As we begin the 2020 Fringe Benefit Tax Year, it is important for businesses to continue to maintain their tax obligations - staying current and compliant during this especially uncertain time.
As the FBT Year runs from 1 April - 31 March, employers will be considering their FBT reporting obligations and potential impacts to the business, alongside possibly reducing their employee's reporting Fringe Benefit disclosure.
We've outlined some of the recent FBT developments, and highlighted the key audit targets by the Australian Tax Office (ATO) for the 2020 Fringe Benefit Tax Year.
New Proposed Changes
- Taxation Ruling - Employers Providing Car Parking Benefits
The ATO has released a draft Taxation Ruling (TR 2019/D5) highlighting that employers providing car-parking benefits to their employees may now be subject to Fringe Benefit Tax.
Under the Ruling (which replaces TR 96/26), if your staff car-parking facilities are both in the vicinity of your business and within one kilometer of a car-park that offers all-day parking as a 'commercial' car-park for FBT purposes, you may have to pay Fringe Benefit Tax on the value of your employees' car spaces - even if they were tax-free before.
Common examples of parking facilities that may now be regarded as 'commercial parking stations' include:
- Shopping Centres;
- Airports; and
- Sports Stadiums
Changes will apply from 1 April 2020.
- Taxation Ruling - Employee Transport Expenses
In December 2019, the ATO released a new draft Taxation Ruling, 2019/D7, - which provides guidance on when an employee's transport expenses are deductible for income tax purposes or are otherwise deductible for FBT purposes.
The introduction of the new TR 2019/D7 (draft) Ruling aims to replace TR 2017/D6 due to the latter's complex coverage of multiple areas and concepts, which have been deemed difficult to interpret and apply in practice.
Under the ATO's current view (TR 2019/D7), transport expense will be deductible when the following occurs:
- The travel occurs on work time, under the direction of the employer;
- The travel fits within the duties of employment; and
- The travel is relevant to the practical demands of carrying out the work duties.
Additionally, the Ruling also considers the following scenarios as being deductible:
- Travel between home and an alternative workplace, such as where an employee travels interstate to attend a meeting;
- Travel between home and remote regular workplace (such as 'fly-in/fly-out' employees); and
- Travel when an employee has relocated or is on secondment for work purposes.
As the previous Ruling (2017/D6) is yet to be withdrawn, the ATO has announced its intention to provide further guidance on employee travel expenses over two (draft) rulings - to be released in 2020.
ATO Audit Targets - 2020
The ATO is focusing on situations where employees are provided with a motor vehicle and uses it for private travel or has it available to use privately.
The ATO's main concerns with respect to this include that some employers:
- Fail to identify or report motor vehicle Fringe Benefits;
- Incorrectly apply the FBT exemption for 'workhorse vehciles' (e.g., by applying it to ineligible vehicles or by treating all travel as being work-related); or
- Incorrectly claim reductions for these benefits without having the appropriate records.
The ATO is reviewing situations where employees receive entertainment-related benefits in order to ensure that employers are complying with their FBT obligations. A common error made by employers include claiming entertainment expenses as a tax deduction but not reporting them as a Fringe Benefit.
Similarly, some employers incorrectly classify such expenses as 'sponsorship' or 'advertising', and overlook the FBT consequences.
Another issue of concern that will form part of the ATO's review focus in the 2020 FBT Year is that some employers mistakenly believe that an FBT liability can be avoided simply by deciding not to claim a tax deduction for the relevant expenditure.
Additionally, any door prize that are won by an employee or their spouse at a staff social function (such as a Christmas Party) may also be subject to FBT.
The FBT implications stem as a result of the benefit provided to an employee in respect of their employment, regardless whether the prize is awarded randomly.
The ATO is focused on identifying situations where car parking Fringe Benefits are incorrectly calculated because they are based on market valuations that are significantly discounted, parking rates that are not representative of commercial parking in the area, or on parking rates that are not support by adequate evidence.
For More Information
For more information on the new proposed changes, the ATO's audit targets for the FBT 2020 Year, or for further advice, please contact Smiljan Jankovic - Director, Archer Gowland on (07) 3002 2699.