Attention Employers: FBT 2021 & Covid-19 Concessions |
The 2021 FBT year has been a year like no other. It commenced not long after several states entered COVID-19 lockdown. Due to the change in working arrangements caused by the COVID-19 pandemic, many employers’ FBT obligations may have been affected.
This letter summarizes the important COVID-19 related FBT developments and other important FBT changes/matters. We recommend you conduct a review of the relevant benefits provided and the transactions that may have FBT implications regardless of whether your business is currently registered to lodge a fringe benefit tax return or not. The ATO link below may assist you in reviewing the transactions and identifying the benefits provided.
https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/Types-of-fringe-benefits/
FBT 2021 What’s New
COVID-19 car fringe benefit concessions
During the pandemic employees may have stored an employer-provided car at their home for a longer than usual period of time without using the car. Under the normal FBT rules, the garaged car is deemed to be available for the employee’s private use therefore a car fringe benefit arises.
ATO released COVID-19 and car fringe benefits factsheet (refer link below) which outlined important concessions in this area.
https://www.ato.gov.au/law/view/pdf/afs/afs-car-fbt-covid-19.pdf
The car fringe benefit taxable value can potentially be reduced under the new concessions for the period an employer provided car is stored at an employee’s home over the COVID-19 period, If all of the following requirements are satisfied.
• The employer must use (and elect in writing before lodging FBT return to use) the operating cost method to value the relevant car’s fringe benefits;
• The car was garaged at employee’s home over all or part of the FBT year, has not been driven at all, or has only been driven briefly for the purpose of maintaining the car;
• Odometer records must be maintained to prove the above.
How to calculate car fringe benefit reduced taxable value under the COVID-19 concessions?
Where a car is stored at an employee’s home over the COVID-19 period and all of the above requirements are satisfied, the employer is permitted to exclude operating costs that relate to the period covered by the COVID-19 concession for car fringe benefits, rather than include the operating costs of the car for the full FBT year. For example, the employer can exclude:
• Fuel costs, Repair & maintenance costs, lease payments incurred during the period (fuel costs are likely to be minimal as the car was not used at all or used only briefly for maintenance purposes);
• Insurance, registration, deemed interest and deemed depreciation attributable to the period (pro rata.)
Car Parking FBT Savings
In general, if an employer provides a car parking space to an employee, no car parking benefit will arise with respect to the car space on any days in which all the commercial car parking facilities within a 1km radius are closed or only offer free all-day parking (e.g., this may occur in response to restrictions imposed due to the COVID-19 pandemic).
ATO guidance tax treatment on cancelled staff events
The ATO COVID-19 and Fringe Benefit Tax factsheet confirms that an employer does not generally have an FBT exposure in relation to non-refundable expenditure paid directly by the employer for a cancelled staff event. This is because the employer has not provided any fringe benefits to its employees as they did not get to attend the staff event. However, if the expenditure was in the nature of entertainment, the FBT exemption will unfortunately mean that it is not be tax deductible, and GST input tax credits cannot be claimed.
FBT exemption for benefits provided to staff for working-from-home
During the FBT year, employers may have provided employees with benefits they do not usually provide because of COVID-19. For example, paying for items that allow the employees to work from home. In general
• the provision of the use of office equipment (a residual benefit, being the loan of the equipment to use at home) does not give rise to FBT liabilities during the COVID-19 concession period;
• consider minor benefit (less than $300) exemptions;
• consider “otherwise deductible” rules (with relevant declarations).
FBT relief for employers providing emergency assistance
Where employers provided employees affected by the COVID-19 outbreak with emergency assistance (as defined in the FBT Act, refer ATO link below) to help employees (or their associates) deal with unexpected challenges/costs during the pandemic, such benefits are exempted from FBT.
https://www.ato.gov.au/General/Fringe-benefits-tax-(FBT)/FBT-exemptions-and-concessions/Emergency-assistance/
Exemption for certain vehicle benefits
An employee's minor private use of a panel van, utility (ute) or other commercial vehicle (that is, one not designed principally to carry passengers) is exempt from fringe benefits tax (FBT) if their private use is limited to:
• travel between home and work
• travel that is incidental to travel in the course of employment duties
• non-work-related use that is minor, infrequent and irregular (such as occasional use of the vehicle to remove domestic rubbish).
You are recommended to obtain an exempt vehicle benefit declaration from the relevant employees.
ATO’s changed its view on non-bona fide lease
Where an employee has traded-in their own car, or made a cash contribution to the car dealer to reduce the finance amount under a novated lease, ATO’s current view is such lease will be considered non-bona fide lease which means the employer will not be providing the employee with a car fringe benefit & may instead be considered providing a property or a residual fringe benefit that may result in a higher FBT liability.
Employers should make sure lease benefit provided is a bona fide lease which occurs when
• all dealings between the lessor, employers and employees are at arm’s length,
• the terms are not based on the reduced (net) cost of the car i.e. no trade in or cash contribution
• the residual of the car is based on a reasonable valuation of estimated market value at the end of the lease, not based on reduced (net) cost and not less than the minimum residual values set out in ATO ID 2002/1004
• there’s no agreement the employee will purchase or be allowed to keep using the car after lease termination
• an option for the employee to purchase the car is by request and agreement between the lessor and purchaser as to the purchase price.
Employee declarations in relation to FBT
An employee declaration is written advice given to employers by your employees containing information relating to the fringe benefits they have received. You must obtain all employee declarations no later than the day on which your FBT return is due to be lodged. If you don't have to lodge a return, you must have the employee declarations by 21 May after end of the FBT year. Please refer below the ATO link to declarations require for FBT recording keeping.
https://www.ato.gov.au/Forms/Employee-Declaration/
Reportable fringe benefits
As in prior years, the employer is still required to calculate the value of reportable fringe benefits (if over the threshold above) to be disclosed on the employee’s PAYG summary/STP finalization items for year ending 30 June 2021.
Should you have any questions or require assistance with FBT, please do not hesitate to contact this office.
Loewy Consulting Partners
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