2021 Fringe Benefits Tax Update

2021 Fringe Benefits Tax Update

Courtney Ashworth

Whilst some aspects of life transition to a new “COVID-normal”, the Australian Taxation Office (ATO) continues to highlight its understanding of how COVID-19 is impacting business, and communicate some of the changes and administrative concessions relevant to employers for the Fringe Benefits Tax (FBT) year ending 31 March 2021 and beyond.

 
1. FBT rates and thresholds
As for prior years, the FBT rates and thresholds have generally remained consistent as follows:
  • FBT rate                         47%
  • Type 1 gross up rate    2.0802
  • Type 2 gross up rate    1.8868
The following rates apply for 2021 (contrasted to 2020):
 
Rate 2021 2020
Car Parking threshold $9.15 per day $8.95 per day
Interest rate 4.80% 5.37%
Motor vehicles
0-2,500cc 56 cents 55 cents
Over 2,500cc 67 cents 66 cents
Motor cycles 17 cents 16 cents

The rates applicable from 1 April 2021 are expected to be released in late March 2021.

The FBT caps available to FBT-exempt and FBT-rebatable employers from 1 April 2020 have also remained consistent with the prior year as follows:

 
Type of Employer Capping limit 2021 FBT year
FBT-rebatable employers $30,000
FBT-exempt employers:
- Public benevolent institutions and health promotion charities
- Public hospitals, non-profit hospitals and public ambulance services
 
$30,000
$17,000


 
2. Motor Vehicles
The ATO is allowing a number of administrative concessions relating to car usage during lockdown periods. Cars stored at home during a lockdown and not driven, or with minor use for maintenance reasons, are considered as not available for private use for this time. Therefore, employers using the operating cost method to value motor vehicles may have no FBT liability for this period.

Further, a logbook will still remain valid during this period even though I may not be representative of the overall business use during this time.

However, a reminder the operating cost method can only be applied if odometer records at the start and end of the FBT year are maintained in non-log-book years. It is crucial to record the odometer reading at these times. A template to record these values can be provided on request.

For cars which do not have a valid logbook, the statutory formula method must be used.

Care should be taken as the ATO guidance is intended to be applied for work cars and not necessarily novated lease arrangement with extensive private use. However, the ATO indicates it will accept reasonable estimates using the same methodology as in the ATO’s
factsheet.

Please refer to our FBT Tax changes article for more information on these concessions.
 
Expect increased compliance reviews
The ATO have announced they expect to collect the data of up to 4.5 million individuals from state authorities relating to motor vehicles for the period 1 July 2019 to 30 June 2022.

This data mining, combined with new and recently finalised guidance regarding business related travel in Taxation Ruling
TR 2021/1 - Income Tax: when are deductions allowed for employees’ transport expenses leads us to expect an increase in the number of ATO compliance reviews relating to motor vehicles. FBT is generally an easy target for the ATO, and it is worth noting and FBT compliance review may also lead to a review of other areas including luxury car tax, Fuel Tax Credit claims, Goods and Services Tax (GST) and Income Tax obligations.

 
3. Entertainment
Many employers have seen their entertainment spend dramatically decrease in line with lockdowns. However, FBT may still arise on the provision of entertainment and employers should ensure they review their accounts thoroughly to correctly capture this information. This will allow an employer to determine the most effective method for calculating the entertainment FBT liability under the available methods, being:
  • 50/50 method
  • Actual method
  • 12 week register method
The ATO has also released guidance in respect of a few particular entertainment-related matters.
 
Non-refundable cancelled events
Non-refundable cancelled events should not give rise to an FBT liability where employees were unable to attend and the amount was not refunded to the employer. FBT may arise if an employer reimburses an employee for a subsequently cancelled event as an expense payment fringe benefit – unless the otherwise deductible rule applies.
 
Not for profit salary packaged meal entertainment
The ATO has indicated it will not allocate any compliance resources to scrutinising expenditure relating to salary packaged meal entertainment provided the meals were provided by a supplier who was authorised as a meal entertainment provider as at 1 March 2020. This means that takeaway meals purchased will be accepted as meal entertainment, including purchases through UberEats, Deliveroo, Menulog and other meal delivery services, provided that the supplying restaurant previously offered a dine-in service.

 
4. Work-related devices and home office supplies
As a result of COVID-19, many employees needed to quickly set-up or upgrade their home office space. Employers assisted employees in a number of ways, including the provision of electronic devices such as laptops, phones, printers, etc. or with the provision of furniture in desks, chairs, keyboards, mice, etc.

Existing FBT concessions may be available to eliminate any FBT liability on the provision of such benefits in a number of ways, summarised as follows:

 
Possible FBT exemption  
Work-related items Exemption available for the provision of certain items primarily used for work purposes, including:
  • Portable electronic devices such as mobile phones, laptops, tablets, printers and GPS navigation receivers
  • Computer software
  • Protective clothing
  • Briefcases
  • Tools of trade
For businesses with aggregated turnover <$10m
No limit to the number of work-related items being given to employees, provided that the device is primarily for use in the employee’s employment.
For businesses with aggregated turnover $10m
Devices able to be provided are limited to one item per year for those items that have a substantially identical function unless the device is a replacement item (e.g. an employer could provide one mobile phone and one laptop per year. An additional laptop could be provided as a replacement in the event of a fault in the first laptop).
Otherwise Deductible rule No FBT will arise if the employee would have been eligible for a once-off personal income tax deduction for that item (if they purchased it themselves). Note this exemption cannot be used for depreciating assets, e.g. a new desk costing $770.
Minor benefits rule Total cost, including GST, was less than $300 for that item and similar such items. In addition, the benefit must be provided infrequently and irregularly.


Watch out for more expensive furniture items such as desks, computer chairs, etc. or non-exempt devices such as desktop computers which may still give rise to an FBT obligation. Risk areas also include blanket allowances provided to employees to source their own home office supplies. These payments may be subject to PAYG withholding or give rise to employer superannuation guarantee obligations in some situations, attracting failure to withhold penalties and superannuation guarantee charges.


5. Employee wellness support
Exempt support
Whilst the ATO reaffirmed that many employee support services can be provided as FBT exempt benefits, employers should be careful to ensure that the support services fit within the accepted guidelines and relates to workplace counselling. For example, assistance with C.V.’s, jobsearch skills, interview skills, meetings or presentations from Financial Advice professional are all accepted exempt services.
 
Non-exempt support
However, third party training which provides employees with new skills, qualifications or accreditations may not be FBT exempt where the additional training merely provides the employee with improved future employment prospects and does not have a direct link to specifically allowed topics, including:
  • Safety
  • Health
  • Fitness
  • Stress management
  • Personal relationships
  • Drug or alcohol abuse
  • Rehabilitation or prevention of work-related trauma or of another disease or injury, or
  • First aid.
The 2020-21 Federal Budget handed down on 6 October 2022 included some expansion of these exemptions with intended effect from 6 October 2022. Refer to our Federal Budget report for more information.

 
6. Things to watch from 1 April 2021
Car Parking - From 1 April 2021
The existing car parking exemption is being extended to apply to employers with aggregated turnover of up to $50 million (up from $10 million) from 1 April 2021.

This provides an excellent opportunity for employers to provide onsite or nearby car parks for employees as they return to the office post lockdowns. Car parks could be provided as an incentive (at the employer’s expense) or under a salary packaging arrangement (at the employee’s expense) without giving rise to an FBT obligation.

The expansion of this exemption is expected to offset some of the risk to suburban employers expected to apply from 1 April 2021 under the expanded definition of a ‘commercial car parking station’ in Taxation Ruling TR 2019/D5.

Please refer to our 
FBT Tax changes article for more information.
 
Exempt work-related items
As with the car parking exemption, the small business exemption available for work-related devices is being expanded from 1 April 2021 to also include businesses with aggregated turnover of up to $50 million.

This means that employers with eligible turnover can provide their employees with work related portable electronic devices.


 
7. Any questions on FBT?
Please contact your Moore Australia advisor if you have any questions about how your business’ FBT liabilities and where your FBT risk profile could be improved.