner has determined that a car parking fringe benefit will not be provided because of the closure of work car park. Specifically:

• If, on a particular day, your office is closed due to COVID-19 and therefore the work car park is also closed, you will not have provided a car parking benefit.
• The time during which the work car park is closed will not form part of the availability periods used to calculate the taxable value of a car space under the statutory method.

Further, the Commissioner has determined that a car parking fringe benefit will not be provided as a result of the closure of nearby commercial parking stations (i.e. all commercial parking stations within a one-kilometer radius of your business premises must be closed on a particular day due to COVID-19).

COVID-19 and car fringe benefits

Where the operating cost method has been elected and a car has not been driven or has been driven briefly for maintenance purposes (e.g. to keep the car battery alive), the ATO will accept that the car is not being held for the purposes of providing fringe benefits to an employee. In these situations, there will be a nil taxable value for the car and no FBT liability.

However, the election to use the operating cost method for the car must be made in writing before lodging the FBT return. In addition, logbook records and odometer records must also be maintained to show the car’s non-use, or intermittent use during the period the car has been garaged at the employee’s home.

Where the operating cost method is not elected, the statutory formula method must be used. However, using the statutory formula method where a car has not been driven will result in FBT liability because the car is being garaged at the employee’s home and is therefore taken to be available for private use.

During a period of COVID-19 pandemic restrictions, the ATO accepts that a car provided to an employee is not taken to be available for an employee’s private use if all the following apply:

• The car is returned to the business premises.
• The employee cannot gain access to the car.
• The employee has relinquished an entitlement to use the car for private purposes.

The ATO has adopted this position in the context of COVID-19 so it’s important to note the outcome may be different outside of pandemic conditions.

Travel expenses vs Living-Away-From-Home Allowance (LAFHA)

TR 2021/4 ^[1] and PCG 2021/3 ^[2] were released in late 2021 to provide guidance on the Commissioner’s position on the distinction between an employee travelling for business purposes and living away from home.

This distinction is important to ascertain. Travel expenses such as accommodation, food and drink expenses are deductible expenses with any benefits or allowances being outside the scope of FBT. Conversely, LAFHA and other living away from home benefits form part of the FBT regime.

Some key takeaways from TR 2021/4 and PCG 2021/3 are:

• For an employee to be travelling for work purposes, they must be required by their employer to stay away from their usual residence overnight, for a relatively short period of time.
• The criteria in PCG 2021/3 does not provide a specific test based on the number of days the individual is away. For example, travel for more than 21 days is not regarded as living at the location in all circumstances.
• Being accompanied by an employee’s family does not necessarily mean that the employee should be treated as living away from home.
• PCG 2021/3 now applies a 90-day threshold test based on an FBT year which can allow employers to apply this threshold test each FBT year.
• PCG 2021/3 provides the type of records that should be maintained by employers to support the various criteria if an employer has determined that an employee is travelling for work purposes or living away from home.

COVID-19 testing

The Federal Government has clarified that work-related COVID-19 test expenses are tax deductible and exempt from FBT when incurred for work-related purposes. This will apply both when an individual is required to attend a physical workplace or has the option to work remotely.

Federal Budget 2020/21 measures

From 1 April 2021, businesses with aggregated annual turnover of less than $50 million can access existing small business concessions for car parking and the provision of multiple work related portable electronic devices.

In addition, employer-provided retraining and reskilling for redundant, or soon to be redundant employees, is exempt from FBT with effect from 1 April 2021.

For assistance preparing and lodging your 2022 FBT return, please speak to your tax consultant or get in touch with our team.

Don’t miss our FBT webinar!

Get up to date with the latest developments (including any COVID 19 considerations) with our FBT webinar on Thursday 24 March at 1-2pm AEDT.

Our tax experts will walk you through recent developments in the FBT provisions which may impact your 2022 FBT return obligations, discuss the ATO focus areas for FBT in 2022 plus measures to consider implementing to minimise your FBT liability.

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^[1] Taxation Ruling TR 2021/4 Income tax and fringe benefits tax: accommodation and food and drink expenses travel allowances, and living-away-from-home allowances

^[2] Practical Compliance Guideline PCG 2021/3 Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location – ATO compliance approach