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FBT Return Action Checklist

FBT Return Action Checklist

In another couple of weeks, the Fringe Benefits Tax Year End draws to a close, on 31 March.

If you would like us to take the headache away from you so that you can get on with running your business, contact us by calling us for an appointment or getting over to www.otsmanagement.com.au and click on the Contact Us tab to arrange an obligation-free first meeting.

However, if you are preparing your own FBT Return, we provide below an Action Checklist to help ensure that you have considered all the major issues. We hope you will find it useful.

Rate of tax

  Yes No
Are you aware of the FBT rate changes for the following FBT years?

The rates are as follows:

FBT year FBT rate
Ending 31 March 2014 (and prior years)
Ending 31 March 2015
Ending 31 March 2016 and 31 March 2017
Ending 31 March 2018 onwards
46.5%
47%
49%
47%

Gross-up rates

  Yes No
Are you entitled to a GST refund on the provision of the fringe benefit?

If yes, Type 1 gross-up rate applies. If no, Type 2 gross-up rate applies.

Because the FBT rate changes for the year ending 31 March 2015 onwards, the gross-up rates also change. The rates are as follows:

FBT year Type 1 Type 2
Ending 31 March 2014 (and prior years) 2.0647 1.8692
Ending 31 March 2015 2.0802 1.8868
Ending 31 March 2016 and 31 March 2017 2.1463 1.9608
Ending 31 March 2018 onwards 2.0802 1.8868
Are fringe benefits that are reportable on employees’ pay-as-you-go (PAYG) payment summaries grossed-up using the Type 2 gross-up rate?

Reportable fringe benefits are grossed-up using the Type 2 rate, regardless of the gross-up rate used in calculating the FBT payable on a benefit.

Types of benefits

  Yes No
Car fringe benefits
Was a vehicle made available to an employee (or an employee’s associate) for private use where the vehicle is owned or leased by you, an associate of yours or a third party pursuant to an agreement with you?

If yes, a car fringe benefit may arise.

Was the vehicle designed to carry less than one tonne or fewer than nine passengers?

If yes, a car fringe benefit may arise. If no, the fringe benefit may be a residual benefit.

Did the employee contribute to the running costs of the vehicle?

The value of the benefit is reduced by the employee’s contribution if appropriate evidentiary documents have been maintained.

Was the vehicle provided a taxi, panel van, utility truck or non-passenger road vehicle designed to carry a load of less than one tonne?

If yes, an exemption from FBT may apply if the private use is limited to: travel between home and work; travel incidental to travel in the course of performing employment-related duties; or non-work-related use that is minor, infrequent and irregular (eg occasional use of the vehicle to remove domestic rubbish).

Has an election been made to use either the statutory formula method or the operating costs method?

The statutory formula method must be used unless an election has been made to use the operating costs method. However, even if such an election has been made, the statutory formula method applies if it results in a lower taxable value. 

Has the valuation method been switched from the previous year?

If the statutory formula method was used in the previous year and the operating costs method has been elected in this current year, has a logbook been maintained?

Statutory formula method
Have you identified car benefits?

The statutory percentage is 20%. Prior to 7.30 pm on 10 May 2011 AEST, there were four different rates, depending on the number of kilometres travelled. Transitional arrangements phased in the 20% rate over three FBT years (2011–2012, 2012–2013 and 2013–2014). See “Car fringe benefits statutory formula rates” on page 6.

Were any non-business accessories (eg window tinting and rust-proofing) fitted to the vehicle during the FBT year?

If yes, the base value of the car is increased by the (GST-inclusive) cost price of the accessories.

How long has the vehicle been owned?

If it has been owned for more than four years, the cost base of the vehicle is reduced by one-third. However, this reduction does not apply to non-business accessories fitted after the acquisition of the vehicle.

Were there any days during the FBT year when the vehicle was unavailable for private use?

The taxable value of the car benefit is reduced by the number of days during the FBT year in which the vehicle was not used or available for private use by the employee (or the employee’s associate).

Operating costs method
Was the vehicle acquired during the FBT year?

If yes, has a log book been kept for a minimum continuous period of 12 weeks?

What were the opening and closing odometer readings for the vehicle?

The readings must be recorded to enable total kilometres travelled for the year to be calculated.

Have you made a reasonable estimate of the business kilometres travelled and the business use percentage?

This must be in writing, which is normally evident by maintaining a log book.

Was the vehicle replaced during the FBT year?

If the vehicle was replaced, the previously established business percentage may be transferred to the replacement vehicle, provided the percentage had not changed.

What is the written-down value of the vehicle as at 1 April 2016?

The deemed depreciation and deemed interest is calculated based on the written-down value of the vehicle as at 1 April 2016.

Have you determined the total operating costs of the vehicle for the FBT year?

Deemed depreciation and deemed interest must also be included in the operating costs of the vehicle.

 
Car parking fringe benefits
Are you a small business employer?

An exemption from car parking fringe benefits arises if your business is a small business or an SBE and car parking is provided (ie not a commercial car park). A small business is a taxpayer with gross income of less than $10 million (other than government bodies for FBT purposes and listed public companies and their subsidiaries). An SBE is essentially an entity with an aggregated turnover of less than $2 million (note the proposed amendments to increase this threshold to $10 million with effect from 1 July 2016).

Did you meet the costs, or part thereof, of the car parking expenses of an employee, where the car being parked is designed to carry a load of less than one tonne or fewer than nine passengers, and the following conditions are present:

·         the car is parked at or near the employee’s primary place of employment;

·         the car is used by the employee to travel between home and work;

·         the car is parked for periods totalling more than four hours between 7.00am and 7.00pm; and

·         a commercial car parking station is located within one kilometre of the premises where the car is parked and the operator of the parking station charges more than $8.48 for all-day parking?

A car parking benefit potentially arises if the answer is yes.

Has an election been made for calculating the number of car parking benefits provided: actual usage records method, statutory formula method, or 12-week register method?

If no election is made, the actual usage records method must be used.

Have you made an election for calculating the value of car parking benefits provided: commercial parking station method, market value basis, or average cost method?

The commercial parking station method will automatically apply if no election has been made.

Living-away-from-home allowances
Have you paid an allowance to an employee to compensate the employee for additional non-deductible expenses and/or other additional disadvantages incurred because the employee’s employment duties require them to live away from their normal residence?

A LAFHA benefit may arise if the answer is yes. Note the treatment of LAFH allowances and benefits has been significantly overhauled, narrowing the scope for eligibility. Among other things, there is an increased requirement to ensure LAFH payments are properly tracked, categorised and substantiated.

Does the employee maintain a home in Australia at which they usually reside or work on a fly-in, fly-out or drive-in, drive-out basis?

If yes, and provided the relevant conditions are satisfied, the taxable value of the LAFHA benefit is the value of the benefit reduced by any exempt accommodation component and any exempt food component.

Meal entertainment fringe benefits
Have you made an election to use either the 50/50 split method or the 12-week register method?

If no election is made, the taxable value is based on actual expenditure incurred.

If using the 12-week register method, is the register still valid?

A register is only valid for the FBT year in which the register period ends and the next four FBT years, provided that the total GST-inclusive entertainment costs do not vary by more than 20% between each FBT year.

Did the employee (or their associate) contribute to the provision of the benefit?

The taxable value of the benefit is reduced by any contributions.

Note that a grossed-up cap of $5,000 will apply from 1 April 2016 for salary packaged meal entertainment and entertainment facility leasing expense benefits for employees of public and not-for-profit hospitals, public ambulance services, public benevolent institutions and health promotion charities. In addition, all meal entertainment benefits will be reportable benefits from 1 April 2016.

Loan fringe benefits
Was a loan made to an employee (or their associate) during the FBT year?

A fringe benefit may potentially exist. A “loan” includes an advance of money, the provision of credit, the payment of money on account of another if there is an obligation to repay, or any other transaction that is a loan in substance.

Was the interest rate charged on the loan lower than the notional FBT interest rate (5.65%)?

The taxable value of the benefit is the amount by which the notional interest rate calculated on the loan for the year exceeds the amount of interest that has actually accrued on the loan during the year.

Was the interest on the loan paid at least every six months?

If interest is not paid at least every six months, a new loan equivalent to the deferred interest component will arise.

Did the employee use the loan for income-producing purposes, which means they would be entitled to a deduction (in their personal tax return) in respect of the interest incurred?

The taxable value of the benefit is reduced by the amount to which the employee would be entitled to a deduction, provided a declaration has been given setting out particulars of the use to which the loan was put.

Property fringe benefits
Was any property provided (free or at a discount) in respect of an employee’s employment?

Property includes all tangible and intangible property. Examples of property are goods, shares and real property. The ATO considers the provision of Bitcoin to be a property fringe benefit.

Have employer-provided property (in-house property fringe benefits) and property provided by other sources (external property fringe benefits) been identified?

The taxable values for the former and latter are calculated differently.

If the benefit is an in-house property fringe benefit, has the $1,000 exemption for “in-house benefits” been considered?

The taxable value of in-house property fringe benefits may qualify for the general exemption of up to $1,000 for “in-house” benefits. However, the $1,000 reduction will not apply to an in-house benefit provided on or after 22 October 2012 under a salary packaging arrangement.

Have in-house property fringe benefits accessed by way of salary packaging arrangements been identified?

If an in-house property fringe benefit is provided on or after 22 October 2012 under a salary packaging arrangement, the taxable value of the benefit is an amount equal to the notional value of the benefit at the time it is provided. The notional value is the amount that the employee could reasonably be expected to pay under an arm’s length arrangement.

If the benefit was an external property fringe benefit, were you dealing with the external party at arm’s length?

If the property is acquired under an arm’s-length transaction by the employer or an associate of the employer, the taxable value of the benefit is the cost price of the property reduced by the amount (if any) paid by the employee. This rule applies if the property is provided to the employee around the time it was acquired by the employer or associate etc.

Would the employee have been entitled to a once-only deduction if he or she had incurred the relevant expenditure?

The taxable value of the property fringe benefit is effectively reduced by the deductible amount (the “otherwise deductible” rule).

Is an employee declaration required?

The otherwise deductible rule requires an employee declaration setting out details sufficient to establish the connection between the property provided and the income-producing activities of the employee. However, if the property was provided exclusively in the course of the employee’s employment, a declaration is not required.

Airline transport fringe benefits
Were any airline transport benefits provided?

There have been changes to the FBT law relating to airline transport fringe benefits. Under the changes, there is no longer a separate category of fringe benefit for airline transport fringe benefits. Airline transport fringe benefits are now taxed under the in-house benefit provisions and the way the taxable value is calculated has been changed.

Expense payment fringe benefits
Did you pay or reimburse an employee (or their associate) for any expenses incurred by them?

Potentially, an expense payment fringe benefit arises. Examples include electricity, gas and telephone expenses, school fees, property rates, mortgage payments, and road tolls.

Would the employee have been entitled to a once-only deduction if he or she had incurred the relevant expenditure?

The taxable value of the expense payment fringe benefit is effectively reduced by the deductible amount (the “otherwise deductible” rule).

Is an employee declaration required?

A declaration, in an approved form, setting out particulars of the expense and the extent to which expenditure would have been otherwise deductible in earning the employee’s income, is required to reduce the taxable value of the expense payment fringe benefit.

Have exempt expense payment benefits been identified?
Work-related items
Did you provide an employee with any of the following work-related items: a portable electronic device (eg a laptop computer, a mobile phone or a GPS navigation device); an item of computer software; an item of protective clothing; a briefcase; or a tool of trade?

If yes, an exemption from FBT may be available.

 

Note that from the 2016-17 FBT year, a small business entity (SBE) will be able to provide more than one work-related portable electronic device to an employee and claim the FBT exemption for each device, even if the devices have substantially identical functions and are not replacement items.

. Note also there are different rules for items provided before 7.30pm AEST on 13 May 2008.

Were the items provided primarily for use in the employee’s employment?

If yes, an exemption from FBT applies.

Did you provide the employee more than one of each of the items listed above (except where the item is a replacement item)?

If yes and the additional item has substantially identical functions to the original item (and is not a replacement item), the additional item will not be exempt from FBT.

Minor, infrequent and irregular benefits
Were there any infrequent and irregular benefits with a notional taxable value of less than $300 per benefit being provided?

A benefit with a notional taxable value of less than $300 does not automatically attract an exemption from FBT unless it is infrequent and irregular.

 

 

FBT rates and thresholds

  FBT year ending 31 March 2017 FBT year ending 31 March 2016
FBT tax rate 49% 49.0%
Type 1 gross-up rate (ie entitled to a GST credit for the provision of a benefit) 2.1463 2.1463
Type 2 gross-up rate (ie not entitled to a GST credit for the provision of a benefit) 1.9608 1.9608
Reportable fringe benefits threshold (ie a total gross-up value exceeding $3,921)2 $2,0001 $2,0001
Car parking threshold $8.48 $8.37
Cents per kilometres for motor vehicle (where the benefit is a residual benefit):
                Engine capacity Rate per kilometre Rate per kilometre
                0–2,500cc 52 cents 51 cents
                Over 2,500cc 63 cents 61 cents
                Motorcycles 16 cents 15 cents
Deemed depreciation rate (operating cost method) for car fringe benefits:
                Date of car purchase Depreciation rate Depreciation rate
                On or after 10 May 2006 25% 25%
                From 1 July 2002 to 9 May 2006 18.75% 18.75%
                Up to and including 30 June 2002 22.5% 22.5%
Benchmark interest rate3 5.65% 5.65%
Minor and infrequent benefits threshold4 $300 $300
Record keeping exemption threshold $8,286 $8,164
  • Threshold is based on the total taxable value of fringe benefits provided to an employee.
  • The actual reportable fringe benefits amount shown on a PAYG summary is always grossed-up using the Type 2 gross-up rate.
  • The benchmark interest rate is used to calculate the taxable value of a loan benefit and the deemed interest of a car fringe benefit where an employer chooses to use the operating cost method.
  • Threshold is based on the taxable value of a benefit and applies to each benefit provided during the FBT year.

Car fringe benefits statutory formula rates

Below are the statutory car rates for car fringe benefits provided prior to 7.30pm AEST on 10 May 2011, or where you have a pre-existing commitment1 in place to provide the car after this time:

Kilometres travelled Statutory rate
Less than 15,000 26%
15,000–24,999 20%
25,000–40,000 11%
More than 40,000 7%

(1)         For those with pre-existing commitments (contracts entered into prior to 10 May 2011), the old statutory rates will continue to apply. The commitments need to be financially binding on one or more of the parties. However, where there is a change to pre-existing commitments, the new rate will apply from the start of the following FBT year. Changes to pre-existing commitments include refinancing a car and altering the duration of an existing contract. Changing employers will cause the new rate to apply immediately for the new employer.

Statutory rates for “new contracts” entered into after 7.30pm AEST on 10 May 2011 have been phased in as follows:

Kilometres travelled From 10 May 2011 From 1 April 2012 From 1 April 2013 From 1 April 2014
Less than 15,000 20% 20% 20% 20%
15,00024,999 20% 20% 20% 20%
25,000–40,000 14% 17% 20% 20%
Above 40,000 10% 13% 17% 20%

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