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COVID 19 tests are now tax deductible for workers and not subject to FBT for businesses where they are purchased to enable the individual to attend work. The Federal Government has now introduced legislation to enact this rule and the change takes effect from the beginning of the 2021/22 tax year.
Where an employer provides benefits to assist employees working from home and in the circumstance where the employee becomes the owner of the item (eg office equipment, such as chairs, desk and so on), an FBT liability may arise in the form of either a property benefit or expense payment benefit. However, employers should consider whether the minor benefit exemption applies, noting the $300 threshold. The otherwise deductible rule may also be considered, but this does not apply to items that would be depreciable.
Where the employer provides the use of certain equipment (that remains on the employer’s books), a possible exemption to consider is one available for the temporary use of equipment usually kept at the business premises. Where the use is to be a more permanent arrangement, it will typically be necessary to have the employee complete a declaration regarding the percentage of their use of the item(s) that is business related. It would be reasonable to expect the use to be close to 100% business-related, but unlikely 100%.
If, on 1 April 2021, the lowest fee charged for all-day parking by each and all commercial parking stations within one kilometre of the premises on which the car is parked was less than the car parking threshold of $9.25, then no car parking fringe benefits will arise during the 2022 FBT year. This may be the case for many over the past year as lots of car parks dropped their rates.
Further, if car parks that are subject to FBT were not used during periods of lockdown – where the statutory 228 days method is used to determine the number of benefits provided – this number of days may be apportioned down for the periods the parking was effectively unavailable.
Looking ahead to the 2023 FBT year, there is a proposal to reverse some slated changes and maintain the status quo, according to an announcement by the Government on 29 March 2022. Historically, car parks that charge penalty rates for all day parking, so as to encourage shorter stays, were not considered ‘commercial parking stations’, so did not trigger FBT for employers providing parking to their employees within one kilometre. However, recent court decisions caused a change to this view and the ATO’s ruling, currently effective from 1 April 2022, includes a wider range of parking stations to be considered ‘commercial parking stations’ and thus potentially triggering an FBT liability for nearby businesses. In particular, many car parks at shopping centres, hospital, universities, etc. would be considered commercial parking stations under this view. However, the Government is now saying that this is not in line with the original policy intention and they plan to change the legislation to ensure this type of parking is excluded from the definition of commercial parking station and thus does not trigger any FBT for nearby employers – effective from 1 April 2022. Again, this legislation will not be enacted prior to the Federal election, so we encourage employers to be on top of the situation near all their business locations. We can assist clients to obtain a low cost report regarding whether there are any car parks charging more than the threshold rate within one kilometre and, if so, to minimise the value for any car parking benefits that may ultimately be subject to FBT.
Where an employer-provided car is garaged at or near the employee’s home, it will be deemed available for private use for the purposes of the statutory formula method of calculating FBT. However, where the car was not being used (or was only driven briefly for the purposes of maintaining the car) due to COVID-19 lockdowns, the ATO will accept that the car is not ‘held’ by the employer for the purposes of providing car fringe benefits to the employee – for the purposes of the operating cost method.
This means the taxable value of the car under the operating cost method can be reduced by any costs relating to the period the car was not being used – such as insurance and registration.
Should there have been a change in driving patterns during the FY 2022 FBT year (such as reduced business and/or private related driving during the COVID-19 lockdown), adjustments can be made to the reasonable estimate of business use percentage based on an existing logbook maintained within the last five years. No other specific data is required to be maintained, but some record of the type of driving undertaken during the year would obviously be helpful.
Similarly to the 2021 FBT year, NFP organisations offering salary packaging of meal entertainment can continue to allow take-away and home delivered meals to be claimed as part of these arrangements. The conditions are that the meals constitute ‘entertainment’ and that that provider was providing such meal services at the start of the FBT year.
Employers who have helped out employees in emergency situation, perhaps related to flooding events, or unexpected quarantine requirements should consider the emergency assistance FBT exemption. One of the main criteria for exemption is that the help is temporary. For instance, buying new white goods for an employee is permanent assistance and would not qualify for this exemption.
Our team stays across the latest developments in FBT laws, especially as they evolve with COVID-19 lockdowns and Federal Budget announcements. For a conversation regarding your organisation’s FBT obligations and opportunities, please contact us.
