Archive for the ‘FBT’ Category

Issues for individuals

Thursday, July 5th, 2018

No more Budget repair levy
The Budget repair levy (2% of the part of your taxable income over $180,000) no longer applies in 2018. This means that the top marginal rate for 2018 (including the 2% Medicare levy) is 47%, as opposed to 49% in 2017. The FBT rate is also 47% for the 2018 FBT year.

Deduct work-related expenses
People overclaiming deductions for work-related expenses like vehicles, travel, internet and mobile phones and self-education are on the ATO’s hitlist this year. There are three main rules when it comes to work-related claims:
• You can only claim a deduction for money you have actually spent (and that your employer hasn’t reimbursed).
• The expense must be directly related to earning your work income.
• You must have a record to prove the expense.
Deductions are not allowed for private expenses (eg travel from home to work that’s not required to transport bulky equipment) or reimbursed expenses (eg for the cost of meals, accommodation and travel). And although you don’t need to include records like receipts with your tax return, the ATO can deny your claim – and penalties may apply – if you can’t produce the evidence when asked.
TIP: The ATO now uses real-time data to compare deductions across similar occupations and income brackets, so it can quickly identify higher-than-expected or unusual claims.

Superannuation contributions and changes
There have been a number of fundamental changes to the superannuation landscape for the 2018 income tax year, including changes to the caps for concessional contributions (now $25,000 for all taxpayers) and non-concessional contributions ($100,000, or $300,000 under the three-year bring forward rule) and the introduction of the general transfer balance cap and total super balance threshold (each currently $1.6 million).
Also from 2018, both employees and self-employed individuals can claim a tax deduction annually (maximum $25,000) for personal superannuation contributions, provided the superannuation fund has physically received the contribution by 30 June 2018 and the individual provides their superannuation fund with a “notice of intention to claim” document.

Issues for businesses

Thursday, July 5th, 2018

Lower company tax rates and imputation
Company tax rates are falling in Australia. Companies carrying on a business with turnover of less than $25 million will pay a rate of 27.5% in 2018 – the rate of 30% only applies if turnover is $25 million or more, or the company is not carrying on a business.
By 2027, the tax rate will reach a low of 25% for companies carrying on a business with turnover up to $50 million.
TIP: The dividend franking rate for 2018 may be different from a company’s tax rate, depending on whether turnover in 2017 was less than the current year’s turnover benchmark ($25 million for 2018).

Deductions for small business entities

Small business entities (companies, trusts, partnerships or sole traders with total turnover of less than $10 million) will qualify for a raft of tax concessions in the 2018 income tax year:
• the $20,000 instant asset write-off – an immediate deduction when buying and installing depreciating assets that cost less than $20,000.
• the simplified depreciation rules – accelerated depreciation rates of 15% or 30% for depreciable assets that cost $20,000 or more;
• the small business restructure rollover;
• an immediate deduction for start-up costs;
• an immediate deduction for certain prepaid expenses;
• the simplified trading stock rules – removing the need to do an end-of-year stocktake if stock value has changed by less than $5,000;
• the simplified PAYG rules – the ATO will calculate PAYG instalments;
• cash basis accounting for GST – the ATO will calculate the GST instalment payable and annual apportionment for input tax credits for acquisitions that are partly creditable;
• the FBT car parking exemption (from 1 April 2017); and
• the ability for employees to salary-sacrifice two identical portable electronic devices (from 1 April 2016).
These concessions are very powerful for small businesses, and can lead to substantial tax savings.

Small business CGT concessions
If you’re selling a business that has an aggregated turnover of less than $2 million (a “CGT small business entity”) or the value of its net CGT assets is $6 million or less (it satisfies the $6 million “net asset value” test), you may be able to access the small business CGT concessions.
These concessions include:
• a 15-year exemption – no CGT is payable;
• a 50% active asset reduction – a 50% CGT discount in addition to the 50% general discount;
• the retirement exemption – up to $500,000 lifetime tax-free limit; and
• the active asset rollover – minimum two years’ deferral.

Fringe benefits tax: employees’ private use of vehicles

Wednesday, January 31st, 2018

The ATO has issued guidance for employers on determining an employee’s private use of a vehicle.
Draft Practical Compliance Guideline PCG 2017/D14 should provide more certainty and transparency about the circumstances where the ATO won’t apply compliance resources to investigating whether private vehicle use meets the car-related FBT exemptions.
Eligible employers who rely on this guideline won’t need to keep records to prove that an employee’s private use of a vehicle is minor, infrequent and irregular.
TIP: The guideline includes specific eligibility conditions for employers and their employees’ vehicle use. Talk to us about whether the new guidance applies to your FBT circumstances.

Fringe benefits tax: should an Uber be treated as a taxi?

Friday, November 3rd, 2017

Earlier in 2017, the Federal Court ruled that UberX drivers must be registered for GST, because they supply “taxi travel”. There has been much discussion of this finding since, and the ATO is now examining whether Uber trips should be eligible for the “taxi travel” FBT exemption.

The FBT exemption, introduced in 1995, currently only applies to travel in a vehicle that is state or territory licensed to operate as a taxi. However, with the Federal Court’s decision on GST for Uber, and some recent state and territory moves towards licensing changes, the ATO has decided to review its interpretation of the definition of “taxi” in the FBT law.

TIP: Any benefit arising from taxi travel by an employee is exempt from FBT if the travel is a single trip that begins or ends at the employee’s workplace.

In a discussion paper open for comment until late October, the ATO has asked questions such as, “Should the FBT definition of ‘taxi’ be interpreted to include not just vehicles licensed to provide taxi services … [but also] ride-sourcing vehicles and other vehicles for hire?”

TIP: Any benefit arising from an employee’s taxi travel is also exempt from FBT if the travel is a result of the employee’s sickness or injury and the journey is between the employee’s workplace, residence and/or another place appropriate because of the sickness or injury.

Single Touch Payroll operative for early adopters

Monday, July 31st, 2017

Single Touch Payroll (STP) is here. It had a “soft” or voluntary start on 1 July 2017. From that date, employers may choose to report under STP. For those who qualify (ie employers with 20 or more employees), STP will be mandatory from 1 July 2018.
For employers with 19 or fewer employees on 1 April 2018, their reporting obligations will not change. They will not need to start reporting through STP from 1 July 2018, but may choose to start using a payroll solution to take advantage of the benefits of STP reporting.

Admin penalties of 75% for failing to lodge FBT returns

Wednesday, February 1st, 2017

The AAT has confirmed that 75% administrative penalties were rightfully imposed on several companies for their failure to lodge FBT returns over a four-
year period. The AAT found that the Commissioner of Taxation was obliged to impose a 75% administrative penalty because the FBT returns were not lodged,
and that the “safe harbour” provisions did not apply to such an administrative penalty.
The AAT also found that it was not appropriate to exercise its discretion to remit the penalties in part or whole under the circumstances. The AAT relied
on the criteria in Practice Statement Law Administration PS LA 2014/4 in arriving at its decision.

Potential changes to FBT concessions on salary packaged entertainment benefits

Tuesday, November 24th, 2015

The Bill proposes amendments to the law governing fringe benefits to introduce a separate grossed-up cap of $5,000 for salary sacrificed meal entertainment and entertainment facility leasing expenses for certain employees of not-for-profit organisations, and all use of these salary sacrificed benefits will become reportable. The changes are proposed to apply from 1 April 2016.

TIP: Note that organisations affected include public and not-for-profit hospitals, public ambulance services, public benevolent institutions (except hospitals) and health promotion charities. It may be prudent to discuss with your adviser as to whether the above changes apply to your circumstances.

Hunger relief organisation wins FBT exemption case

Thursday, August 14th, 2014

Hunger Project Australia (HPA) has been successful before the Full Federal Court in seeking endorsement as a “public benevolent institution” (PBI) for fringe benefit tax (FBT) purposes. This was despite the organisation being predominantly engaged in fundraising, and not providing aid or relief directly. As a result, the provision of benefits to one of its employees is to be taken to be exempt benefits for FBT purposes.

HPA is a member of a worldwide collaboration of organisations operating under the name “The Hunger Project” whose principal aim is the relief of hunger. The activities of HPA are to raise funds, which are then disseminated to Hunger Project members in the developing world.

The Commissioner argued that an entity that merely engages in fundraising activities and does not materially perform charitable works directly for the benefit of the public is not a PBI. The Full Court rejected the Commissioner’s arguments requiring a PBI to directly dispense relief. The fact that such an institution does not itself directly give or provide that relief, but does so via related or associated entities, is no bar to it being a PBI, the Court said.

Departure from private ruling results in FBT assessments

Tuesday, October 1st, 2013

The AAT has held that the Tax Commissioner was no longer bound by a private binding ruling that he had issued to a taxpayer company, because the taxpayer had implemented the scheme differently to the private ruling. As a result that the Commissioner was authorised to issue the taxpayer with fringe benefits tax (FBT) assessments for the relevant years.

Broadly, the private ruling provided that there would be no housing fringe benefit in relation to a home that was half-owned by the company (with the other half owned by a couple, who were also the directors of the company) on the basis that the business use of the home was 50%. However, the AAT considered that, in fact, less than 50% of the home had a “business use”, and therefore the private ruling was not longer binding.

Deductions for accommodation and food refused

Saturday, August 31st, 2013

An individual employed by a mining company at Port Hedland on a “fly-in fly-out” basis has been unsuccessful before the Federal Court in appealing an earlier decision that refused his deduction claim of $36,000 for accommodation and food against an allowance.

In the earlier decision, it was held that the allowance was properly characterised as a living-away-from-home allowance (LAFHA) under the fringe benefits tax (FBT) rules. As a result, it was subject to FBT in the hands of the taxpayer’s employer, and travel expenses could not therefore be claimed in relation to it. In affirming the earlier decision, the Court said the expenses in relation to accommodation, food and travel were not incurred by the taxpayer in the course of gaining or producing his assessable income. Rather, the expenditure arose from the taxpayer’s decision not live in Port Hedland and to instead travel to Port Hedland on a fly-in fly-out basis.


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