Earlier in the year there was major Inland Revenue focus on employers who take out group life insurance, disablement and trauma insurance policies. A number of employers were contacted and asked to explain their approach to the FBT treatment of such policies. In many cases this led to increased FBT liabilities in settling with Inland Revenue or the prospect of a costly technical and legal argument if the position was to be pursued.
In a further change which applies from 1 April , the FBT treatment of life insurance premiums has been standardised to ensure that all life insurance premiums are treated as specified insurance premiums. Certain life insurance policies previously did not meet the definition of a specified insurance premium and were therefore considered an unclassified benefit such that the de-minimis exemption might apply. This means that going forward the de-minimis exemption will not apply to life insurance policies.
Inland Revenue released a public ruling in December clarifying and updating its operational position for the on premise exemption for carparks. As a minimum the carparks must be reserved, specific car spaces. Now is a good time to consider your car parking contracts to determine whether the new position will apply to you even if your agreement is stated as a license arrangement.
From our experience there is the potential to claim back significant FBT from prior years and real savings to be had going forward by looking more closely at the substance of a car parking agreement rather than just the words used. Inland Revenue are increasingly focussing on the FBT implications for motor vehicles provided to employees. With this in mind, we would recommend the below issues are considered leading up to the 31 May deadline:.
There is an exemption from FBT for unclassified benefits provided to employees provided a de-minimis threshold is not exceeded. This calculation is a rolling quarterly calculation.
In practice we find this opportunity is missed completely or the rolling quarterly calculation of the threshold is not done correctly. Further, the de-minimis threshold applies across all associated entities and not on an entity-by-entity basis, regardless of whether or not the entities are providing benefits to the employees of another entity. The exception is where there is a pre-existing commitment in place, before 7. Where you have a pre-existing commitment in place, the statutory percentages are available in Chapter 7.
The diminishing value depreciation rates are used for car fringe benefits valued under the operating cost method. The table below sets out the weekly amounts we consider to be reasonable food and drink amounts for a living-away-from-home allowance LAFHA paid to employees living away from home within Australia.
These amounts are for the total of food or drink expenses and include any amounts that may have been allowed for home consumption. The tables below set out the weekly amounts we consider to be reasonable food and drink amounts for a LAFHA paid to employees living away from home outside of Australia:.
This is why having your documentation in place is so important. One of those anomalies this FBT year is where a business has purchased vehicles but fringe benefits have not been reported to the ATO. Is documented in writing. The employee needs to agree in writing to forgo a certain amount of income before that income has been earned , in return for benefits of a similar value. If the ATO want to clarify this point there will need to be documentation and a trail — paperwork and transactions — backing it up.
Employers must pay fringe benefits tax FBT on the value of certain non-cash benefits called fringe benefits supplied to their employees 1 or associates of the employees in lieu of paying salary or wages. The FBT returns must be lodged by 21 May if lodging by paper or by 25 June if lodging electronically through a tax agent and payment is due by 28 May 3.
Records must be kept for five years after the end of the FBT year in which the benefit was provided 5. The FBT law specifies various categories of fringe benefits each with its own valuation rules 6 , exemptions and reductions. The first task is to correctly classify each kind of benefit into the correct category — a daunting task considering the number of FBT categories. To complicate matters further, the provision of one kind of benefit can give rise to different categories of fringe benefits, depending on the circumstances under which the benefit was provided.
Take for example the provision of food, drink or recreation to employees. This can give rise to either:. The FBT year will be the second year where employers with a fleet of 20 or more cars will be able to use a simplified method i. This method requires that an employer has at least 20 cars that qualify as tools of trade i.
There are a number of conditions that must be satisfied to adopt this method.
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