Fringe benefits tax (FBT) thresholds to change
In response to recommendations made by the Taskforce on Reducing the Regulatory Burdens on Business, the Government has promised to increase the fringe benefits reporting threshold and the minor benefits threshold effective from 1 April 2007. The irony of these changes is that they help employees more than employers. Employers will still incur compliance costs determining whether employees have reached the thresholds, and will still need to determine whether minor benefits worth less than $300 are infrequent and irregular in order to treat them as exempt.
The eight FBT-related recommendations made by the Taskforce, and the interim response to four of them, are summarised in the table below. A final comprehensive response addressing all of the 186 recommendations made in the Taskforce’s report is to be provided by the end of July 2006.
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No.
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Taskforce recommendation
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Government’s response
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5.29
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Limit fringe benefits reporting to remuneration benefits only.
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Not addressed in interim response but implicitly not accepted.
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5.30
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If recommendation 5.29 is not accepted, increase the threshold for FBT reporting from $1,000 to $2,000 and exempt a wider range of benefits from reporting.
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Agreement in principle to increase the threshold to $2000. Proposed to take effect from 1 April 2007.
More consideration will be given to exempting a wider range of benefits in the Government’s final response.
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5.31
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Increase the FBT minor benefits threshold from $100 to $300.
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Agreement in principle to increase the threshold to $300. Proposed to take effect from 1 April 2007.
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5.32
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The ATO should review and clarify its guidelines on ‘irregular’ and ‘infrequent’ for the purposes of the FBT minor benefits exemption.
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The ATO is reviewing the existing guidelines and will provide further clarification.
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5.33
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The ATO should better publicise the work it has done to reduce, and develop administrative solutions to further reduce, the compliance costs of calculating FBT on road tolls.
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The ATO will better publicise the work it has already done and is reviewing the current administrative solutions.
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5.34
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Review specific aspects of FBT with a view to reducing compliance costs, namely:
(a) requirement to report fringe benefits on a GST-inclusive basis – as most small business accounting systems generally record GST-exclusive values, all benefits need to be reviewed manually to identify which must be grossed up to the GST-inclusive value
(b) treatment of car parking - a broad review and simplification of the calculation of FBT is needed.
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Not addressed in interim response.
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5.35
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Work should be done to examine whether giving entities the option of submitting group FBT returns would be beneficial.
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Not addressed in interim response.
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5.36
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Give employers the same automatic extension to lodge FBT returns given to tax agents lodging FBT returns.
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Not addressed in interim response.
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2007 FBT year details
The ATO has issued several new Taxation Determinations setting out relevant rates/factors/ amounts applicable to the 2007 FBT year commencing on 1 April 2006:
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TD number
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Topic
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Rate/factor/amount
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TD 2006/13
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calculating the taxable value of a fringe benefit arising from the private use of a motor vehicle other than a car - using the
cents per km basis
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0 - 2500cc: 40 cents/km
Over 2500cc: 48 cents/km
Motor cycles: 12 cents/km
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TD 2006/14
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indexation factors for valuing non-remote housing
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NSW: 1.015 Vic: 1.013
Qld: 1.048 SA: 1.029
WA: 1.025 Tas: 1.036
ACT: 1.029 NT: 1.034
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TD 2006/15
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employer’s record keeping exemption threshold
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$6,391
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TD 2006/23
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amounts representing a reasonable food component of a living-away-from-home allowance for expatriate employees
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1 adult: $191
2 adults: $306
3 adults $344
4 adults: $458
N.B. adults + child(ren) rates also included
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TD 2006/24
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benchmark interest rate for calculating the taxable value of
· a loan fringe benefit
· a car fringe benefit (valued using the operating cost method)
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7.30%
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FBT exemption for laptop accessories – further clarification
In the last issue of Indirect Tax Quarterly, we summarised the ATO’s position on the availability of the section 58X(2) exemption for laptop accessories – as outlined by the ATO at the NTLG FBT sub-committee meeting in November 2005. More recently, the ATO has qualified its position in relation to laptop upgrades. The ATO now accepts that a section 58X(2) exemption is available for the total cost of a laptop inclusive of additional memory, hard drive upgrade, added internal modem or wireless LAN module or any other upgrade involving built-in internal components which are ordered and itemised on a single invoice, even if at a separate cost.
In relation to the amendment to section 58X(2) to treat portable printers designed for use with a notebook, laptop or similar portable computer as exempt work-related items, the ATO’s view is that the exemption has limited application. There are only a small number of printers on the market that are, because of their characteristics, intended to be used with notebook/laptop computers and are also portable in the sense of being for use outside an office environment as a mobile work tool. The average desktop printer does not qualify for exemption. Where a portable printer qualifies for exemption, certain accessories purchased at the same time and itemised on the same invoice are also exempt. These include an optional battery, charging kit and blue tooth device.
Car parking – FBT issues
The ATO has recently issued an interpretive decision in relation to the calculation of a daily rate equivalent for periodic parking arrangements in circumstances where the parking station charges a parking fee for all-day parking which becomes progressively lower after a number of days parking. ATO ID 2006/93 confirms that the formula in section 39E of the FBT Act applies to determine the lowest fee the parking station is taken to charge for all-day parking on a given day. In the scenario outlined, the parking station charges $16 for Day 1, reducing to $5 per day for Day 26 and beyond. On the basis that the car has been parked for a continuous period of one year, application of the formula in section 39E gives a daily rate equivalent of $7.70. This decision reinforces the importance of reviewing the schedule of rates provided by commercial car parks in order to ensure that FBT is being captured correctly.
With the increasing number of small long- and short-term car parking businesses springing up within five to ten minutes drive from major airport terminals, employers located outside the CBD but close to an airport may find themselves with an FBT exposure. Employers in these locations, if providing car parking to employees, should check whether they are within 1km of a car parking facility. The existence of an FBT liability will depend on whether the facility is a ‘commercial car parking station’ and charges more than the car parking threshold ($6.43 for the 2006 FBT year; rate for the 2007 FBT year yet to be announced).
NSW pay-roll tax rebate
From 1 July 2006, businesses in areas within NSW with consistently above average unemployment may be eligible for a pay-roll tax rebate worth up to $144,000 a year. The rebate is aimed at businesses in their first year of operation, businesses relocating from interstate or overseas and expanding businesses paying pay-roll tax for the first time. For the first three years, eligible businesses will receive a 100% rebate of their pay-roll tax liability. In the fourth and fifth years, the rebate will be 66% and 33% respectively. The regions in which businesses may be eligible for the rebate are Outer South Western Sydney, Canterbury Bankstown, Fairfield/Liverpool, Illawarra, Gosford-Wyong, Hunter, Mid-North Coast and Richmond-Tweed.
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Page Last Updated: 09 May 2006
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Source: Deloitte Touche Tohmatsu - Australia (English)
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