Your one stop guide to FBT year end for 2022
Are you prepared for FBT year end this March 31? On top of a continually shifting landscape that has been reshaping how employees draw down on benefits, there are also new FBT changes to contend with. Our guide covers all the key areas you need to be across to maximise your FBT return.
2021/22 has been another big year for employers, employees, and the broader community. COVID-19 continues to impact a range of FBT areas, with employers required to be across the latest FBT exemptions including the purchase and provision of RATS. Isolation and WFH requirements have added another layer of complexity as many work patterns and behaviours changed, including split teams, increasing home garaging of work cars, and new driving patterns. For 2021/22 it’s important to ensure you are across all the relevant requirements when preparing your FBT return.
To minimise your liability and assist in preparing for FBT year end on March 31, we have outlined some of the items you need to consider when determining a potential FBT liability:
1. Motor Vehicles
- Discuss with us your method of valuing car benefits.
- Ensure logbooks are still valid and not more than 5 years old.
- Record your odometer at 31 March 2022.
- Record the total number of days when the vehicle was unavailable to an employee.
- Ensure your car expenses are up to date and records are kept.
- Ensure employee contribution records are up to date.
- For exempt work vehicles, review whether non-work related use is minor, infrequent and irregular.
- If there is a change in car use due to COVID-19 – please ensure you take note of this. Whilst existing logbooks may still be valid, consider whether an adjusted business use percentage should be calculated or a new logbook kept which is representative of usage throughout the year.
2. Entertainment Expenses
- You will need details of client versus non-client entertainment.
- Discuss with us your method of calculation (i.e 50/50 or actual method).
- Determine which employees receive frequent versus infrequent benefits.
- Record any employee contributions.
- Understand what is or isn’t entertainment for FBT purposes and what is tax deductible. If entertainment expenses have reduced due to COVID-19, consider if the actual method will result in a more favourable outcome than the 50/50 method due to the ‘minor benefits exemption’.
3. Telephones, Mobiles and Internet
- Obtain an employee declaration on the percentage of business use, supporting documents and basis of calculation.
- Check allowances or expense reimbursement details for phones.
4. Local and Overseas Travel
- Update your diary with travel dates and details.
- Any accompanying partners? Did work travel turn into personal travel?
- The Australian Taxation Office (ATO) have issued taxation ruling TR 2021/1 and TR 2021/4 which outlines when employee transport and travel expenses are considered to be ‘otherwise deductible’. Please contact us for clarification.
5. Loan Fringe Benefits
- The ‘otherwise deductible rule’ will only apply for interest-free loans if made to the employee personally not an associate.
- Where this does not apply, interest should be charged at the benchmark interest rate of 4.52% for the 2022 FBT year and paid every six months.
FBT and employment conditions
Ensure if your policies or employment contracts issued to staff cover your potential FBT liabilities. What about airport lounge memberships? Travel for potential employees to attend an interview? Subscriptions to trade and professional journals? FBT rules often change year upon year.
Import things to note in your preparations:
- The fringe benefits tax rate for the 2022 FBT year is 47%.
- The ATO are focusing on small business and individual work related claims generally.
- The benefit for ‘taxi travel’ between home and work is exempt from FBT under a specific provision of the FBT Act and includes ride sharing services such as Uber.
- Remember to obtain all required employee declarations and log books to support the claim for a reduction in FBT.
- FBT on meal entertainment is unable to be calculated using the 50/50 split and 12 week register methods if meal entertainment is provided to an employee under a salary packaging arrangement.
- Emergency benefits assistance, such as relating to COVID-19 may be considered exempt benefits.
- The ATO has finalised taxation ruling TR 2021/2 which increases the scope of what can be considered a car parking benefit for FBT purposes. However these new rules will apply for car parking benefits provided on or after 1 April 2022.
- Entities with a turnover of less than $50 million may be eligible for car parking exemption from 1 April 2021 (previously a $10 million threshold).
- You will be required to add any reportable grossed-up value for individual employees into your payroll system.
If you have a tax agent, both lodgement and payment is due on 25 June 2022.
If you don’t lodge with a tax agent, you need to lodge and pay by 21 May 2022.
If you expect there will be delays in completing your fringe benefits tax returns, for example due to COVID-19, we can apply to the ATO for an extension on your behalf.
We will contact our clients to offer assistance in the preparation of the fringe benefits tax return over the coming weeks.
If you have any questions in the meantime, regarding FBT or the numerous State and/or Federal subsidies, exemptions and payments now available, please call us on (08) 9327 1777, or contact us via email.