Fringe Benefits Front of Mind as Employees Return to Offices

09 June 2020

As many Australian companies welcome staff back into their corporate offices after weeks of working from home, employees keen to avoid overcrowded public transport and looking closely at their options for the daily commute.

Employers thinking about providing staff with car parking or taxi travel as part of return to work arrangements would do well to look at the tax implications of each arrangement in advance.

BDO Australia Tax Partner, James Trainor has looked at some of the Fringe Benefits Tax implications as employers look at what they can offer to staff in terms of car parking and taxi travel.

“When it comes to car parking and taxi travel there are a number of issues to do with exempt and taxable fringe benefits, James said.

“Key FBT considerations are:

  • Car Parking: It’s less costly for employers to provide car parking on their business premises – such as in the employer’s building or sub-let from a nearby car park, compared to reimbursing employee casual car parking.  While both may be subject to fringe benefits tax, the concessional valuation rules for employer business premises car parking will typically result in a lower tax cost for the employer. 
     
  • Taxis: Providing taxi travel to and from work is also an option as these taxi expenses paid for by the employer are exempt from FBT. Unfortunately ride share services such as Uber are not defined as ‘taxi’ travel in the FBT law just yet.

James spoke to the AFR Weekend on the subject and explained that: “The employer will have to pay FBT where an employee drives to work, parks their car nearby the office and has the cost of that parking covered by the company.  It is calculated by determining the type of benefit and the taxable value. The rules enable the employer to claim an amount that is lower than the actual cost by using lowest fee charged by a nearby car parking station rather than the amount paid. There are researchers that provide the lowest rate in postcodes around central business districts.”

The following example shows how the FBT liability may be lower where the employer provides car parking in Sydney CBD.  Let’s assume the actual cost for all day parking is $30.  If the employee pays this and gets reimbursed, the FBT is calculated on $30 per day. 

Alternatively, if the employer leases a car spot and allows the employee to park there, for FBT purposes the employer can ignore the actual cost (let’s assume the actual lease cost is $30 per day) and use the lowest fee charged by a nearby car parking station (let’s assume this is $18 per day).  Over six months the saving for the employer is in excess of $1,400 for that one employee alone. 

Another example shows that by salary packaging the car parking, rather than paying it from after tax income, the employee is $746 better off.  This is because the FBT rules allow for the car parking to be valued at $18 per day, rather than $30 per day and also because the employer should be able to claim a GST input tax credit (which the employee cannot do if paying themselves).

Read James’ comment in the AFR Weekend at www.afr.com/wealth/personal-finance/parking-perk-could-drive-staff-back-to-offices-20200603-p54z32

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