Get the most out of your 2017 FBT. We compiled a helpful list of new rules, old regulation and most importantly, reminders to ensure that you beat the deadline and get the most out of your FBT return this year. Let’s get started.

New rule for multiple work-related electronic devices

From 1 April 2016, an employer can now provide more than one portable electronic device even if they have similar functionalities. This, however, applies to small business employers exclusively, and the device must be provided to employees principally to enable the employees to do their job. Remember that the ‘work-related use test’ must be satisfied for each device provided.

New FBT meal entertainment benefit changes

The Government has introduced a separate single grossed-up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing expenses for employees of FBT-rebatable employers. The ‘Actual Method’ must be used for valuing salary packaged meal entertainment. This change is relevant when dealing with not-for-profit organisations.

Check last year’s FBT return and relevant rates

Other than the items noted above, there are no other significant legislative changes from the 2016 FBT year. This means that the 2016 FBT return can be used as a guide. You should however take note of any case law or ATO decisions – check the ATO website for further information. The FBT rate, the FBT rebate rate and Type 1 and Type 2 gross-up rates still take into account the temporary budget repair levy of 2%. This up-to-date summary shows the rates applicable for the FBT year ending 31 March 2017.

No FBT liability: should you lodge anyway?

The ATO now accepts that employers that have no FBT liability do not need to lodge an FBT return – even if they provide fringe benefits to their employees. If you choose not to lodge, you may need to have evidence that supports your ‘nil’ FBT payable position in the event of an ATO audit. Be aware that by not lodging, the ATO has an unlimited amendment period in relation to that FBT year. This could potentially cause issues for employers down the track. Lodging a return, starts a 4-year amendment period clock.

Cars – minimising your FBT liability

Any car (owned or leased) that is given to employees for private purposes, including travelling between home and work, creates FBT exposure. What can you do to minimise your FBT liability in these circumstances? Some strategies include:

  1. Look at the operating cost method versus the statutory formula – be aware that for the operating method you need a logbook for each car;
  2. Consider whether ‘after-tax employee contributions’ could provide a better outcome for both employee and employer; and
  3. If you have cars held for more than four full FBT years at the start of the current FBT year, apply the 1/3 reduction to the cost base under the statutory method

Distinguish ‘meal entertainment’ and ‘recreation’

It is vital to correctly distinguish ‘meal entertainment’ and ‘recreation’, as meal entertainment is subject to different valuation methods (such as 50/50 split) while ‘recreation’ is not. Recreation may need to be reported on the individual’s payment summary while entertainment is not reportable.

Contractors and FBT

Think FBT doesn’t apply to contractors? Think again! Employers must ensure that any contractors are genuine contractors. A good starting point is to complete the ATO employee contractor decision tool for each new contractor engaged. Any non-cash benefits paid to a contractor who is deemed to be an employee could trigger FBT liabilities (on top of all the other issues). Contractors are an area of particular focus for the ATO.

Obtain FBT Declarations

It is important to obtain all employees’ declarations before the lodging of your FBT return. This is particularly relevant for any ‘otherwise deductible amounts’, living away from home allowances and remote area concessions. For a complete list of declarations required, refer to the ATO website.

GST payable on cash contributions

If employees are making after-tax contributions in respect of their car benefits, don’t forget that GST is payable on cash contributions. This must be remitted by the employer to the ATO. There is no GST payable on unreimbursed petrol costs.

Do you have everything covered?

Ensure that you have considered all FBT benefits and that you have managed your FBT exposure accordingly. Remember that FBT is a tax on the employer, not employees.

Other benefits to consider include:

  1. Are there loans to employees at concessional rates?
  2. Has there been a waiver of a debt owed by an employee?
  3. Has the employer paid for any private expenses of an employee e.g. gym membership, health insurance or school fees?
  4. Is the employee living away from home due to work arrangements and the employer is paying an allowance?
  5. Are there any salary packaging arrangements in place?
  6. Has the employee been provided with goods or services from the employer?

If you have answered yes to one or more of these questions, or would like further clarity or advice on any of the topics discussed in this article, we recommend you contact your adviser at MPT Group for further guidance.

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