It’s time for businesses to lodge their Fringe Benefits Tax (FBT) returns. Here’s what you need to know for your 2017/18 lodgement and how to best prepare for next year’s FBT return.
1. Lower FBT Rate.
The good news is that as of March 31st the FBT rate will be lowered from 49% to 47%. As part of the 2015/16 Budget, the Government introduced a temporary repair levy of 2% on individuals whose personal income was $180,000 and above and, as a result, increased the FBT rate by 2% to 49%. This levy will no longer apply. Gross-up and Gross-down rates will also change accordingly. Be aware that FBT exemption thresholds have also changed. It’s important for employers and employees to check their salary packaging calculations.
2. Taxi Travel Definitions may Change.
Previously, there has been an exemption on taxi travel if the travel was one way from the employee’s place of work to another work destination or due to illness. This exemption currently applies only to registered taxi services. However, in 2017 the Australian Taxation Office (ATO) sought comment on a 2017/2 Fringe Benefits Tax Definition of a Taxi (TPP2017/2).
The definition clarification came about as a consequence of the Federal Court ruling about Uber in 2017 and as a result of the increasing popularity of ride-sharing services. There are changes anticipated to the definition of what types of ride-share vehicles are exempt. Our recommendation is to continue to use registered taxis to be eligible for this exemption, but be aware that changes may be announced at any stage to include ride-sharing vehicles.
3. Potential Relaxation of Record Keeping for Exempt Vehicles.
Currently, utes, panel vans and dual cabs that aren’t designed primarily for passenger transport are exempt from FBT. According to the ATO’s draft Practical Compliance Guideline (PCG 2017/D14), providing certain conditions are met, employers may no longer have to keep records year to year to demonstrate eligibility of the FBT exemption on a vehicle provided to an employee. Clearer definitions are also outlined about whether private use of a vehicle is minor, infrequent or irregular.
4. Draft Changes to the Treatment of Travel Expenses.
There are also some draft rulings in place outlining the general principles of how to treat many common travel expenses (Draft Taxation Ruling TR 2017/D6). They detail changes to the interpretation of deductible travel expenses and living away from home deductions. These will have implications for both income tax and FBT returns.
In summary, the major changes are as follows:
- Flights, accommodation and meals are subject to FBT unless employers can demonstrate they are deductible in some other way.
- There is no longer a safe harbour time for determining the difference between living away from home and travelling to work.
- There are two new definitions- “special demands travel” and “co-existing work location travel” for those that are required to move consistently between various changing work locations.
Be aware that should this ruling become final; it will most likely apply to previous and future years. Therefore, take into account the draft ruling and ensure you are clear on whether the employee travel was a requirement for the employee’s work (and therefore not subject to FBT) or not.
5. Potential Car Parking Exemptions.
Small businesses that have an annual turnover under $10 million are now eligible for the small business car parking exemption and extended work-related items exemption from April 2017.
While the statutory due date of May 25th for FBT lodgement is looming, Charter Partners, as a registered taxation agent, has until June 25th to lodge your FBT return electronically. Should you have any questions about your FBT return this year or possible changes to company policy you may need to look at for next year, please call us on (07) 3366 1891.
Anthony McPhee, Principal
B.Bus (Accy) QUT | FCPA, SSA (SMSF Specialist Advisor with the SMSF Association) & Registered Tax Agent
Anthony has over 25 years accountancy, taxation and superannuation (SMSF) experience. He eagerly welcomes a challenge and his passion is in small business accounting, superannuation, consulting and taxation advice. He provides real business benefits for each of his clients and is well regarded for his succinct and accurate accounting skills. Anthony is also a self-managed superannuation fund (SMSF) specialist with Australia’s leading SMSF body, The SMSF Association.