14 April 2022
In readiness for the 2022 FBT season, we provide you with the latest updates and developments.
2022 FBT Rates, Dates and Thresholds
For the 2022 FBT year, the FBT rate will remain the same at 47% with the associated Type 1 and Type 2 gross-up rates also remaining unchanged.
Do I need to lodge an FBT Return?
Employers who have an FBT liability must lodge an FBT Return.
If an employer does not have an FBT liability, we recommend that an FBT return is lodged to ensure commencement of the three year amendment period for which the Commissioner can generally amend FBT returns.
If FBT instalments were paid during the year and the employer does not have an FBT liability for the year, an FBT return must be lodged to obtain a refund of the FBT instalments.
1. Car parking FBT exemption – small business threshold increased to $50m
From 1April 2021, the small business turnover threshold increased to $50m for the purposes of determining whether the car parking FBT exemption is available to small businesses. Certain conditions apply including that car parking space must not be provided in a commercial parking station in order to obtain the FBT exemption.
2. Assistance and benefits provided due to COVID-19
a. COVID 19 tests
The costs of COVID-19 tests, including Rapid Antigen Tests (RATs), provided to employees to attend a place of work are deductible from 1 July 2021. Therefore, these costs are also exempt from FBT under the ‘otherwise deductible’ rule from this date.
The existing record keeping requirements such as ‘otherwise deductible’ employee declarations are required to be maintained where the benefit is a property fringe benefit (ie the tests are physically given to employees). This can be problematic where there are large numbers of employees.
Employers can use employer declarations where the benefit provided is an expense payment or residual fringe benefit. The minor benefits exemption can also be considered where the benefit is under $300 (including GST) and provided on an infrequent and irregular basis.
b. Personal protective equipment
The emergency assistance exemption may apply if an employer provided protective equipment such as gloves, masks, hand sanitisers, wipe and anti-bacterial spray to allow employees to safely continue to work. The exemption applies where these benefits are provided to employees that are involved in cleaning premises or required to be in close proximity with customers or clients, e.g. hairdressers, cleaners, medical practitioners and hospitality workers.
If an employee’s specific employment duties do not include the above, the minor benefits exemption may apply.
c. Car benefits
Garaging of cars: During a period of COVID-19 restrictions, a car previously provided to an employee is not taken to be available for private use provided:
- the car has been returned to the employer’s business premises;
- the employee cannot gain access to the car; and
- the employee has relinquished an entitlement to use the car for private purposes.
In respect of cars garaged at home, where a car has not been driven at all during the period or has only been driven briefly for the purpose of maintaining the car, the ATO will accept that the employee did not ‘hold’ the car, provided an election is made to use the operating cost method and appropriate odometer records are maintained.
Logbooks: As an impact of lockdowns, driving patterns of employees with car benefits may have significantly changed. Where an employee has an existing logbook in place, they can continue to rely on this logbook despite changes in driving patterns or make a reasonable estimate of the business kilometres travelled. Odometer records for the year must be kept as these will show how much the car has been driven during the year, including any lockdown period.
d. Car park closures
The ATO have confirmed that no car parking benefit will arise for the period when a work car park is closed or if all commercial parking stations within a 1 km radius are closed on a particular day.
e. Working from home
Work related items such as laptops and mobile phones provided to staff working from home are unlikely to trigger an FBT liability to the extent such items are primarily used for work purposes.
Where employers allow employees to use equipment such as computers, monitors, stationery and computer consumables or pay for internet access, the minor benefits exemption or otherwise deductible rule may apply.
3. Car parking benefits – Definition of commercial parking benefits
The ATO issued guidance on the definition of a ‘commercial parking station’ in TR 2021/2. This extended the interpretation of commercial parking stations to include those that charge penalty rates for all day parking, such as nearby shopping centres and hospitals from 1 April 2022.
As part of the Budget announcements, the Federal Government has announced consultation on the definition of ‘commercial parking station’ to restore its previous interpretation.
4. ATO guidance on travel and accommodation related benefits
In 2021, the ATO released three new comprehensive publications relating to the tax treatment of transport and accommodation expenditure:
- When are deductions allowed for employees’ transport expenses (TR 2021/1);
- Accommodation and food and drink expenses, travel allowances and LAFHA (TR 2021/4);
- Determining if allowances or benefits provided to an employee relate to travelling on work or living at a location (PCG 2021/3).
These rulings address the circumstances in which travel expenses are ‘otherwise deductible’ to employees and therefore, whether the benefits are not subject to FBT. This requires consideration of several factors including:
- Whether the travel is within the duties of employment and not as a result of the personal circumstances of the employee;
- The employer asks for the travel to be undertaken;
- The travel occurs on work time;
- While travelling, the employee is under the direction and control of the employer;
- Home to work travel is generally not deductible;
- Has an employee relocated from their usual place of residence or is the employee living away from home?
It is clear from the rulings that employers should carefully consider whether travel expenses paid for directly or reimbursed to each employee would qualify as ‘otherwise deductible’ to the employee. This requires a review of the circumstances of each employee. Employee declarations are also critical to eliminating FBT on travel expenses.
5. Entertainment expenses – Use of the ‘actual method’
With extended lockdowns and work from home directives, employers may find that the entertainment benefits provided during the year have been significantly lower compared to prior years. If so, the actual method in place of the 50/50 method for determining entertainment benefits will likely result in a better outcome for employers.
The reduction of FBT taxable values to nil under the ‘otherwise deductible’ rule requires careful attention to recordkeeping. Depending on the type of benefit (and for many benefits), this requires the provision of invoices and receipts by employees to the employer, as well as the provision of signed employee declarations by the date of lodgement of the FBT return. The Government announced in the 2020/21 Budget that measures would be introduced to reduce FBT recordkeeping requirements by providing the ATO with powers to accept existing corporate records instead of requiring employee declarations. Until such measures are introduced, recordkeeping is critical to the reduction of FBT.
If you would like further information on FBT, employment taxes or assistance with your FBT obligations, please contact the authors of this article.
Head of Human Capital & Corporate
Leader in Advisory & International Services
This newsletter is current as of 14 April 2022, however, please note that announcements and changes are being made by the Government and the ATO regularly, and we expect that the tax and business-related responses will continue to evolve. Before acting upon the content of this newsletter, please contact us to discuss how the above applies to your specific circumstances.
This information is general advice only and neither purports, nor is intended to be advice on any particular matter.
No responsibility can be accepted for those who act on the contents of this publication without first contacting us and obtaining specific advice.
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