What is FBT
Anne Harvey – Group Tax Manager, Corporate Finance
Objectives
• What is FBT• What does Taxable Value mean• How is FBT calculated• Types of benefits which attract FBT• When is FBT charged• Update on LAFHA Reforms• Understand Reportable Fringe Benefits
Fringe Benefits Tax - Facts
FBT year 1 April to 31 MarchTax Rate 46.5% - Calculated on Grossed Up Taxable ValueFBT paid by employer – UNSWIncludes benefits under a salary sacrifice arrangementReportable Fringe Benefit included on Payment Summary in June, if >
$2000
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
FBT Calculated on Taxable Value
What is Taxable ValueDetermined by the rules applying to each category of fringe
benefitGenerally the cost of the benefitSome benefits concessional tax, e.g. Motor VehiclesSome 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.
Type 1 Entitlement to ITC
Gross Up rate 2.0647
Taxable Value – incl GST $1000.00* Gross Up rate 2.0647Grossed up TV
$2064.70FBT rate 46.5%FBT cost $960.09
Type 2
No entitlement to ITC
Gross Up rate 1.8692
Taxable Value - no GST $1000.00
* Gross Up rate 1.8692
Grossed up TV $1869.20
FBT rate 46.5%
FBT cost $869.18
FBT Calculation
PRT = $1000 * 1.8692 * 5.45% (NSW PRT rate) = $101.87
UNSW applicable
• Car – available for private use• Expense
reimburse expense to employee pay third party for expense
incurred by employee• Property
Provide free or discounted property• Debt waiver – forgive employee’s debt• Loan - charge no or low interest • Housing - right to use accommodation
and usual place of residence• Living Away From Home Allowance• Residual – not fit a specific category• Tax-exempt body entertainment
Non UNSW
• Car Parking – at or near work and commercial parking station within 1km that charges fee for all day parking which above threshold. (Exemption for Educational Institution in legislation)
• Entertainment (Tax-exempt body entertainment applies)
• Airline transport - airline employees/ travel agents; free or discounted stand by travel
• Board – accommodation and entitlement to 2+ meals a day. Remote construction, oil rig, resident teacher at boarding school.
Types of Fringe Benefits
• Salary packaged Motor Vehicles or UNSW provided – personal use. • Medical Insurance - inpatriates• Permanent Residency – application, police & medical checks, lawyers fees
(Exempt if to enter Australia on relocation)• Gifts, awards and prizes - $300 or more• Travel for family – SSP, accompany employee on business (exclude
relocation)• VC Child care support• Furniture purchase in lieu of relocation transport/ relocation allowance• Kensington College accommodation and meals – provided to
tutors/employees• Reimburse deferred HECS/HELP fees• Write off Advance - Debt waiver• Outstanding Advance not acquitted within 6 months – Loan• Home phone/ internet – private %• Dual purpose travel – business and private• Entertainment – tax exempt body
Examples of Benefits Incurring FBT
Benefit
1. Home internet, home telephone, faxGenerally charged to 6649/6630
2. Course fees – Masters, postgraduate (not short courses)
3. Tax return preparation
4. Where would be entitled to Income Tax deduction if incurred expense
Declaration
1. FBT 12/14. Reduction for business use %
2. FBT 21. Directly related to current job and entitled to income tax deduction.
3. FBT 21. Income Tax deductible
4. FBT 21. Income tax deductible
Reduction or Exemption with Declaration
• Work related item – portable electronic device. Laptop, portable printer, mobile phone, electronic diary, PDA. Limit 1 item per FBT year – same function
• Minor benefit < $300 provided infrequently & irregularly (not for entertainment)
• Professional memberships• LSL awards $1000 for 15 yrs,
+$100 each additional year• Otherwise deductible
• Relocation transport• Relocation consultant• Temporary accommodation
on relocation (limits)• Sale/purchase new home –
relocation (conditions)• Removals and storage
household goods (within 12 months)
Reduction or Exemption within legislation
Entertainment v Sustenance
Entertainment – FBT
• Social function, farewell• 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
Sustenance – no FBT
• 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
• Tea / coffee – employee• Overtime meal in office
Business Purpose
• Predominantly business undertaken
• Considered Incidental to business – extra day to acclimatise
• Weekends during business period, e.g. 2 week business trip
• Day to prepare/ wrap up• Make Flight connections• Due to flight availability/ delays• 1 day Stopover en route – no
extra cost• Day between business meeting
Dual Purpose
• Travel to conference then holiday• Holiday at same or different location• Book Annual Leave days in myUNSW• Family accompanies• Private portion 40% or more of total
days• Travel Allowance only for business days• Frequency of trips• No restrictions on private travel
Flight cost split 50/50 between business and private FBT on 50% private
If employee pays 50% of airfare directly to Travel Agent No benefit No FBT
Travel Benefits
Currently
• FBTAA provides concessional taxation to LAFH benefits
• LAFHA is compensation for additional expenses & disadvantages suffered due to employee being required to live away from usual place of residence in order to perform employment duties
• Required by employer to move• Temporary period – fixed term
contract• Intention to return to live at former
locality• Employee provides a LAFHA
declaration each FBT year
Tax Implications
• Employee Salary Sacrifices for Rent and F&D
• Managed by HR through Payroll• Rent – No PAYG, No FBT • F&D – No PAYG, No FBT on exempt
statutory amount (i.e. >$42pw per adult up to ATO rate)
• No Payroll Tax - Exempt Fringe Benefit
• LAFHA not subject to SGC• No Workers Compensation -
Exempt Fringe Benefit
Living Away From Home
Living Away From Home Reforms Background
• 2010 - ATO started to take stricter view on LAFHA in Private Rulings issued• Mid 2011 – ATO sent review letters to some organisations requesting information • Mid 2011 – ATO audit letters• 29 November 2011 – Treasury released Consultation paper on proposed LAFHA
reforms• 3 February 2012 – Submissions due on Consultation paper• UNSW as part of Go8 made submission to Treasury outlining significant impacts of
reforms• Large number of Accounting bodies and other organisations also made submissions• Late 2011 – HR advised Faculties to be aware of changes in recruitment discussions• February 2012 – HR arranged for PwC to provide information session to LAFHA
recipients• 8 May 2012 – in Federal Budget further details released on proposed reforms –
expected start date 1 July 2012• Exposure Draft and Explanatory Materials released• 28 June 2012 – Bill introduced to winter sitting of Parliament• Bill not yet been passed – new start date 1 October 2012
Living Away From Home Reforms
• Treat LAFHA as part of employee’s assessable income
• Allow an Income Tax deduction to employees eligible for LAFHA For reasonable expenses
incurred and substantiated for accommodation
For food beyond statutory amount. If exceed specified amount, substantiate full expense
Maximum period of 12 months
Retain written evidence for 5 years
Eligibility
• Required by employer to live away from Australian residence
• Maintain a home in Australia• Ownership interest in home• Home which living away from
must be available for their personal use and enjoyment at all times
• Cannot be rented out or sublet• Expectation to return to live at
former residence
Living Away from Home Proposed Reforms
Who impacted
• Fixed term employees from Overseas - no longer eligible for LAFHA from 1 Oct 2012
• Domestic employees on LAFHA if change to contract
• Visiting Academics Living Allowance – from 1 Oct 2012 no longer exempt from FBT as not living away from Australian residence
• SSP – accommodation or living expense paid/reimbursed – from 1 Oct 2012 only exempt if satisfy proposed LAFHA rules
Tax Implications
• Employee - Overseas employee now taxable salary from 1 October 2012
• Employer Additional Payroll Tax - no longer
LAFHA Additional Workers Compensation Additional SGC
• Employer subject to FBT on LAFHA benefits provided to employees not eligible to claim income tax deduction
• Employer subject to FBT on F&D for employees eligible for LAFHA on first $42 per week per adult, $21pw per child
Living Away From Home Reforms
If expenses charged to the GL account, FBT will be accrued at month end
Accrued FBT v Actual FBT
V
Reportable Fringe Benefits
• Reportable Benefits Motor Vehicles LAFHA Expense Benefit Property Benefit Residual Benefit Housing Loans Debt waiver Recreational entertainment
• Non Reportable Benefits
F&D Entertainment Hire/Lease entertainment
facility (i.e. corporate use/ exclusive use facility)
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 1.8692
Example: 4 family airfares @ $1500 = $6000TV (no GST) $6000FBT $6000*1.8692*46.5% = $5215
RFB $6000*1.8692 $11215
Employee• Not included in assessable
income • Included for rebate and
surcharge calculations• Medicare levy surcharge• Super co-contributions• Child support obligations• HELP repayments• Dependent tax offsets• Income tested government
benefits
Reportable Fringe Benefit – Payment Summary
Questions
Further Information
Finance website: http://www.fin.unsw.edu.au/PoliciesProcedures/AccountingManual/FBT.html
Contact: Anne Harvey - Ext 51635. Email: [email protected]
Eric McCallum – Ext 52825, Lucy Lowe – Ext 51204