FBT Solutions

02 8079 2924

Month: June 2012

Whilst today’s announcement by the Government to defer the start date of the LAFH reforms to 1 October 2012 is recognition that employers and there employees require more time, the timing could not have been worse for those employers who have implemented the changes in anticipation of a 1 July 2012 start date.

Employees who lost there LAFHA entitlement will now be seeking reinstatement – employers will have to unravel all the work done and then revisit again in September ahead of the new 1 October start date.

There again, some employers may not be willing to change back arrangements, to then change them again in a few months.

At this time of the year there is enough going on without all this additional work.

 


The Government has introduced today into Parliament the bill in relation to the new rules for Living Away From Home (LAFH) concessions.

The main changes to the previously released draft legislation include:

1. a new start date of 1 October 2012 (rather than 1 July 2012);

2. a change to the ‘ordinary weekly food and drink’ or statutory amounts, back to $42 per adult per week and $21 per child per week under 12;

3. further guidance on when an employment contract may be considered to be ‘varied’ for those employees who fall within the transitional provisions. Specifically in relation to contract extensions, pay rises, promotions and a change in working hours; and

4. clarification on the start date of the 12 month capped period for claiming LAFH benefits for employees who are living away from home on 1 October 2012 and qualify for LAFH concessions under the new rules.

 


Tuesday 2 October 2012 is National AP Day.

Time to recognise and reward your AP team.

Nominate your AP star and they could win an Ipad 3.

Does your AP team rock? Nominate your rockin good AP team and they could win a $500 lunch voucher.

Nominate online at at: www.nationalapday.com.au ; or

Download the nomination form here: http://www.nationalapday.com.au/NATIONAL%20AP%20DAY%20Nominate%20Form.pdf

Print out this poster and put it on the wall: http://www.nationalapday.com.au/NAPDay-Poster.pdf

Training for AP teams… http://www.fbtseminars.com.au/pdf/fbt_Employee_expenses_allowances_training_Apr12.pdf

 


Here are some benefits we have uncovered in our FBT return review work:

  1. Long service awards – it’s not just the excess over the threshold that’s taxable, it’s the lot
  2. 2011 Rugby World Cup costs (and keep an eye on costs for the 2012 Olympics) – accommodation, airfares, taxis, meals, match tickets, sightseeing tours etc
  3. Permanent residency application costs
  4. Permanent residency consulting fees
  5. University fees
  6. Waiving of employee termination recoveries (Relocation costs, PR application costs, Study costs)
  7. Car parking – not identifying all benefits
  8. Car parking – not performing a survey www.fbtme.com.au

And remember, it’s not what’s in the FBT return that’s the issue, it’s what’s not in the FBT return that is the issue


FBT States and Territories Industry Partnership minutes –  14 March 2012

A very interesting and relevant issue for employers, discussed at the above ATO FBT States and Territories Industry Partnership meeting….

11.6 Salary packaging shortfall

Clarification is sought of the ATO response provided to agenda item 5.6 of the FBT STIP meeting held on 25 October 2011. This item which concerned an invoice raised by an employer that was seeking to recover its salary packaging costs from the employee covers a complex issue for on-going management of salary packaging arrangements, especially where there is an outsourced benefit provider.

In most government salary sacrifice arrangements, the employer is required to pass on all administrative and FBT costs to the participant, on the basis that entering into these arrangements must be cost-neutral to the Government agency.

When establishing a package the various elements have a character of estimates, because the final FBT liability cannot be established with certainty until the final calculations are made. There are quite a number of variables which affect the resulting liability, most recent being the change to the statutory formula rates.  More traditionally, for some packages, the employer is able to calculate a car fringe benefit under both available methods and ‘elect’ the lower cost method for the FBT return.

In addition, the employee may choose to make an employee contribution against the projected taxable value of the benefit.  If the contribution does not fully cover the taxable value, there will be an FBT liability, commonly termed a shortfall.  Because this amount is only fully known past the end of the FBT accounting period, management of the recovery of shortfalls presents a number of options that may need to be confirmed by the ATO.

The agenda item covers one STIP member’s interpretation of recovery action. However, it is important to note that technically the FBT liability is an amount due by the employer, not the employee and cannot be deemed to be reimbursement of an obligation of the employee. If the package results in a shortfall, one ATO officer has suggested to me that it is technically an overpayment of salary and wages.  In most government agency situations, it is not possible to waive the shortfall.  Therefore a reference to TD 2008/11 is questioned.

Question

Is it feasible to create an obligation by issuing an invoice?  What is the GST status?

There is a need for a pragmatic process for managing salary packaging shortfalls. There is also a need for clarity about recovery of this amount from the employee. Should it be from pre-tax or post-tax salary?

In the case of overpaid salary and wages, the employee is required to repay the gross and reclaim overpaid tax from their personal return.

There has been some administrative view that the employee should be able to make an employee contribution out of post-tax salary after 1 April in the relevant year, and contribute it to the employer prior to finalising the employee’s payment summary.

The ATO response to agenda item 5.6 seems to stop short.  Please provide more assistance in managing this difficult issue that is both practical and workable as well as not giving rise to further fringe benefits that were never intended.

ATO response

The response to agenda item 5.6 of the FBT STIP meeting held on 25 October 2011 was given in relation to a particular factual situation that was raised by a member who was concerned that a fringe benefit had been created by the arrangement that had been entered into by an agency.

In the particular arrangement that was raised for discussion, the employer had issued an invoice to an employee who wanted to arrange for the amount of the invoice to be included in a salary sacrifice arrangement.

The ATO in response to the agenda item advised that a fringe benefit would arise from the arrangement as it involved the employer either waiving the debt shown on the invoice, or reimbursing the amount paid by the employee.

Although a fringe benefit arose from the particular arrangement discussed at the October FBT STIP, this does not mean that an additional fringe benefit will arise when ever there is a salary packaging shortfall.

There are a variety of arrangements that can apply when a salary packaging shortfall occurs. The decision as to which arrangement is to apply is a matter for the employer and employee to decide.

Members who wish to obtain advice about the taxation implications of a particular arrangement should apply for a private binding ruling in which all of the factual circumstances can be considered in detail.

If the above is a concern, let us help you at our upcoming training on Understanding Salary Packaging:

http://www.fbtseminars.com.au/pdf/fbt_under_salary_seminar_Mar12.pdf

 


Would you like to know how affordable FBT Outsourcing is?

Please complete the form

TO FIND OUT

How many employing entities do you have in Australia? (i.e. how many Australian FBT returns do you lodge?)

Are your FBT returns reviewed externally prior to lodgement?

Do you currently use FBT software to prepare your FBT return/s?

How many employing entities do you have in New Zealand? (i.e. how many New Zealand FBT returns do you lodge?)

GREAT!

We will send you a fee estimate via email (within 72 hours).