COVID-19 In The 2021 Fringe Benefits Tax Year

By Grace Wong

COVID-19 has affected many aspects of our daily lives however employers may not have thought about the impact on their fringe benefits tax (FBT) liability for the FBT year ended 31 March 2021.

FBT is a tax employers pay on certain benefits they provide directly or indirectly to their employees, including their employees’ family or other associates.

We have summarized below three common FBT exposure areas impacted by COVID-19.

1. Working from home office equipment

Many employers provided their employees with office equipment (e.g. desk, office chair or other equipment that is not a portable electronic device) to promote a smooth transition to working from home.

The FBT exposure depends on how the benefit was provided:

The key difference between (1) and (2) is that the employee returned or will return the equipment to the employer in (1) whereas in (2) the employee keeps the equipment.

Exemptions & Reductions

If an exemption or reduction applies to a fringe benefit, the taxable value of the benefit is reduced by the exempt amount or reduction amount.

If (1) applies, the employer may consider the section 47(3) exemption from the Fringe Benefits Tax Assessment Act 1986: regarding a residual benefit that consists of the use of property that is ordinarily located on business premises and used in connection with business operations. This exemption does not apply to (2) or (3).

For all scenarios above the employer may consider the minor benefits exemption or the otherwise deductible rule. However, under (2) and (3) these exemptions are limited due to:

• Minor benefits exemption – cost of the equipment must be less than $300 including GST (whereas under (1) the use of the asset must be equal to less than $300 including GST); and

• The Otherwise Deductible rule can only apply if the employee could have claimed an immediate tax deduction for the equipment (rather than depreciation over time) in their personal tax return

2. Cancelled staff functions

Due to COVID-19 some staff functions, for example end of financial year parties, did not go ahead as planned.

However, there is no FBT exposure in relation to non-refundable deposits for staff functions that were later cancelled as:

• the transaction was between the employer and the venue (not employees); and

• staff did not attend the event therefore no fringe benefit was provided.

Ordinarily entertainment expenses are non-deductible, and the associated GST non-claimable, unless the expense was subject to FBT. Unfortunately, non-refundable deposits for staff functions are still considered to be entertainment expenditure. This means employers cannot claim income tax deductions and GST credits for non-refundable deposits.

3. Employer-provided cars garaged at employees’ homes

When an employer-provided car is parked at an employee’s home, generally the car is considered to be available for private use. This constitutes a car fringe benefit.

The ATO have provided an exemption for cars garaged at employees’ homes due to COVID-19, provided the following conditions are satisfied:

• the operating cost (logbook) method is used to value car fringe benefits;

• the employer must elect in writing to use this method (rather than the default statutory method);

• the car must have been garaged at the employee’s home during the FBT year; and

• while the car was garaged at home, it was not driven or it was driven briefly only to maintain the car.

Applying the exemption will result in the number of days available for private use being reduced and therefore a lower taxable fringe benefit for the employer.

Meet The Staff – Nikki White

Nikki began working at Harris Black in 1998, before leaving to work in London for a year and later returning to Harris Black as a Manager. More recently, Nikki has been appointed as a Principal and shareholder of Harris Black. Nikki holds a Bachelor of Business (Accounting) and is a member of the Chartered Accountants Australia and New Zealand.

Some interesting facts about Nikki – without preparation, Nikki could give a 40 minute presentation on Hollywood movies/actors/gossip but if she could share a meal with any 4 individuals, she would choose Queen Elizabeth, Turia Pitt, James Reyne and her grandfathers.  If money was no object, Nikki would train, eat well and work towards travelling the world sightseeing and competing in triathlons in exotic locations.

An excerpt of the interview with Nikki is below:

Loss Carry Back Measures – 2021 & 2022

A temporary tax relief allows eligible companies, with an aggregated turnover of less than $5 billion, to carry back tax losses incurred in the 2020, 2021 or 2022 financial years, to be used against profits taxed in a previous year, 2019 or later.

These companies will receive a refundable tax offset in the year they made a loss, if they elect to use this mechanism when they lodge their 2020-21 or 2021-22 tax return. The losses carried back must not be more than earlier taxed profits and must not result in a franking account deficit.

Any tax losses that are not fully offset against previous taxed profits, or not elected to be used, will be carried forward as normal.  Companies can elect the amount that they wish to carry back.

Reminder – Taxable Payments Annual Report (TPAR)

If your business makes payments to contractors or subcontractors you may need to lodge a Taxable Payments Annual Report (TPAR) by 28 August each year.

You need to report payments made to contractors for certain services including:

• building and construction services
• cleaning services
• courier services
• road freight services
• IT services
• security, investigation or surveillance services

Important Tax Dates

30 April 2021
• Lodge TFN report closely held trusts if any beneficiary quoted their TFN to a trustee in quarter 3, 2020-2021.

15 May 2021
• Lodge 2020 tax returns for all entities that did not have to lodge earlier (including all remaining consolidated groups), and are not eligible for the 5 June concession.

26 May 2021
• Lodge and pay eligible quarter 3, 2020–21 activity statements if you or your client have elected to receive and lodge electronically.

28 May 2021
• Lodge and pay quarter 3, 2020–21 Superannuation guarantee charge statement – quarterly (NAT 9599) if the employer did not pay enough contributions on time.

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