COVID-19 has had an immense impact on the way we work, and has had flow-on effects on Fringe Benefits Tax (“FBT”). It is imperative for employers to be aware of these changes, as getting FBT wrong can be costly due to its 47% tax rate.
Summarised below are some of the FBT consequences of the pandemic and the government’s response, including measures announced in the Federal Budget.
Car fringe benefits
Employers may be liable for FBT where employees are working from home and where the car provided is garaged at the employee’s home. Many employers were or are garaging cars at the employee’s home for security purposes due to business premises being unattended.
Normally, for FBT purposes, if you provide a car to an employee and the car is being garaged at the employee’s home, then the car is deemed to be available for private use. This is regardless of whether the employee actually uses it for private purposes. As such, the employer may be liable for FBT for providing the car to its employee.
However, as a result of COVID-19, the ATO has announced that for the period that a car is garaged at the employee’s home due to the pandemic, a FBT liability may not arise if the following applies:
- The car is not being driven at all, or only being driven for maintenance purposes; and
- The employer has elected to use the operating cost method (hence a logbook is required to be kept).
What you need to do
If the above applies to you, you will be required to keep odometer records of the car. This is to show how much the car has been driven during the lockdown period to support no personal use of the car while garaged at the employee’s home. It is also essential that you record the odometer reading of the car when the employee returns to work at the business premises.
Furthermore, driving patterns of work vehicles may have been impacted due to minimal usage by employees as a result of COVID-19. If there is an existing logbook for the car, the ATO will allow you to continue to use the existing logbook percentage even if driving patterns have changed due to COVID-19. However, you will also be required to maintain odometer records for the year to show how much the car has been driven during the year, including any lockdown period.
New FBT concessions were announced on 6 October 2020 in the Federal Budget and have since been legislated. They aim to exempt certain benefits currently subject to FBT and reduce red tape.
An exemption from FBT now applies to costs incurred by employers on retraining and reskilling employees – to encourage employers to retain and re-train staff who are moved to different roles within an organisation.
The small business entity turnover threshold has increased from $10 million to $50 million. As a result, from 1 April 2021 businesses with a turnover below $50m now have access to the following concessions:
- Exemption from FBT on car parking benefits, where the car parking is not provided in a commercial car park and the business is not a listed public company, subsidiary of a listed public company, or a government body; and
- Exemption from FBT when providing multiple work related portable electronic devices to employees, even if the devices have substantially identical functions (larger businesses can only provide one work related portable electronic device per FBT year, unless the item is a replacement).
If you have any questions or would like to discuss your FBT liabilities, please email Kylee Smith or phone your Pilot advisor on 07 3023 1300.