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FBT For UNSWAnne Harvey – Group Tax Manager,
Corporate FinanceEric McCallum, Lucy Lowe - Tax Team
Agenda
• What is FBT - Facts• Taxable Values • Calculating FBT• Exemptions and Reductions• Types of Benefits – Examples• Entertainment• Travel• Travelling v Living Away From Home• Visiting Academics• FBT Accounts• Common Errors• Reportable Fringe Benefits• Finance Website• Questions
Fringe Benefits Tax - Facts
• FBT year 1 April to 31 March• Tax Rate 47% (49% from 1 April 2015)• FBT calculated on Grossed Up Taxable Value• FBT paid by employer – UNSW• Includes benefits under a salary sacrifice arrangement• Reportable Fringe Benefit included on Payment Summary in June, if over
$2000 in employee benefits• FBT is tax on benefits (right, privilege, service or facility)
provided to employees & associates (relative, partner/ spouse, child) by an employer, associate of employer or under an arrangement with a
third party in respect of employment – reward for service
• “Employee” includes current, former and future employees
If pay Salary PAYG deduction Employee pays taxIf provide fringe benefit no PAYG deduction Employer pays tax
r Benefits Tax - Facts
FBT Calculated on Taxable Value
What is Taxable Value• Determined by the rules applying to each category of fringe benefit• Generally the cost of the benefit• Some benefits concessional tax, e.g. Motor Vehicles• Some reductions and exemptions provided in legislation
GST Impact• Taxable Value based on GST inclusive amount• FBT payable depends on whether entitlement to ITC credit • Can claim Input Tax Credit for GST paid
Important correct GST codes are used and GST amount is correct.
ring Benefits Tax - FactsType 1
Entitlement to ITC
Gross Up rate 2.0802
Taxable Value – incl GST $1000.00
* Gross Up rate 2.0802
Grossed up TV $2080.20
FBT rate 47%
FBT cost $977.69
ITC to claim $1000/11 = $90.91Total Cost $1000-90.91+977.69+102.83=$1989.61
Type 2 No entitlement to ITC
Gross Up rate 1.8868
Taxable Value - no GST $1000.00
* Gross Up rate 1.8868
Grossed up TV $1886.80
FBT rate 47%
FBT cost $886.80
No ITC to claimTotal Cost $1000+886.80+102.83=$1989.63
FBT Calculation
PRT = $1000 * 1.8868 * 5.45% (NSW PRT rate) = $102.83
Exemptions and Reductions in Legislation
Exemptions
• Work related item - portable electronic device – limit 1 per FBT year
• Protective clothing• Minor Benefit• < $300 – Infrequent and Irregular• Relocation – transport,
consultant• Employment Interview or
Selection• Airport lounge• Professional subscriptions• Child care or gym on business
premises• LSL awards - $1000/15 years +
$100/ additional year• Car parking• Shared accommodation for
family – no additional cost
Reductions
• Otherwise deductible with declaration - reduced by % of business use
• Relocation in employee’s car – cents/km, with declaration
• Full time education of children of Overseas employees (HR)
• Holiday transport overseas employee – 50% concession. Limit 1 trip/year
• Temporary accommodation on relocation – time limits and searching for accommodation
Examples of Benefits Incurring FBT
Current Policy allows for these Benefits
Be aware of FBT What can the Business Unit Control
Salary packaged Motor Vehicles - Employee pays FBT UNSW provided MV - limit personal
use
Permanent Residency – application, police & medical checks, lawyers fees where already in Australia Only exempt if to enter Australia on
relocation
Gifts, awards and prizes - $300 or more Try to structure to under $300, e.g. 2 @ $250
instead of 1 @ $500
Travel for family (excludes relocation) SSP – Limit to what Policy allows
Renewal of 457 Visa where already in Australia Only exempt if to enter Australia
Reimburse deferred HECS/HELP fees – this reimbursement of loan for employee not course fee Don’t reimburse if fees deferred
VC Child care support Furniture purchase in lieu of relocation transport/ relocation allowance Transport actual goods, not buy new
household goods
Write off Advance - Debt waiver Ensure advance acquitted promptly
Accommodation and meals – provided to tutors/employees – TKC/URC
Medical Insurance – inpatriates and expatriates
Outstanding Advance not acquitted within 6 months – Loan benefit with interest calculated Ensure advance acquitted promptly
Entertainment – tax exempt body Home phone/ internet – private use %. Only provide where large business use. Need
declaration from employee
Recreational entertainment Bowling Cruises Movie tickets
Dual purpose travel – business and private. FBT on 50% - private activity Identify upfront with employee paying 50% of
airfare
Travel Diaries Run Travel Tax Exception Report. Ensure obtained
ring Benefits Tax - Facts
• On premises – less likely entertainment
• Off premises – more likely entertainment
• Overtime – Sustenance
• Employee travelling –Sustenance
• After work - FBT
• How elaborate• Sit down meal – FBT• With alcohol - FBT
• Finger food – sustenance• Coffee - sustenance
• Social – entertainment FBT
• Complete working day in comfort – Sustenance
• CPD seminar - sustenance
Why What
WhereWhen
Entertainment v Sustenance
Sustenance (No FBT) Entertainment (FBT)
Sustenance
CoffeesMorning Teas
Overtime mealWorking lunch <$15-$20 head
Finger FoodSandwiches Fruit
Seminar nibbles snacks
ring Benefits Tax - Facts
Sustenance – no FBT(6611)
• Morning and afternoon tea for employees• Birthday cake – morning tea for
employees• Light lunches, sandwiches, finger food,
salad, juice, etc for employees• Light breakfast at training seminar –
incidental to seminar• Finger food and light refreshments (with
moderate alcohol) immediately after training or CPD seminar – incidental to seminar
• Meal at seminar that goes for over 4 hours
• Meal (with alcohol) while travelling on business – employee (7010,7110)
• Tea / coffee – employee• Overtime meal in office• Conference dinner – part of conference
Entertainment – FBT
• Social function, farewells• Party, Christmas party• Restaurant meals• Business lunch & drinks • Celebrations, Dinners• Spouse meal of employee travelling on
business• Non travelling employee (when dines
with travelling employee)• Morning, afternoon tea, light lunches –
associates• Leisure or amusement activities• Sporting activities, golf days• Gym membership, sporting club
memberships• Holiday• Theatre/movie ticket• Cruises• Team bonding without structured training
Business Purpose – no FBT
• Predominantly business undertaken• Considered Incidental to business – extra
day to acclimatise/ recovery day• Weekends during business period, e.g. 2
week business trip with weekend in middle• Day to prepare/ wrap up• Make Flight connections• Due to flight availability/ unavoidable delays• 1 day Stopover en route – no extra cost• Day between business meetings
Dual Purpose - FBT
• Travel to conference then take holiday• Holiday at same or different location• Book Annual Leave days in myUNSW and
not incidental to trip• Family accompanies• Travel Allowance/accommodation only for
business days• Frequency of trips• No restrictions on private travel
Private days more than 40% of total days
Options Flight cost split 50/50 between business
and private FBT on 50% private Employee pays 50% of airfare directly to
Travel Agent No benefit No FBT
Travel Benefits
Travel – What Days are Business and Private
Business Days
At least 2-3 hours of business in day
Unavoidable delays between business activities
Travel days to and from the business location
Travel recovery days at start or end of trip
Weekends or public holidays within business activities
Working from office or hotel where majority of day spent working
Travel Diaries
• Travel Diary - TR5 form• 6 or more nights away from home or trip not exclusively business• For Employees only, not required for students, visitors• Show Business activities undertaken, location• Show dates of activities, commencement time, duration• Attach to Serko booking under UNSW tab• If outside Serko, attach to Expense Claim, Travel Acquittal, Credit Card
reconciliations, retain in School • If No Travel Diary, FBT applies to all costs for trip. • No Travel Diary - Reminder emails, follow up in Serko
Travel > 5 nights
Complete Travel
Diary
Attach to Serko
booking
Travelling v LAFH
Short periods (ATO - 21 days)
Commercial style accommodation –
hotel, motelUnaccompanied
by familyMove from
location to locationMaintain home at previous location
Longer TermSet up new
homeLease Longer
term AccommodationAccompanied by
FamilyStay in one
place
Duration
Family
Nature of
Accommodation
Frequency of trips
Move around/ Fixed place
Travelling LAFH
ATO Travel Allowances
Within Income Tax legislation
Difference Tax Treatment Within FBT legislation
Living AllowancePay Living Allowance FBT legislation on LAFHA
Meet eligibility requirementsMeet Conditions
Does an Exemption apply
Requirements – Declarations, substantiationsLimits – Time and Dollar
No Exemption – FBT applies• F
BT is Additional cost if pay LA
• Alternatively Pay as Taxable Allowance - PAYG deductions
Living Allowance – Eligibility Requirements
from 8 May 2012• Required by employer/future employer to live away from normal residence in Australia
– Must be a home in Australia
• Employee or spouse have an ownership interest in normal residence in Australia. – Incur ongoing cost of maintaining residence, e.g. mortgage, rates, rental payments
• Maintain a home in Australia (at which they usually reside) which is available for their immediate use and enjoyment at all times while LAFH.
– Residence cannot be rented out or sublet while away– Residence can be left vacant or family continue to live there– Adult children living at home with parents specifically denied LAFH
• Expect to return to normal residence upon completion of job
• Eligibility based on exemption in FBT legislation
Living Allowance - Conditions
• LAFH concessions restricted to maximum period of 12 months– 12 months per location, per employee– If work location changes, 12 month period starts again, but distance between old and new
cannot be commutable– 12 month period can be paused if employee resumes living at usual residence, e.g. annual
leave• Employee to provide a LAFH declaration – each FBT year• Substantiate amount spent on accommodation
– Exempt from FBT actual expenditure incurred and substantiated, e.g. rental receipts, bank statements, credit card statements, statement from landlord. Excludes mortgage repayments
– Any allowance not spent on accommodation subject to FBT• Food and Drink can provide an allowance
– If not exceed ATO’s reasonable limits, no substantiation required– If exceeds ATO’s reasonable limit full amount must be substantiated
ATO sets reasonable F&D rates each FBT year. 1 April – 31 March. Rates based on location and family size.
Visiting Academics
Characteristics
• Currently employed by academic institution either interstate or overseas
• On Sabbatical leave and remunerated by existing employer
• Invited by UNSW to undertake array of activities and to observe and collaborate
• Visa limits on number of days to undertake academic or research activities (if from outside Australia)
Benefits Provided• Reimburse actual cost incurred –
airfares, accommodation, meals, incidentals
• Direct payment of expense - airfares, accommodation, meals
• Provide accommodation – stay in UNSW accommodation
• Pay allowance for living costs – accommodation, meals, other costs. Based on Travel Allowance rates and minimum salary band
• Must be reasonable: 2014/2015 Accommodation $185 per day Meals $102.55, Inc’al $18.70/day
Visiting Academics
Assessment
• Duration of Visit• Visa conditions• Payment for Living
Costs• Within Reasonable
Travel Allowance rates
• Double Tax Agreement with Visitors home country
• Supporting documentation
Tax Exemption
• Pay in AP• Traveller ≤ 90 days• DTA - Professor/
Teacher Article ≤ 2 years
• DTA - Independent Contractor Article –varying Time and Monetary limit
• Visitor assessed on payment in home country
No Tax Exemption
• Pay in HR• Visitor obtains TFN• PAYG withholding
depending on tax residency and tax free threshold
Professor Teacher Clause
Maximum 2 years
• Argentina• Belgium• China• Fiji• Germany• Hungary• India• Indonesia• Ireland
Independent Contractor
No time limit
• Austria• Canada• Denmark• Netherlands• Romania• Russia• Spain• Switzerland• Taipei• Vietnam
Visiting Academics – DTA exemption countries
• Italy• Korea• Malaysia• Netherlands• Philippines• Poland• Sweden• Thailand• Turkey
< 183 days
• Chile• Czech Republic• Malta (Max $12500)• Mexico• Slovakia• South Africa• Sri Lanka• United States of America
<90 days, Max $8000• Kiribati• PNG
Visiting Academics
Visits Up to 90 Days – Pay in AP
From Country with Professor/Teacher Article in DTAVisit up to 2 years. 18 Countries – Pay in AP
From Country with Independent Contractor Article in DTADuration varies by country – No time limit, <90 or 183 days. Some have monetary limits – Pay in AP
Other Countries, no DTA. DTA but Outside time and monetary limits. – Pay in HR
FBT Applicable Accounts in General Ledger
GL Account
645764596501661366196623662466266630
Description
EntertainmentEntertainment –
RecreationalUniforms FBT PayableStaff Exp Membership
FeesStaff Gifts & Awards
$300+Staff Exp –Recognition
AwardsStaff Exp - EducationStaff Exp – ChildcareStaff Expenses FBT
FBT Accrual A/c
66626687666366646687
-669266826687
If expenses charged to the GL account, FBT will be accrued at month end
Accrued FBT v Actual FBT
V
Common FBT Mistakes
• Benefits not charged to FBT applicable account• Gifts ≥ $300 per person, allocated to account < $300• Teaching awards treat as exempt, coded to non FBT account benefit to employee• Not include name of recipient of benefit (not required for meal entertainment) “Who was the
purchase for”• Reimburse deferred course fees – not payment for work course; payment of employee’s debt• Reimburse for additional 10% when no GST charged• Renew work visa and treat as exempt. ATO view: to continue to live and work in Australia• Permanent residency application when already in Australia and treat as exempt to live and
work in Australia• SSP airfares and split based on number of employees and family. Child airfares cheaper, may
only pay contribution to spouse airfare not full amount.• Coffees/Morning teas charged to entertainment account• Conference/workshop/seminar meals/overtime meal or while employee travelling charged to
entertainment account• Description not helpful to explain what expense for • Family accommodation in same room as employee, no extra cost – can exempt• Meals while employee travelling coded to Entertainment account
Reportable Fringe Benefits
Reportable Benefits Motor Vehicles LAFHA Expense Benefit Property Benefit Residual Benefit Housing Loans Debt waiver Recreational entertainment
Non Reportable Benefits Food & Drink/Meal Entertainment Hire/Lease entertainment facility (i.e.
corporate use/ exclusive use facility) Car Parking (UNSW exempt car parking)
Employee Receives More Than $2000 in RFB in year include Grossed Up value of benefits on Payment Summary at June
Employer
RFB Grossed Up using lower gross up rate 1.8868
Example:
4 family airfares @ $1500 = $6000
TV (no GST) $6000
FBT $6000*1.8868*47% = $5321
RFB $6000*1.8868 $11321
Employee
• Not included in assessable income
• Included for rebate and surcharge calculations
• Medicare levy surcharge• Super co-contributions• Child support obligations• HELP debt repayments• Dependent tax offsets• Income tested government benefits
Reportable Fringe Benefit – Payment Summary
Finance website - Taxation
Finance website - Taxation
Finance website - Taxation
Further Information and Questions
• Further Information– Finance website - Taxation
• Questions