FBT 2023 – What’s new, what’s updated and what’s in the spotlight.

 

The Fringe Benefits Tax (FBT) year ends on 31 March.   As in every year there are some new hot spots for employers and employees.

FBT updated and problem areas

• Electric Vehicles
• Work From Home arrangements
• Car parking changes
• Motor vehicle problem areas
• Mismatched FBT and income tax amounts
• Business assets personally used by owners and staff
• Not lodging FBT returns
• Housekeeping essentials

Important FBT issues for 2023

Electric Vehicles

To encourage Australians to shift rom petrol to electric vehicles legislation has passed to make certain no or low emission vehicles exempt from FBT.

The main condition applicable to this exemption are:     

• The value of the car is below the luxury vehicle threshold of $84,916
• The car is first acquired AND used after 1 July 2022

Whilst the electric vehicle is exempt from the employer paying FBT it is not exempt from the reportable FBT amount to be included on an employees PAYG Summary.  For this reason the value of the benefit is still required to be calculated and then the exemption applied.

Working from home arrangements

Many workplaces have shifted from the traditional model of 100% Office based on a more flexible arrangement in regards to working from home.  To facilitate this new working environment employers have provided their employees with work-related such as laptops and mobile phones.  Providing such devices to your employees shouldn’t trigger a FBT liability, as long they are primarily used by your employees for work. 

However, paying a phone or internet bill will be classified as a Fringe Benefit.  Particularly if this occurs more than once in the year.

Car parking changes

A controversial ruling from the ATO expands the scope of the FBT rules dealing with car parking benefits.   The ruling expands the definition of what constitutes a commercial car parking station to the extent that it now includes Shopping Centre Car Parl.  Where an employer provides:

• Car parking facilities for employees within 1km of a commercial parking station (this has been expanded to include shopping centre carparks from 1 April 2023), and
• That commercial car park charges more than the car parking threshold ($9.72 for the year ended 31 March 2023)

a taxable car parking fringe benefit will normally arise unless the employer is a small business and able to access the car parking exemption.   Fortunately, a small business is defined as a turnover of les than $10 million dollars.

Once again even though a small business may be able to apply he exemption the fringe benefit must be calculated and then the exemption applied.

Motor Vehicles problem areas

Just because your business buys a motor vehicle and it is used almost exclusively as a work vehicle, that alone does not mean that the car is exempt from FBT. If you use the car (or other work owned vehicle) for private purposes - pick the kids up from school, do the shopping, use it freely on weekends, garage it at home, your spouse uses it - FBT is likely to apply.  Remember this applies to ALL vehicles and is likely to include your work vehicle even if not a car.  The private use of work vehicles is firmly in the sights of the ATO and has been for some time.

Private use is when you use a car provided by your employer (this includes directors) outside of simply travelling for work related purposes.  If you are of the opinion that private use does not apply, you MUST have a recent 12 week logbook to prove it.  (logbooks must be no more than 4 years old)

While there are two methods to calculate the FBT liability on the private use of a car, the choice of method can result in very different FBT liabilities.  Using the logbook method may provide a better result especially this year if the work vehicle has not been used at all and garaged at or near the employee’s home.

Instead, by comparison if the statutory method is used, the FBT liability could be much higher.  This is because the FBT calculation under this method will include the days which the car has been garaged at home and is taken to be available for private use of the employee (regardless of whether or not the employee has permission to use the car privately).  Similarly, where the place of employment and residence are the same, the car is taken to be available for the private use of the employee.

Mismatched FBT and income tax amounts

The ATO has become skilled at data matching to identify FBT errors or omissions.  The key areas of data matching include:

• Employee Contributions reported on the FBT return and the Income Tax Return
• Entertainment Expenses included on the income tax return but not included on the FBT return.
• Motor Vehicles registered in a business/company name but not reported on and FBT return.
• Businesses employing staff but no FBT return lodged.

Particular attention to any possibility of FBT should be reviewed and even if you feel no FBT applies it is considered best practice to loge a Nil FBT return.

Business assets personally used by owners and staff

Private use of business assets is an area that crosses across a whole series of tax areas: FBT, GST, Division 7A and income tax.  

If you use any business property for ANY purpose other than its regular day to day business purpose you should discuss this with us.

Not lodging FBT returns

The ATO is continues to be concerned that some employers are not lodging FBT returns or lodging them late to avoid paying tax.    At present they are actively following up businesses that have outstanding returns or whom they think should have lodged a return.

Of particular focus are:

• Businesses that are registered for FBT but lodge late. If your business is likely to face delays in lodging the FBT return, it’s usually a good idea to get in touch with the ATO early and ask for an extension request; or
• Businesses that are not registered for FBT. If your business employs staff (even closely held staff such as family members), and is not registered for FBT, it’s essential you have reviewed your position and are certain that you do not have an FBT liability. If the business provides cars, car spaces, reimburses private (not business) expenses, provides entertainment (food and drink), employee discounts etc., then you are likely to be providing a fringe benefit. Make sure you have reviewed the FBT client questionnaire we sent you! Lodging a Nil FBT return, even if you do not provide benefits, is best practice to limit any potential FBT audit exposure.

Housekeeping

It can be difficult to ensure the required records are maintained in relation to fringe benefits – especially as this may depend on employees producing records at a certain time. If your business has cars and you need to record odometer readings at the first and last days of the FBT year (31 March and 1 April), remember to have your team take a photo on their phone and email it through to a central contact person – it will save running around to every car, or missing records where employees forget.

If your business pays expenses for employees, make sure you get a business use diary & declaration to establish the business use % prior to lodging your FBT return.  We have available pro-forma declarations for many of these matters and would be happy to provide them to you if we have not already done so.