APRIL 2016 FBT - Dobbyn + Carafa › files › docs › fbt client update.pdf · Liability limited by a scheme under Professional Standards Legislation other than for the acts of

Liability limited by a scheme under Professional Standards Legislation other than for the acts of financial services licensees.

Due Date Document

21 May 2016 Paper Lodgement of the 2016 FBT Return

28 May 2016 Payment Due Date for 2016 FBT Liability

25 June 2016 Electronic Lodgement of the 2016 FBT Return

FBTrates

The FBT year runs from 1 April to 31 March. The FBT rate changed for the FBT year ending 31 March 2015. It is interesting to note the FBT rate increased again for the current FBT year (ending 31 March 2016). This increase will be reduced when the impact of the debt levy is scheduled to be removed. This will affect the FBT year ending 31 March 2018 onwards.

Please refer to the below table regarding these changes.

FBT

DeadlinesThe Australian Taxation Office (ATO) has announced the due date for lodgement of 2016 FBT Returns Introduction

The 2016 Fringe Benefits Tax (FBT) year has now come to a close. With the above in mind, we have provided a general recap on FBT and how it may affect your business.

We highly recommend that you contact our office if you have any FBT queries from either a personal or business perspective.

APRIL 2016 FBT Client Update

FBT year FBT rate

Ending 31 March 2014 (and prior years) 46.5%

Ending 31 March 2015 47%

Ending 31 March 2016 and 31 March 2017 49%

Ending 31 March 2018 onwards 47%


MEAL Entertainment

Generally, it is deemed a private expense if meals are provided with alcoholic drinks. However, depending on the nature and purpose of the expense, different tax treatments may apply.

FBT obligations can arise where the nature of the expense is classified as a form of entertainment rather than simply providing sustenance (e.g. food and drink provided at a social function or in a restaurant generally). Comparatively, the provision of light meals or non-alcoholic drinks for employees at work or while meeting with a client on a business matter, will generally be tax deductible.

There are three valuation methods available for meal entertainment:

• Actual method;• 50/50 Split method; and• 12-week register method.

By default, the actual method will be applied where an election has not been made to use the 50/50 split method or 12-week register method.

Please refer to the table below for the various meal entertainment costs that may be subject to FBT.

Social Functions Costs - Using the Actual Method

Type of Entertainment Does FBT Apply Income Tax Deduction GST Credits Available

Social Function held at the Business Premises

Food and drink (including alcohol) consumed by:

• employees on a working day No No No

• associates of employees (cost per associate > $300) Yes Yes Yes

• associates of employees (cost per associate < $300) No No No

• clients, contractors or suppliers No No No

Taxi Travel (e.g., single, uninterrupted trip that begins or ends at work)

• employees (including accompanying spouse) No No No


Social Function held at an External Venue

Food, drink (including alcohol) and travel provided to:

• employees and associates (cost per head > $300) Yes Yes Yes

• employees and associates (cost per head < $300) No No No


Please note that the table above does not apply where the 50/50 split method is used to calculate the fringe benefit taxable value of the entertainment costs listed above.

Certain benefits are excluded from FBT. The following work related items are exempt from FBT if they are primarily used by the employee for work purposes:

• Portable electronic devices (laptop, tablet, mobile, PDA, computer, and GPS device);• An item of computer software;• Protective clothing required for the employee’s job;• A briefcase;• A calculator;• A tool of trade;• Newspapers and periodicals; and• Membership fees and subscriptions.

Minor Fringe BenefitA minor fringe benefit is exempt from FBT if the value is less than $300 (including GST) and it is minor and infrequent.

PROPERTY Fringe BenefitsA property fringe benefit arises if you provide an employee with property (either tangible or intangible) for free, or at a discount that is not otherwise deductible. Property includes:

• Goods;• Real Property (e.g. Land and Buildings);• Rights to property (e.g. Shares or Options); and• Any other kind of property, including money.

The property that you provide to your employee may be classified under two different categories:

• In-house property fringe benefits; and• External property fringe benefits.

Broadly, in-house property fringe benefits arise where you provide an employee with identical or similar goods that you sell in the ordinary course of your business (e.g. a television retailer who provides a television to an employee at a discount). On the other hand, an external property fringe benefit is any property that is not an in-house property fringe benefit (e.g. a retailer rewards an employee with a gift voucher).

LOAN FRINGE BENEFITS If you provide a loan to an employee with no interest or a low rate of interest, it may constitute a loan fringe benefit. A low interest rate is defined as a rate lower than the ATO ‘statutory rate’. The ‘statutory rate’ of interest for the FBT year ending 31 March 2016 is 5.65% (TD 2015/8).


FBT

Exempt Items


Under the new provisions, a LAFHA arises where the employee is required to live away from their normal residence as opposed to their usual place of residence. Under the new provisions the taxable value of the LAFHA depends on the circumstances of the employee to whom the LAFHA is provided. Please contact our office if you would like further clarification regarding these new changes and how they may affect your business.

Please also contact us if you would like to gain a further understanding of LAFHA declarations, record keeping and substantiation requirements.

Salary sacrificing may not be worth it By now you should have reviewed any salary sacrifice agreements to ensure that they are still viable at the higher 49% FBT rate. In some cases, salary sacrifice agreements may no longer achieve the intended goals and simply create an administrative burden for little to no benefit.

For high income earners (above $180,000) however, the difference in timing between the FBT year and the income years means that there will be a planning opportunity 1 April 2017 when the FBT rate will reduce to 47% and 30 June 2017 when the 2% debt levy is removed.

Appropriate documentation needs to be in place to ensure a salary sacrificing arrangement is effective. A written agreement signed by the employee needs to be completed before the entitlement is earned. If this agreement is signed post this event it can be considered invalid which can have a detrimental effect on the employees PAYG withholding and superannuation guarantee amounts.

LAFHA

Two Laptops are better than one for a small businessIf your business is a small business (turnover under $2 million), from 1 April 2016 the FBT exemption on portable electronic devices will be extended. From this date, you can offer employees more than one work-related portable electronic device, such as a mobile phone, laptop and tablet and not have to pay FBT on it even if the device is the same or similar to other devices already provided in that same FBT year. All other businesses are limited to one device that is identical or similar to another.


Car Parking Fringe BenefitsA car parking fringe benefit may arise where an employer provides an employee with parking facilities on the employer’s premises and the following conditions are met:

• The car was parked on the business premises or other leased premises which is within one-kilometre of a commercial parking station;• The car is parked for a total of more than four hours between 7.00am and 7.00pm on any day;• The car is used by the employee to travel between home and work (or work and home) at least once on that day; and• The lowest fee charged by any such commercial parking station, within one-kilometre of the business premises, to the general public at the beginning of the FBT year exceeds the car parking threshold. The car parking threshold is $8.37 for the 2016 FBT year (TD 2015/11).

If the provision of the parking space meets all the above conditions and a car parking fringe benefit arises, it may still be exempt from FBT if all of the following apply:

• The employer does not provide the car parking in a commercial car park;• The employer is not a government body, listed public company or a subsidiary of a listed public company; and• The employer was a small business entity for the last income year before the relevant FBT year, or the employer’s total income for the last income year before the relevant FBT year was less than $10 million.

The taxable value of a car parking fringe benefit can be calculated by using various methods. If you would like to discuss these methods further please feel free to contact our office.

CAR Fringe BenefitsIn general, a car fringe benefit arises where an employer makes a business vehicle available for the private use of an employee. The car must be provided to an employee in respect of their employment and “held” by the employer. It is also worth noting that trips made to and from work are considered private in nature for this purpose. Similarly, a car provided by way of a novated lease may also give rise to an FBT liability.

Currently, there are two methods available to calculate the FBT liability of a car fringe benefit:

• Operating Cost Method; and• Statutory Method.

If you feel you may need to register for FBT, or if you have any general queries regarding your FBT obligations, please do not hesitate to contact us on (03) 8530 1669.


The material and contents provided in this publication are for your information only. Items herein are general comments and do not constitute advice. You should not act specificaly on thebasis of this information alone. We recommend that our formal advice be sought before acting in any of the areas. This advice is issued as a helpful guide to clients only and for theirprivate use. Should you require further assistance or information, please contact us at your earliest convenience.

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D+C client manager or director

anthony carafadirectore: [email protected]

anthony dobbyndirectore: [email protected]

jason harrissenior client managere: [email protected]

dean pappassenior client managere: [email protected]

paul punsenior client managere: [email protected]

jahnvi modiassistant client managere: [email protected]

D+C editorial team

kathleen mcdonaldpractice managere: [email protected]

zoe clarkmarketing coordinator + practice administratore: [email protected]

contact uslevel 9, 636 st kilda roadpo box 6139 st kilda road centralmelbourne vic 3004p: +613 8530 1669 f: +613 8530 1616www.dobbyncarafa.com.au

about us Dobbyn + Carafa is an exciting boutique accounting, taxation and corporate advisory practice. Our firm represents a fresh new approach to the accounting profession and the services and the outcomes that can be provided to our clients. Our leadership team comes from large to mid-tier firms and we will provide the same level of expertise and services to the SME market at the right rates and more importantly with the right attitude!

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APRIL 2016 FBT - Dobbyn + Carafa › files › docs › fbt client update.pdf · Liability limited by a scheme under Professional Standards Legislation other than for the acts of