Small Businesses: Don’t Forget your FBT Concessions
If your clients own a small business still recovering from the COVID-19 induced downturn, remember that they can take advantage of FBT concessions to lower the amount of FBT they will need to pay. The concessions include exemptions for car parking in some instances, and work-related portable electronic devices. All this could mean more cash to invest in the revitalisation and ultimate success of small businesses. Even if a business was not considered to be a small business entity a few years ago, the turnover threshold has changed, and it may be worth a reassessment.
For small business employers, the car parking benefits provided to employees could be exempt if the parking is not provided in a commercial car park and the business satisfies the total income or the turnover test. This is the case if the business is not a government body, listed public company or a subsidiary of a listed public company.
The second exemption relates to work-related devices. Small businesses can to provide their employees with multiple work-related portable electronic devices that have substantially identical functions in the same FBT year, with all devices being exempt from FBT. Note, however, that this only applies to devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigations receivers and mobile phones.
What is a “small business entity”?
To be a small business entity, the business must satisfy the turnover threshold, which for the 2020–2021 FBT year (1 April 2020 to 31 March 2021) is $10 million. From 1 April 2021 (that is, the 2021–2022 FBT year onwards), the turnover threshold will increase to $50 million.
Therefore, to be a small business entity, the business in question must have had an aggregated turnover in the previous year of less than $10 million for the 2020–2021 FBT year, or $50 million for the 2021–2022 FBT year and onwards. There may also be other tests that the business can satisfy in place of the aggregate turnover test, depending on its circumstances.
When concessions are not available
Businesses that do not satisfy the small business entity tests will not be eligible for the car parking or work-related devices exemption. This means that, generally, the business/employer can only provide one work-related item in each category (ie if the items’ functions are substantially identical) to each employee, each FBT year (unless an additional item is a replacement).
Whether the items have substantially identical functions depends on the facts of each case. For example, the ATO considers that where a tablet can perform the functions of a laptop computer, even in reduced capacity, it has substantially identical functions to a laptop. Thus, either a laptop or a tablet may be provided to each employee for each FBT year, but not both.
As for car parking fringe benefits, where a business is not considered to be a small business or where it provides car parking to employees in a commercial car park, the business will not be exempt and will bear the extra administrative burden of having to work out whether it is liable for car parking fringe benefits, and if so, the amount of FBT it is liable for.
Where a business does not satisfy the definition of a small business entity in the current FBT year, this may be worth a revisit in the 2021–2022 FBT year when the threshold will have increased – the business may then be eligible to receive these FBT exemptions as well as other tax concessions.
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.