2024 FBT Questionnaire – additional information

The purpose… is to provide you with extra information regarding Fringe Benefits Tax (FBT) so that we may help identify fringe benefits and reduce your potential exposure to penalty taxes and interest.

We will be happy to provide further information upon request, but please also check out the Australian Taxation Office publications “Fringe Benefits Tax – A Guide for Employers” NAT 1054 if you have any questions.

The following is an explanation of the major types of benefits that are potentially in everyday business dealings. Please note that each of the benefits described has various inclusions, exclusions and exemptions that can’t be explained in detail here. However, these can be considered once we have identified whether a particular type of benefit has been provided.

Motor Vehicles

Motor Vehicles are by far the most common fringe benefit. Essentially, this type of benefit arises where an employer’s car is used by an employee for any private purposes, notwithstanding that the vehicle is also used for business purposes. Generally, this situation arises where an employee is provided with a vehicle for travel between home and work or uses a vehicle for any other private use.

The Fringe Benefits Tax Assessment Act (FBTAA) allows two methods for calculating the taxable value of the motor vehicle fringe benefit –

Statutory Formula Method
Operating Cost Method

For the current year onwards there’s an FBT exemption for zero or low emission vehicles. These are EVs or Plug-In Hybrids that cost less than the luxury car tax amount ($89,332 in 2023-24). This reduces the amount of any FBT liability to nil, although the benefit still needs to be reported under one of these methods on the employees payment summary.

We recommend providing us with details to calculate the taxable value under both the above methods; this then enables us to choose the method which gives you the best result for FBT purposes.

The Statutory Formula method calculates the taxable value of the benefit depending on how many kilometres have been travelled during the FBT year. For vehicles acquired after 11 May 2011, there is a flat rate of 20% regardless of kilometres travelled.The record keeping for the operating cost method is much more onerous than the statutory formula method but this can, in many circumstances achieve a lower FBT result. The taxable value is calculated by applying the log book percentage against the costs of operating the vehicle for the FBT year. A Log book complying with the Tax Act must be completed.

Even after we have done all the calculations, we may reduce the taxable value of the fringe benefit to nil through employee reimbursements or contributions. This can actually be paid in cash (e.g. employee pays for petrol) but is usually performed by way of a journal entry against your loan account (i.e. reducing your loan balance with the company). Even though we may not physically lodge an FBT Return in many cases, we still need all the information to perform the necessary calculations which enable us to provide you with an appropriate journal entry.

Car Parking Fringe Benefits

Car parking facilities provided by an employer to an employee may give rise to a car parking benefit. A car parking benefit arises where the following conditions are satisfied:

The employer’s business has gross income of $50m or more for the year.
A car is parked on “business premises” which is within 1 km of a “commercial parking station” and the carpark’s fee for all day parking is more than $10.40 on the first day of the FBT year i.e. 1 April 2023.
The car is parked on those premises for more than 4 hours in total from 7am to 7pm on the particular day.
The provision of car parking facilities is in respect of the employee’s employment.
The car is parked at or in vicinity of the primary place of the employee’s employment.

The car on that day is used in connection with travel from home to work. Alternatively, where the business has gross income of under $50m, car parking fringe benefits will still be considered provided if provided through a commercial parking station.

As there are three methods of calculating the taxable value of a car parking fringe benefit, you will need to discuss your circumstances with us to determine the information you may need to provide. However we will generally need to know how many car parking spaces can reasonably be used by employees and the lowest commercial car park charge within 1 km of your business.

Please note that from 1 April 2022, shopping centres, hospitals and other businesses that provide prohibitive day rates count as “commercial parking stations”. We expect an increase in FBT liabilities for businesses. Further clarifications around this change are still developing.

Loan Benefits

A loan fringe benefit arises where an employer makes a loan to an employee, including a director; for these purposes a “loan” includes:

Advance of money
Provision of credit
Payment of an amount on behalf of another person where that person has an obligation to repay.

The focus of this type of benefit is on directors or shareholders “debit” loan balances with their companies. A “debit” loan balance is where the director owes the company money. If your loan account has gone into debit at any time during the FBT year we will have to obtain details of the movements to calculate the statutory interest, which is at the rate of 7.77%.

A general ledger printout of the loan account gives us most of the information to enable us to do the calculations. We may already have prepared some accounts for you during the year and have details of these movements. Alternatively, these details may need to be compiled now.

If these loans are used for income producing purposes (e.g. you have borrowed money from the company to buy shares) there will be no taxable fringe benefit but we will still need to do the calculations for substantiation purposes. If interest is already being charged on the loan (e.g. a loan to an employee) then we will need the interest rate charged or the interest actually charged in order to calculate the taxable fringe benefit.

Note: A loan of property is not a loan benefit; this is defined as a “residual benefit”, which is discussed in a later section.

Debt Waiver Benefits

A taxable benefit arises where an employer releases an employee from a debt. The taxable value is the amount waived, so therefore we will require this information if applicable.

Expense Payment Benefit

An expense payment benefit arises where an employer pays or reimburses private expenses incurred by employees, including directors.

The following types of expenses comprise expense payment fringe benefits:

Children’s school fees
Private telephone accounts
Electricity, gas (heat & power)
Insurance premiums
Driver’s licence
Holiday transport
Home office computers
Rates and land taxes
Medical and health benefits
Travel / credit cards
Mortgage/loan payments
Other – please ask us if you have any queries

In most cases, where the employee would have been allowed a “once only” tax deduction for the expense if the employer had not paid or reimbursed it, then the taxable value is reduced to the extent it is deductible.

We will need the following details in relation to expense payment fringe benefits:

The name of the employee for whom it was paid.
The date, nature and amount of the payment
The extent to which, if any, the payment is tax deductible to the employee

Note: Any item for which depreciation will be claimed is excluded from being a once only deduction

Housing Benefits

A housing fringe benefit arises where an employer provides an employee a right to occupy or use accommodation as a usual place of residence. This accommodation includes the following: house, flat, unit, hotel, motel, guesthouse, bunkhouse, ship, oil rig, caravan or mobile home. If the accommodation cannot be described as the employee’s usual place of residence then the benefit will not be a housing benefit, but will be a residual benefit.

Note: Accommodation whilst travelling on business will definitely not be a housing benefit. Depending on the circumstances, expenditure of this type will be fully tax deductible.

Living Away From Home Allowance (LAFHA) Benefits

A living away from home allowance benefit arises where an employer pays an employee an allowance to compensate for additional expenses or disadvantages suffered because the employee was required to live away from his or her usual place of residence for employment purposes.

The following requirements must generally be satisfied:

The employee was required to live away from usual place of residence;

The employee continues to maintain a home in Australia, which is available for immediate use during the period that they are required to live away from home;

The employee must be paid an allowance in addition to salary;
An allowance must be paid in respect of employment;
An allowance was paid to compensate the employee for additional non-deductible expenses and other living disadvantages incurred because the employee is required to live away from home to perform employment duties;
The period of the allowance is limited to 12 months.

Unless these conditions are satisfied, the amount paid to employees may be assessable to them as a normal allowance, or subject to FBT. The extent to which a LAFHA benefit is subject to FBT will be determined on the basis of the facts, so please provide as much information as you can about such an arrangement if you think it applies to you.

Property Benefits

A property benefit arises when an employee is provided with property, free or at discount, by an employer. Property includes goods, real property such as land and buildings and chooses in action such as shares and bonds.

If you have provided employees with any goods during the year please provide as many details as possible (i.e. what was provided) to determine whether a fringe benefit has been provided.

Food and drink consumed by current employees on a working day on the employer’s premises is an exempt property fringe benefit.

Note: Property is provided when the ownership passes. If ownership does not pass e.g. the employee used the property for a time then this would be classified as a residual benefit.

Entertainment

This is one of the most complex areas of tax law. Depending on the type of entertainment provided and the circumstances in which the benefit was provided, the entertainment could be one of a number of types of fringe benefit discussed in this attachment. However at this stage we are only asking you to determine whether you potentially paid an expense which could be classified as entertainment.

Meal Entertainment Fringe Benefits

A meal entertainment fringe benefit consists of entertainment by way of food and drink, travel and accommodation in connection with the entertainment is also included.

The taxable value can be calculated as follows:

Election to use the 50/50 split method or “12 week register method”
If no election is made, the actual expenditure is used

We will generally calculate the Fringe Benefit Tax implication under the 50/50 method and the actual method to determine which gives the best FBT result.

Generally sustenance expenses are not meal entertainment fringe benefits.

These include:

Staff amenities
Morning and afternoon tea items
Deductible travel away from home relating to local or overseas travel
Eligible in-house meals
Food and drinks provided at a seminar

We only require you to provide details that would give rise to a fringe benefit; however, it also gives us the opportunity to determine whether items of entertainment are tax deductible. Giving us more details about these transactions will aid us in completing your year-end tax returns.

To help us determine the FBT consequences please provide us with the following details:

How many employees, family members or clients were involved
The situation – was it on the employer’s premises, was the employee travelling on business etc.
The amount of the expenditure involved and whether any of this expense was reimbursed.

Residual Fringe Benefit

Essentially, any other benefits you may have provided to employees in respect to their employment are covered by residual fringe benefits. Examples of residual fringe benefits are free or discounted services, such as travel or performance of work, the use of property and the provision of insurance coverage. The provision of vehicles other than cars, (e.g. hire taxis, rental cars, trucks and motor cycles) also fall under this category.

Please contact us if you wish to discuss any potential residual benefits you may be providing to employees.

Contributions to Worker Entitlement Funds

A worker entitlement fund is a trust fund for employee long service leave, sick leave or redundancy payments. These funds are also referred to as redundancy trusts or redundancy funds.

If you are an employer who makes payments to a worker entitlement fund, you need to ensure that the fund is prescribed, or will be prescribed by 31 March 2024.

Paying into a prescribed fund will ensure you do not pay FBT on the amounts paid into the funds.

Exempt Benefits

The FBTAA has various exemptions relating to every category of fringe benefits. They are not all covered here, however please note the following tax deductible, but FBT exempt, items an employer may provide to an employee, called “Eligible work related items”.

The “Eligible work related items” include:

Retraining and Reskilling redundant employees to help gain new employment
Mobile or car phones used primarily in the employee’s employment
Protective clothing required for employment of the employee
Briefcases
Calculator
Tools of trade
Computer software used in the employee’s employment
Notebook, laptop or similar (only relates to lighter, portable computers).

For small businesses, employers are now permitted to provide employees with more than one work-related portable electronic device each year, even where the devices have substantially identical functions. For example, a smartphone and tablet device.

**Remember**

FBT Return is due for lodgement by the 21 May!