FBT Solutions

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Budget 2012


Check out our FBT Survival Kit website, a great source for FBT checklists, FBT return & FBT update seminar materials, employer & employee elections & declarations and much more…. www.fbtsurvival.com.au

Living Away From (LAFH) allowances and benefits

http://www.fbtsurvival.com.au/wp-content/uploads/2013/02/LAFH-declarations.pdf

 


Cars in transition and under attention

Cars usually represent the biggest risk area for employers. With a continuing and elevated level of attention from the ATO, management of cars from a FBT perspective must always be a priority.

Car reform & transition

Whilst the car reforms commenced back on 10 May 2011, we mustn’t lose sight of the transitional rules and these will require continued monitoring through until 1 April 2014 when the flat rate of 20% applies. Therefore, only two FBT return periods (2013 & 2014) remain where employers (and employees) will need to worry about such things as odometer readings and annualising of kilometres when valuing the car benefit using the statutory formula method (SFM).

Cars provided prior to 10 May 2011, or where a pre-existing commitment was in place to prior to that date, will continue to use the old statutory fractions unless there has been a change in commitment. Changes made after 10 May 2011 to commitments existing prior to 10 May 2011, such as re-financing a car, altering the duration of an existing contract or changing employers, are new commitments and will therefore be subject to the new arrangements. Under the transitional rules, if the amendments (new commitments) do not apply at the start of an FBT year (or from the time the car was first held if that happens after the beginning of the FBT year), the amendments will instead begin to apply from the start of the next FBT year as follows:

 

Thresholds

 

Old   rates

New   rates after 10 May 2011

 

2012

2012

2013

2014

2015

0 – 15,000 kms

26%

20%

20%

20%

20%

15,000 – 25,000 kms

20%

20%

20%

20%

20%

25,000 – 40,000 kms

11%

14%

17%

20%

20%

More than 40,000 kms

7%

10%

13%

17%

20%

Therefore, the key point is that whilst a car may be subject to the new rates, the application of the new rate may not occur until the first day of the next FBT year. This requires the 2013 FBT return preparers to flag these changes for the 2014 FBT return. And hopefully, this requirement has been flagged by the 2012 FBT return preparer for the 2013 FBT return. Use of annual rotation of the FBT return preparer can often lead to confusion.

When preparing your 2013 FBT return, the choice of rates will depend upon whether the old grandfathered rates continue to apply as a pre 10 May 2011 contract or if the car is included in the new transitional rates. The table below illustrates:

Thresholds

Grandfathered Rates

Transitional Rates

0 – 15,000 kms

26%

20%

15,000 – 25,000 kms

20%

20%

25,000 – 40,000 kms

11%

17%

More than 40,000 kms

7%

13%

ATO focus

Cars are the single largest FBT revenue item for the Government (although LAFHA may well challenge for the title in 2013!). As mentioned, cars remain a major ATO focus. The ATO are targeting cars on a number of fronts….

Luxury cars and use of logbook

The ATO have focussed closely on the use of log books in general but particularly in respect of luxury vehicles, especially high end luxury sports cars.

Exempt cars

The ATO have undertaken a campaign targeting employers who have claimed exemption for vehicles and are not lodging FBT returns. There exists a general lack of understanding on the application of car exemptions and often this is due initially to lack of clear policy and then poor compliance procedures. It is an area that requires careful management as cars are highly visible benefits and their related costs run clearly through the financials.

Employee contributions project

ATO analysis has identified that a high percentage of employers who report employee contributions in their FBT returns with the effect of reducing the taxable value of benefits, are failing to report those employee contributions as assessable amounts in their income tax returns and related GST liabilities in the periodic BAS.

The ATO has been issuing letters to employers where the ATO has identified discrepancies between Income Tax Returns and FBT Returns. The ATO are reminding employers of their responsibilities with contributions and that they must be reported as income in the correct label on the income tax return. If the employer has not reported the income then an amended return will be necessary.


Reform of salary sacrificed ‘in-house’ fringe benefits

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On 22 October 2012, as part of the Mid-Year Economic and Fiscal Outlook 2012-13, the government announced reforms to remove the concessional fringe benefits tax (FBT) treatment for in-house fringe benefits accessed through a salary packaging arrangement.

The proposed reforms will apply to in-house benefits provided under salary packaging arrangements made on or after 22 October 2012, and from 1 April 2014 for in-house benefits provided under salary packaging arrangements made before 22 October 2012.

In-house fringe benefits arise when employees receive goods or services from their employer or an associate of their employer that are identical or similar to those provided to customers by the employer or an associate of the employer in the ordinary course of business. Under the existing FBT concession, the taxable value of in-house fringe benefits is 75% of either the lowest price at which an identical benefit is sold to the public or under an arm’s length transaction. In addition, depending on the nature of the in-house fringe benefit, the aggregate taxable value may be reduced by a further $1,000.

The existing FBT concession was introduced before the widespread use of salary packaging arrangements. This measure will return the use of this FBT concession to its original intent.

Under the proposed reform, the taxable value of in-house fringe benefits provided through a salary packaging arrangement will be (depending on the nature of the benefit) either:

  • the lowest price that an identical benefit is sold to the public, or
  • the lowest price under an arm’s length transaction.

Legislation was tabled in parliament on 29 November 2012.

Legislation and supporting material

Tax Laws Amendment (2012 Measures No. 6) Bill 2012 and the Explanatory memorandum tabled in parliament on 29 November 2012.

More information

For more information, refer to:

http://www.ato.gov.au/taxprofessionals/content.aspx?doc=/content/00339112.htm


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