As the end of the 2022 FBT year is here, we want to make sure that you have the right paperwork readily on hand to help support your business’s 2022 FBT return.
The following is a brief overview of the most common types of fringe benefits, a few key changes this year and what COVID-19 concessions are available.
If a business supplies an employee with a motor vehicle to use for private purposes, it will be caught under FBT. There are two methods to work out the FBT payable on motor vehicles:
- The statutory formula method - takes 20% of the base value of the motor vehicle as taxable.
- The operating cost method – takes the running costs of the vehicle (including an implied depreciation and interest expense) as taxable, less the business use percentage recorded on a logbook.
Under the operating cost method, it is mandatory for a log book to be maintained by the driver. Log books need to record the business travel of the vehicle in kilometres over a period of 12 consecutive weeks, after which they are valid for 5 years. If the business use percentage of the motor vehicle is high, you may save significant tax by using the operating cost method when compared to the statutory method.
Work horse vehicles (such as Utes) – these have been exempt from FBT in the past but the ATO have tightened the rules in recent years - any private use (apart from going to and from work) must be kept to less than 1,000 kms per year, with no return private trip exceeding 200kms.
Information we will need from you:
- Closing odometer readings for all vehicles using the operating cost method at 31 March 2022.
- If any vehicles were sold during the 2022 FBT year, what the closing odometer reading was at sale.
- Purchase contracts for new motor vehicles.
- Log books for new vehicles if the operating cost method has been chosen. If a log book has exceeded its 5 year validity, a new one will need to be prepared.
- For vehicles using the operating cost method, a breakdown of ALL running costs of the motor vehicle (whether it was paid for by the business or the employee).
Meal Entertainment Expenses
When a business provides entertainment by the way of food or drink to its employees, it will be caught under FBT. There are 3 methods to value meal entertainment:
- Actual method – this is the actual expense incurred by the business to provide the meal entertainment to employees.
- 50/50 method – 50% of the cost of all meal entertainment expenses (regardless of its nature) is taken as taxable.
- 12 week register method – similar to a vehicle log book, this works out a taxable percentage on all meal entertainment based on the proportion of costs provided to employees and their associates over 12 weeks.
Only the proportion of meal entertainment that is subject to FBT will be tax deductible to the business, which also means businesses can only claim input tax credits on that same deductible amount (i.e. if no FBT applies, no meal entertainment is deductible).
One important thing to keep in mind is that if your business is using the actual or 12 week register method, entertainment provided to employees at less than $300 per head (including GST), and on an infrequent or irregular basis, may be exempt from FBT.
For example, the annual staff Christmas party should be exempt from FBT if the cost is less than $300 (including GST) per person attending, per benefit provided.
Car Parking Fringe Benefits
Businesses with an annual turnover of more than $50 million will be regarded as having provided an employee with a car parking benefit on a particular day where, broadly, between 7am and 7pm on that day, all of the following conditions are satisfied:
- A car is parked on business premises or associated premises of the provider for more than four hours.
- An employee uses the car in connection with travel between their place of residence and primary place of employment at least once on that day
- The car used by the employee for travel on that day is either: – provided to the employee (or their associate) by the employer as a car benefit; – owned by, or leased to, the employee (or their associate); or – otherwise made available to the employee (or their associate) by another person (where the other person is neither the employer nor their associate, and the car was not made available under an arrangement to which the employer or their associate is a party).
- The car park is located at, or in the vicinity of, the employee’s primary place of employment on that day.
- The lowest representative fee charged for all-day parking on the first business day of the FBT year, by any commercial parking station within a one-kilometre radius of the car park, exceeds the car parking threshold (i.e. $9.25 for the 2022 FBT year).
- The parking is provided to the employee in respect of their employment.
- A commercial parking station is located within a one-kilometre radius of the car park used by the employee. This has been expanded to include hospitals, medical clinics and sports stadiums from 1st April 2022.
ATO Guidance & COVID-19 Concessions
What is new for the 2022 FBT year:
- Car Parking – a car parking benefit will not arise if:
- All commercial parking stations within a 1km radius during the COVID-19 lockdowns were closed or are providing free parking,
- No commercial parking station within a 1km radius charged more than $9.25 for all-day parking on 1 April 2022, or
- The work car park was closed as a result of the Office being shut due to COVID-19
- Re-leasing cars - It is crucial to ensure that the new arrangements are still bona fide leases so that no surprise FBT consequences arise.
- Retraining and reskilling staff – an FBT exemption on ‘eligible’ benefits provided for retraining and reskilling redundant (or soon to be redundant) employees on or after 2 October 2020 is available.
- COVID 19 related provided benefits – there will be limited or no FBT implications on a number benefits provided relating to vaccinations, testing and protection against COVID-19 (i.e PCR or RAT tests, masks and emergency food, accommodation and transport), as well as benefits provided to employees to assist them with working from home.
- Motor Vehicles - garaged at employees’ homes during lockdown will be exempt from FBT for the days each state was under lockdown, as long as the operating cost method is used and any private use of the motor vehicle was kept to a minimum.
- Secondary IT devices – Businesses that provide employees with multiple portable electronic devices that are substantially identical, may attract additional attention from the ATO.
ATO Audit Risks
The below are some of the common accounts where fringe benefits are typically overlooked by employers:
- Employee amenities - Check for any entertainment-related benefits, such as meal entertainment provided to employees at a staff social function, or gifts. Note amenities provided to employees working from home during COVID-19 may be exempt based on the nature and frequency.
- Promotional, advertising or sponsorship expenses - Some employers mistakenly believe that all expenditure related to advertising or promoting their products or services is inherently business-related. Employers must identify expenditure that gives rise to entertainment-related benefits provided to employees rather than advertising benefits for the employer (e.g., food and drink consumed in a corporate box or free tickets to a sporting or other social event).
- 'Business' Travel-related expenses Check for any travel-related benefits provided to employees, including where there is a private component of the trip or where an employee travels with their spouse. Furthermore, consider whether any entertainment-related benefits are provided while employees are travelling for work purposes (e.g., reimbursing an employee for the cost of attending a sporting event with clients).
- Value of cars reported for FBT purposes - the ATO has observed an increasing trend of employers simply using the ‘book value’ of car fringe benefits for FBT purposes which is incorrect.
Lodgement and payment due dates of 2022 FBT Return
- 23rd May 2022 if you lodge yourself,
- 27th June 2022 if via a registered tax agent and lodged electronically.
Please contact your usual hmh advisor on +61 3 9840 2200 if you have any queries at all in relation to anything mentioned previously.
Download our 2022 FBT Checklist
Download our 2022 Motor Vehicle Odometer Declaration