Fringe benefits tax hall consulting ogasco abu dhabi

########

The Fringe Benefits Tax (FBT) rate is currently 49%. The rate increased from 47% on 1 April 2015 in conjunction with the introduction of the 2% debt tax on high-income earners (Temporary Budget Repair Levy). The FBT year that is just ending is the first year at the higher tax rate – which means if you have an FBT liability, you will pay more tax.

In the past, employees of FBT exempt and rebatable entities have been able to salary sacrifice an unlimited amount of meal entertainment expenses (e.g., restaurant meals) with no impact on their existing annual caps. But, this will all change on 1 April 2016. From this date, a separate single grossed-up cap of $5,000 for salary sacrificed meal entertainment benefits for employees of exempt and rebatable employers will apply.

To give you some idea of the impact let’s look at the example of a doctor employed by a public hospital who salary sacrifices $32,000 of meal entertainment benefits. If the doctor salary sacrificed these benefits in the 2015-16 FBT year, the full $32,000 would be exempt from FBT and he has nothing to report in his tax return. physics c electricity and magnetism If the doctor salary sacrifices these benefits in the 2016-17 FBT year, then the first $5,000 will not count towards their annual exemption cap. However, the balance will be taken into account in determining whether the employee exceeds their exemption cap for the year. gas x ultra strength during pregnancy If this excess amount causes the employee to exceed their annual exemption cap then an FBT liability will arise. The entire amount (including the first $5,000) will also be included in their reportable fringe benefits amount for the year, which could impact on their ability to satisfy other income based tests within the tax system.

With any salary sacrifice agreement just be aware that certain rules must be followed. For example, the appropriate documentation needs to be in place to ensure that the arrangement is ‘effective’. This means that the employee should agree in writing to forgo an amount of salary and wages before that entitlement has been earned. If it’s after, it’s not valid and the employee will simply be taxed on that amount. The business would also be liable for obligations such as PAYG withholding and superannuation guarantee amounts. 4. Two laptops are better than one for small business

If your business is a small business (turnover under $2m), from 1 April 2016 the FBT exemption on portable electronic devices will be extended. From this date, you can offer employees more than one work-related portable electronic device, such as a mobile phone, laptop and tablet and not have to pay FBT on it even if the device is the same or similar to other devices already provided in that same FBT year. h gas l gas unterschied All other businesses are limited to one device that is identical or similar to another. 5. Yoga or gym classes at the office?

Wondering what to do with that extra office space? Put in gym facilities for the team? Use a room for a yoga class or personal trainer perhaps? A recent ATO decision confirmed that the FBT implications of these two options are quite different. The reason is the definition of a “recreational facility.” A recreational facility is exactly that, a facility for recreation. Recreational facilities can be exempt from FBT if certain conditions can be met. However, a fitness class or a personal trainer is not a recreational facility and therefore, FBT would generally apply.

The FBT rate change is a by-product of the introduction of the 2% Debt Tax (Temporary Budget Repair Levy) on high income earners. The debt tax is payable at a rate of 2% on every dollar of a taxpayer’s annual taxable income over $180,000. In effect, the top marginal tax rate became 49% from 1 July 2014. gastroparesis The change to the FBT rate is to discourage high income earners from using the FBT system to lower their taxable income.

It’s essential that you review all salary sacrifice agreements. Providing employee benefits is more expensive and potentially less attractive now and over the next few years unless that cost is passed through to employees. And, in some cases, the salary sacrifice agreement may not achieve the intended goals and simply create an administrative burden for little to no benefit.

Living away from home allowances – reforms from 22 October 2012 severely limit access to FBT concessions for living away from home (LAFH) allowances particularly for non-residents. electricity history facts The reforms introduce a higher level of substantiation, limit the time the FBT concessions can apply to a LAFH to 12 months (in most cases), and dictate strict conditions such as maintaining a home in Australia for their personal use (no rentals). Special rules exist for fly-in-fly-out and drive-in-drive-out employees.

Salary sacrificing goods or services that your business provides – for many businesses, there was once a tangible financial benefit to packaging up goods or services they provide as part of the remuneration offered to employees. Retailers providing discounted clothes to employees and private schools discounting school fees for children of employees, are just two examples. On 22 October 2012, the FBT concessions that were previously available in this situation were removed.

Another issue that comes up is determining whether someone is living away from home, relocating or just travelling. The ATO is looking closely at Australian taxpayers claiming living away from home (LAFH) allowances to make sure they are not incorrectly accessing the FBT concessions. 9gag instagram logo If somebody is living in Sydney but travelling to Melbourne on an ad hoc basis every other week for work, they are simply travelling. They may be entitled to travel deductions but are not entitled to the FBT concessions that can apply to LAFHAs. If the person relocates temporarily to Melbourne, keeps their home in Sydney for their use (can’t be rented out), then it’s more likely they can access the living away from home allowance concessions. You need to double check to get the distinctions right.

The ATO has warned employers against complex structuring arrangements designed to channel benefits to employees using an employee remuneration trust. The most recent ATO alert looks at arrangements where the employer repays an employee’s loan through a trust. Under these arrangements, employees acquire units in a unit trust funded by a loan from the trustee. gas up the jet The loan is repaid by the employer using amounts salary sacrificed by employees. The result is that the taxable value of the benefit provided to the employee skirts the FBT system – a big no, no from the ATO’s point of view.

So why is this important? The distinction is important because under FBT law, an employee can for example, salary sacrifice one portable electronic device each year FBT free as long as that device is also used in their job. So, that means that as long as you use the device for your work (for example working from home), you can pay a lot less for that device than if you just walked into the shop and bought it. But wait there’s more. You can also salary sacrifice more than one electronic device each year as long as those devices have different functions. So, you could salary sacrifice a laptop and an iPad in the same year FBT free if the laptop and iPad had different functions.

If the statutory formula method had been scrapped, there would be an adverse effect on the taxable value of car fringe benefits where the car was mostly used for private use or the employee failed to keep an eligible log book. When using the statutory formula method, the taxable value of car fringe benefits is a flat 20% of the base value of the car, regardless of the distance travelled by the employee (note there are transitional rates in certain circumstances).

If somebody is living in Sydney but travelling to Melbourne every other week for work, they are simply travelling. They may be entitled to travel deductions but cannot claim an exempt LAFHA. If the person relocates temporarily to Melbourne, keeps their home in Sydney for their use (can’t be rented out), then it’s more likely they can claim a living away from home allowance. You need to double check to get the distinctions right.

It’s not all bad news on the FBT front – there are still some opportunities out there. national gas average 2007 One area we are often asked about is associate leases. An associate lease is where you salary sacrifice the car repayments for an associate’s car, for example your wife’s car. In effect, your spouse leases their car back to your employer for you to use. This arrangement does not have to be just for new cars, it can work well with existing cars. And, it works best when your spouse is on a lower tax bracket than you or is not earning an income.

Back in the 2012/2013 ‘mini Budget’ (the Mid Year Economic and Fiscal Outlook) the Government announced that they would scrap the concessional treatment that applied to in-house fringe benefits. The old treatment allowed employees to only recognise 75% of the lowest publicly available cost of the goods or services reduced by a further $1,000 in their salary sacrifice agreements.

The transition period for this change that allowed people with pre 22 October 2012 salary sacrifice agreements to keep receiving the concession, ends on 31 March 2014. If you are an employer with these agreements in place and you have not reviewed them, you need to do this quickly as it might significantly change the remuneration of your employee. If you are an employee receiving the concessional FBT treatment, you need to understand what the change will mean to you.