FBT Solutions

02 8079 2924

Month: December 2012

Reducing your FBT liability

We can help you to reduce your FBT liability. Companies, Accounting firms and Government organisations request our services for a number of reasons:

  • Tax Agent Sign Off – the provision of the lowest daily car parking rate is more than just the provision of a number, it is a carefully considered tax service.
  • Peace of Mind – we undertake a quality assessment to ensure that where FBT is payable, it is minimised and supported with the appropriate documentation; and where it is not payable, substantiation is provided.
  • Saving You Time – there is a considerable cost of your time in researching, measuring and applying the FBT law.
  • Accuracy and Saving – you will receive the lowest rate within 1km of the employer provided parking, so you will not be paying more tax than required. We often identify rates lower than those you may find yourself, which can mean large savings on FBT liability.
  • Valid Methodology – our process adopts the methodology accepted by the ATO to ensure accuracy and compliance.
  • Multiple Locations– many organisations have multiple locations across Australia and this can be logistically challenging for employers. We survey car parks Australia wide and have sourced the lowest rates in each of these locations.
  • No Job Too Small – we can help you, whether you have 1 or 100 locations.
  • Retrospective Refunds – the lodgement of a FBT return is on a self assessment basis. Therefore, if you think you’ve paid too much FBT on your car parking historically, then we can assist you with claiming your refund from the ATO.

We can process the refund on your behalf – that shows you how confident we are in the quality of our Car Parking Rates reports. All refunds are approved and usually released by the ATO within 28 days.

If you’ve paid too much FBT on car parking, there’s a good chance you’ve paid too much FBT in other benefit categories, examples being entertainment, in-house benefits, cars and relocation expenses.


What is a parking benefit?

If you provide or reimburse any of the following, you will need to consider FBT:

  • Leasing of car parking
  • Owned car parking
  • Parking related to shift workers
  • Provision of car parking vouchers
  • Provision of car parking passes
  • Reimbursement of car parking expenses
  • Valet parking
  • Stacker parking
  • Parking for FBT exempt vehicles
  • Long term or short term parking

How we can help you?

We can help you in a variety of ways including:

  • Providing the lowest daily rates within 1 km
  • Reviewing your valuation methodologies
  • Assessing your daily rate calculations
  • Checking on the 1 kilometre radius
  • Reviewing your policies, processes and procedures
  • Reviewing past FBT return calculations to assess refund opportunities

Identify Savings

Can we reduce our FBT liability?

There are a number of ways to reduce your FBT liability:

  • Obtaining the lowest daily rates within 1 km
  • Alternate valuation methodologies
  • Use of 12 week registers (valid for 5 years)
  • Frequent travellers
  • Restructuring parking arrangements
  • Salary packaging of car parking

Car parking is an ideal benefit to salary package. Here are 10 top reasons why:

1.Packaging a car parking space will, in virtually all cases, result in an increased take home pay for the employee and reduced costs for the employer.

2.Combine the packaging of a car and a car park – FBT savings can be generated for both by recording “no benefit” days on the same documentation.

3.Prepare a log book for your car benefit and car parking benefit at the same time – save time and double the savings.

4.The employer claims the GST and only charges you the GST exclusive cost.

5.Car parking is a concessionally taxed fringe benefit. The FBT payable is lower than the amount applied to the actual cost.

6.If your employer provides the parking outside the vicinity of where you work, then the parking may be FBT free.

7.If where you work is outside the main CBD area, then the parking may be FBT free.

8.Use of the after tax contribution method will generally give rise to even greater employee savings.

9.The FBT law allows for a number of valuation methodologies – choose the one that fits your work lifestyle.

10.Happier employees! Employers who offer flexible salary packaging arrangements attract and retain staff.


What are the changes?

As we all know, from 1 October 2012, the Living Away From Home rules have been significantly overhauled. Whilst the rules remain in the FBT law, there is an increased requirement to ensure LAFHA payments are properly tracked and categorised. The main changes are as follows:

(a)  The taxation of LAFHA will continue to occur wholly within the FBT regime

(b)  LAFH benefits will only be FBT exempt where the  employee maintains a home in Australia (subject to transitional rules and fly-in-fly-out or drive-in-drive-out arrangements)

(c)  LAFH benefits will only be FBT exempt for the first 12 months of each work location (subject to transitional rules), unless the employee is on a fly-in-fly-out or drive-in-drive-out arrangement

(d)  LAFH benefits will only be FBT exempt to the extent they are actually incurred by the employee and substantiated

(e)  Substantiation provisions require documentary evidence of accommodation and food and drink expenses. Documentary evidence includes:

  1. normal LAFHA – a declaration in an approved format
  2. fly-in-fly-out or drive-in-drive-out arrangement – a different declaration in an approved format
  3. requirement for the employee to substantiate their expenses

(f)   There are transitional rules up to 30 June 2014

  1. Will apply to permanent residents who were LAFH as of 8 May 2012 to access concessional treatment after 1 October even where not maintaining a home in Australia.
  2. Will not apply to temporary or foreign residents after 1 October 2012, unless they are maintaining a home in Australia
  3. The transitional rules are subject to there being no material amendments to the employee agreement

Want to learn more:

2013 FBT Return Preparation Seminars

Registration form:  http://tinyurl.com/8b64uqw or online at: http://www.cvent.com/d/dcqx6v/1Q

Melbourne 14 March – Sydney 20 March – Brisbane 27 March


Managing the changes

There are a number of practical challenges that require managing:

A variety of LAFHA scenarios

From 1 October, it is possible that organisations will have a variety of LAFHA scenarios, including the following:

Scenario

Payroll   Code

Fully exemptLAFHA Accommodation is   equal to or less than actual rental expense

LAFHA Food is equal to   or less than the exempt component

 

LAFH Accom – Exempt

 

LAFH Food – Exempt

Fully TaxableEmployee doesn’t qualify   for the transition or not eligible from 1 October

 

LAFH Accom – Taxable

LAFH Food – Taxable

Partially taxable accommodationAccommodation allowance   in excess of actual cost. Therefore, the amount of the allowance up to actual   cost is exempt, and the excess is taxable and subject to FBT

 

LAFH Accom – Exempt
LAFH Accom – Taxable
Fully exempt / fully taxableThe employee qualifies   for the transitional LAFHA arrangements on 1 October 2012 and then on 1   December 2012 has a material change in contract From 1 Oct to 30 NovLAFH Accom – Exempt

LAFH Food – Exempt

 

From 1 Dec to 31 March

LAFH Accom – Taxable

LAFH Food – Taxable

The reason for setting out the above 4 scenarios in a table is to illustrate some of the complexities brought about by the law changes and the need to manage these scenarios carefully in the payroll system. It must be noted that other scenarios will exist!

Change over challenges

From our experience, organisations are taking a variety of approaches to managing the change over to the new rules and/ or applying the transitional rules. A common, but generally unintended approach due to time pressures, results in three time periods across the 2013 FBT return year as follows:

LAFHA paid from 1 April 2012 to 30 September 2012

  1. LAFHA paid from 1 October 2012 to the date a decision is made
  2. LAFHA paid from the date a decision is made until 31 March 2013

The reason for the above is due to a number of factors, including:

  1. the short time frame available to employers from the date of the law change to the start date of 1 October. Basically, it may not be  physically possible to understand the law changes, whilst understanding each employee’s personal and contract position and put the appropriate change in place, including consulting with the employee (remembering that the law only received Royal Assent in September);
  2. employers required time to develop and agree a policy, and determine the appropriate treatment to apply to each employee; and
  3. some employers were / are constrained by workplace agreements and other business needs

And the above doesn’t recognise that some organisations have / had trouble with allocating responsibility for the change.

LAFH Declarations

The ATO have issued 4 approved LAFH declaration formats. It is vital that the correct declaration is completed by each employee.

Importantly, for many employers who stopped paying LAFHA to temporary residents as at 30 September, declarations up until that date are required. Whilst it may feel like rubbing salt in to the wound, it is preferable to go through that process sooner than later. If an employee leaves and a signed declaration is not available, then come FBT return time, the employer will be faced with additional FBT liabilities.

Conclusion

The transition to the new LAFHA rules is a difficult process and many organisations are still working through the rules and trying to apply these to the employee’s personal circumstances, contractual agreements and broader agreements.

Payroll has an increased role to play in categorising LAFHA payments between taxable and exempt, and splitting components between the exempt portion and the excess taxable portion.

Many employers will be faced with significant FBT liabilities due to a range of factors and continued additional workload in the short to medium term. To the extent that payroll can help to manage this burden, this will in turn help to manage risk and deliver accurate data for FBT reporting requirements in May 2013. Want to learn more:

2013 FBT Return Preparation Seminars

Registration form:  http://tinyurl.com/8b64uqw or online at: http://www.cvent.com/d/dcqx6v/1Q

Melbourne 14 March – Sydney 20 March – Brisbane 27 March


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).