Fringe Benefits Tax (FBT) - March 2018 Update
The FBT year-end runs from 1 April to 31 March, so it's time to review if any payments made to employees (including directors) falls under the FBT umbrella.
Some common types of FBT payments include car expenses, car parking, entertainment (food and drink), employee discounts, reimburse private expenses, and living away from home allowance (LAFHA).
Key Changes to FBT 2017
The ATO have made some changes for the 2017 FBT year, mainly for:
- reimbursement of motor vehicle
- meal entertainment expenses
- allowance covering the cost of expenses for living away from home (LAHFA), and
- work related items exemption.
Below will cover some of these key changes in more detail.
Motor Vehicle Benefits
The ATO now only allow car expense deductions using two methods:
1. Cents per kilometer
A single rate per kilometre now applies for all motor vehicles regardless of the engine size. For 2017 FBT year, the ATO has determined the basic car rate of 66 cents/km and a maximum of 5,000km for reimbursements to employees.
If you use this method to calculate private use of your vehicle, a valid logbook must be kept over a minimum continuous period of 12 weeks. If you haven’t done this by now, it’s not too late. If you start a logbook before 31 March it can extend for a 12 week continuous period over the 31 March cut-off date. Logbooks can be obtained from news agencies, or for more tech-savvy users, there are many logbook apps available for your smartphone.
The following information must be recorded:
- The date the trip started and ended and odometer readings (take photos for records)
- Kilometres traveled
- The specific purpose of the trip
- Running costs (fuel, oil, interest expense, and decline in value).
FBT does not apply to non-passenger vehicles (such as vans, utes and other commercial vehicles) if private use is limited to travel between home and work, that is incidental or, if it is non-work related, minor, infrequent and irregular.
New Meal Entertainment Benefits Rules
For meal entertainment benefits the concessions have been removed where an employee agrees to receive meal entertainment benefits instead of future salary. The key changes include:
- all salary packaged meal entertainment and facility leasing benefits are to be included in the employee’s payment summary where it exceeds the $2,000 reporting exclusion threshold
- the 50-50 split or 12-week register methods to value these benefits can no longer be used
- for employees of charities and not-for-profits, a new separate $5,000 cap for ‘salary sacrificed’ meal entertainment benefit now exists. If these benefits exceed the cap, the excess will be counted toward their current $30,000 exemption or $17,000 rebate cap.
You will be required to substantiate this expenditure with receipts including the date the meal was provided, the kind of entertainment provided and where.
Living Away from Home Allowance (LAFHA)
The following exemptions must all apply to each employee to make their LAFHA exempt from FBT.
- An employee living away from home must maintain an ownership interest in a private residence which is available for immediate use. The employee must provide a declaration to the employer stating the place the employee usually resides and that it is continually available for the employee’s use, and the address of the place the employee resided during the period the LAFHA relates.
- LAFHA can only be paid for 12 months per employee per location.
- Substantiation of the accommodation and meals components must be provided by the employer.
There are many other instances where FBT is applicable. If you have any questions or concerns in regards to your possible FBT liability, please contact our office.
Exempt Work-Related Items
Certain exemptions for FBT apply such as portable electronic devices like laptops and iPads, protective clothing, tools of trade etc. If your business only provides these exempt items, or items that are infrequent and valued under $300, then you most probably don’t need to worry about FBT.
Ways you can reduce your FBT liability
There are some ways in which you can try to reduce your FBT liability:
- provide a cash salary in replacement of fringe benefits
- look at providing benefits that are exempt from FBT
- provide benefits that your employees would be entitled to claim as an income tax deduction if they had to pay for the benefits themselves.
There are many other instances where FBT is applicable and how your liability can be reduced.
If you have any questions or concerns on your possible FBT liability, please feel free to contact us.