Fringe Benefits Tax amendments
The Federal Budget includes a number of Fringe Benefits Tax (‘FBT’) amendments, as outlined below.
No more car parking fringe benefits for SMEs
This proposed measure will expand the current FBT exemption for small business car parking fringe benefits to include businesses with an aggregated annual turnover between $10 million and $50 million.
The Fringe Benefits Tax law currently includes an exemption for car parking fringe benefits for small business entities, which in this context applies generally to those employers with annual turnover less than $10 million. This means that medium employer businesses, often referred to as having turnover between $10 million and $50 million, are currently ineligible for the car parking fringe benefit exemption.
This measure proposes from 1 April 2021, that eligible businesses will be exempt from FBT on car parking if the car parking is not provided in a commercial car park, where aggregated turnover is less than $50 million.
Businesses that are not eligible under the current FBT exemption, which presumably will also be ineligible under the proposed changes to the exemption, include the following entities:
- Public companies, or subsidiaries of public companies;
- Government bodies.
Fringe Benefits Tax exemption – employer-provided retraining
The Government announced that certain employer-provided retraining and reskilling will be exempt from Fringe Benefits Tax (‘FBT’).
FBT applies where an employer provides training to its employees that is not sufficiently connected to the employee’s current employment. For example, a business that retrains their sales assistant in web design, to redeploy them to an online marketing role in the business, can be subject to FBT on the retraining costs.
The Government clearly wishes to encourage employers to help workers transition to new employment opportunities within or outside their business. Therefore, this proposed measure will treat retraining and reskilling costs incurred by employers and provided to redundant or soon to be redundant employees, as exempt from FBT from 2 October 2020.
However, the exemption will not extend to:
- Retraining acquired by way of a salary packaging arrangement; or
- Training provided through Commonwealth supported places at universities (ie generally undergraduate degrees).
In addition, the Government will consult on potential changes to the current arrangements for workers that undertake training at their own expense. The current rules, which limit deductions to training related to current employment, may act as a disincentive for Australians to retrain and reskill to support their future employment needs
Multiple work-related electronic devices to be FBT exempt for SMEs
Small and medium sized employers will be able to provide multiple work-related portable electronic devices without incurring FBT liabilities under this proposed measure.
Under the current FBT law, eligible work related items such as phones, tablets and laptops provided primarily for use in the employee’s employment are treated as exempt from FBT. However, additional items acquired in the same FBT year for that employee, would not be exempt, where there are substantially identical functions to an earlier item acquired (unless it was a replacement item eg where the item was lost or destroyed).
The law was changed for the 2016/17 FBT year and later years to remove this requirement that the items have substantially identical functions, for small business entities (generally entities with aggregated annual turnover of less than $10 million).
The proposed Federal Budget measure will also remove this requirement for entities commonly referred to as medium sized entities, being those entities with aggregated annual turnover of between $10 million and $50 million. It is proposed that this measure commence from 1 April 2021.
Fringe benefits tax – reduced compliance burden on employers
The Government is proposing to reduce the current fringe benefits tax (FBT) return record-keeping obligations by allowing employers to use existing corporate records.
Currently, employers have an obligation to keep records for up to five years that are adequate to enable their FBT liability to be assessed. These records need to validate the taxable value of the fringe benefits provided and the method of allocation to employees where relevant. Although there are some standard records that need to be kept, such as invoices and receipts, there are additional records that employers need to create such as employee declarations.
This can be quite burdensome for employers. For example, there are currently 20 different forms available on the ATO website, providing different declarations for employers to use for their record keeping. It can be quite time consuming in practice to prepare and obtain all the relevant signed declarations from employees in time for lodgement of the FBT return.
This proposed measure will reduce the record-keeping obligations by allowing employers to rely on existing corporate records that are determined by the Commissioner to be adequate alternative records. This reduces compliance costs and removes the need for employers to create additional records. This measure is proposed to begin on 1 April from the start of the first FBT year following the Royal Assent of the relevant legislation.