It’s Time to Consider FBT
The ATO has issued a worksheet which summarises the FBT rates and thresholds for 2021–2022 (ie 1 April 2021 to 31 March 2022). Most of the rates have been previously announced, but the worksheet helpfully puts the numbers in one place and does include two previously unannounced thresholds.
New numbers for 2021–2022 include the:
- record keeping exemption threshold of $8,923 (up from $8,853 for 2020–2021); and
- statutory or benchmark interest rate of 4.52% (down from 4.8% for 2020–2021).
The housing indexation figures for each state and territory are also provided, and there have been some changes since 2020–2021. However, at the time of writing the car parking threshold for 2021–2022 is still pending – it will be updated once the relevant CPI figure is available.
Other previously announced thresholds include the:
- cents-per-kilometre rate;
- living-away-from-home allowances (LAHFA) for Australia and overseas.
Other unchanged rates and thresholds listed in the worksheet include the:
- FBT rate of 47% (unchanged since 2017–2018);
- gross-up rates of 2.0802 for Type 1 benefits and 1.8868 for Type 2 benefits (also unchanged since 2017–2018);
- pay by instalment threshold of $3,000;
- reportable fringe benefits threshold of $2,000;
- capping thresholds for the FBT exemption and FBT rebate concessions;
- car fringe benefits statutory formula rate of 20% (unchanged since 2014–2015); and
- deemed depreciation rate of 25% for car fringe benefits valued under the operating cost method.
Lodgment dates and instructions
In a separate worksheet, the ATO advises that the due date to lodge the return and pay the liability for the FBT year is 21 May, unless either:
- the ATO accepts a request for an extension of time to lodge; or
- a registered tax agent meets the lodgment program requirements for FBT and lodges the return electronically by 25 June.
The ATO has also released its 2021 Fringe benefits tax return instructions.
For the FBT historians out there, the ATO has also released a worksheet that sets out the “historical” rates and thresholds, which date back to 2012–2013.
Working from home benefits and FBT: updated ATO advice
The ATO has issued an update to its worksheet entitled COVID-19 and working from home benefits.
The advice is not new – much of the material already appears on a worksheet entitled COVID-19 and fringe benefits tax. However, given the new FBT year upon us, it’s worth practitioners reminding themselves of the ATO’s views (which of course they can completely disagree with).
Work laptops, other portable electronic devices and tools of trade
Given the impact of the pandemic, it would be expected that employers have given or loaned certain eligible work-related items to employees to facilitate them working at home. Alternatively, employers may have reimbursed employees for expenditure incurred on these items.
The ATO states that an eligible work-related item is exempt from FBT if it is:
- primarily for use in the employee’s employment; and
- not a duplicate of something with a substantially identical function that has already been provided to the employee in the FBT year (unless it is a replacement).
An eligible work-related item is:
- a portable electronic device;
- computer software;
- protective clothing;
- a briefcase; or
- a tool of trade.
Examples of portable electronic devices include laptops, tablets, smartphones and calculators. However, the ATO states that it does not consider a desktop computer to be a portable electronic device. The ATO’s reasoning for this is explained in a separate worksheet.
The worksheet states that a small business may be eligible for an exemption and that they can “provide multiple portable electronic devices to an employee, even where the items have substantially identical functions”.
It reminds businesses that, from 1 April 2021, the turnover threshold for businesses to be eligible for this exemption will increase from $10 million to $50 million. Again, there is a separate ATO worksheet discussing how a business determines if it qualifies as a small business.
General office equipment
“General office equipment”, as the term is used by the ATO, includes desks, chairs, cabinets, stationery, computer monitors and peripherals, and other items generally available for use in an office setting. There are different ways employers may provide such equipment to employees, which may have different FBT outcomes.
Lending office equipment
The benefit arising from lending general office equipment to employees during temporary working from home (WFH) arrangements due to COVID-19 may be exempt from FBT. However, for ongoing WFH arrangements, the benefit may also be exempt in some circumstances – and where it is not exempt, the taxable value may be reduced by the otherwise deductible rule.
Temporary WFH arrangements
During periods of temporary WFH arrangements due to COVID-19, the provision of office equipment will be exempt from FBT if it is:
- property that is ordinarily located on business premises;
- wholly or principally used directly in connection with business operations.
Office equipment is considered “ordinarily located on your business premises” if:
- the home use of the equipment by an employee is temporary; and
- there is an expectation that the equipment will be returned to the business premises when the temporary WFH arrangement ceases.
The equipment does not need to have been physically located on the business premises prior to entering into a WFH arrangement to meet the test, provided it is an item that is expected to be returned to the premises.
Ongoing WFH arrangements
Office equipment that an employer loans to an employee to support a WFH arrangement that will continue on a long-term basis is, in the ATO’s view, unlikely to meet this exemption.
However, it states that the benefit may be exempt if the employer makes a “no-private-use declaration” that covers all office equipment loaned to employees to support their WFH arrangements where both of the following apply:
- the equipment is subject to a consistently enforced policy in relation to its use; and
- this use means the benefits would have a taxable value of nil.
The ATO will accept that the requirements of this exemption are met where the employer provides general office equipment to its employees solely to enable them to work from home and has a “consistently enforced policy” documenting this purpose.
In such cases, employers will not be required to provide documentation that demonstrates the employment use of the office equipment. The fact that there may be some incidental use of an item outside of work hours while it is located at an employee’s home “does not prevent the benefit from meeting this exemption”.
If an employee does not complete a no-private-use declaration, the taxable value of that benefit may be reduced under the otherwise deductible rule. The applies if the employee would have received a once-only deduction had they incurred the expenditure themselves to rent the equipment solely to use for work purposes.
If it cannot be shown that the equipment still belongs to the employer and will be returned when the WFH arrangement ceases, then the provision of the equipment may be a property benefit.
Counselling and health care
Counselling services provided to support an employee’s WFH arrangement may be exempt from FBT under the rules for work-related counselling. “Work-related counselling” refers to counselling that seeks to improve or maintain the quality of an employee’s work performance and relates to matters such as health and safety, stress management, relationships, retirement and any other similar matters.
Similarly, health care provided to an employee to support their WFH arrangement may also be exempt from FBT if it is the provision of work-related preventative health care. “Work-related preventative health care” means any form of care that:
- is provided by or on behalf of a legally qualified medical practitioner, nurse, dentist or optometrist;
- has the principal purpose of preventing an employee from suffering from injury or disease that is related to their employment; and
- is available to all employees who are likely to suffer from similar work-related injury or disease.
Important: Clients should not act solely on the basis of the material contained here. Items herein are general comments only and do not constitute or convey advice per se. Also, changes in legislation may occur quickly. We, therefore, recommend that our formal advice be sought before acting in any of the areas.