12 March 2020
With the 2020 Fringe benefits tax (FBT) Year End looming, we have put together this concise FBT summary guide to provide your business with:
- a brief overview of some the recent developments that may affect your 2020 FBT position
- an update on certain FBT areas the ATO is focusing on
The FBT rate for the 2020 FBT year (1 April 2019 to 31 March 2020) is 47%, which is equal to the top individual marginal tax rate of 45% and Medicare levy of 2%. Employers must pay FBT at this rate on the grossed-up taxable value of fringe benefits.
The table below sets out how to determine the grossed-up taxable value of fringe benefits:
Type 1 benefits: 2.0802
Type 1 benefits are referred to as ‘GST creditable benefits’. The type 1 gross-up rate is applied when the provider is entitled to claim any input tax credit for the fringe benefit provided.
Type 2 benefits: 1.8868
Type 2 benefits are those which the provider is not entitled to claim as an input tax credit for the fringe benefit provided. For example, a loan fringe benefit or the provision of overseas travel.
FBT return lodgement and payment dates
The table below sets out the various FBT due dates relevant for taxpayers who either prepare their FBT returns themselves or use tax agents to prepare their returns.
Type of taxpayer
When to lodge FBT return
When to pay FBT owing
Taxpayer who self-prepares FBT return or uses a tax agent to lodge FBT returns by paper
21 May 2020
21 May 2020
Taxpayer who uses tax agent to lodge FBT returns electronically
25 June 2020
28 May 2020
FBT updates that may affect you
1. Rewrite of Taxation Ruling on car parking
The ATO has released draft Taxation Ruling TR 2019/D5 Fringe benefits tax: car parking benefits to replace Taxation Ruling TR 96/26 which has been withdrawn.
For a car parking fringe benefit to arise, one condition is a commercial parking station must be located within a one-kilometre radius of the work car park.
The most significant development in TR 2019/D5 has been the interpretation of what the Commissioner constitutes a commercial parking station. The draft Ruling now provides a commercial parking station can include the following:
- Shopping centre
Previously, shopping centre car parks and other similar facilities such as hospital car parks were generally not considered to be commercial parking stations for FBT purposes.
This change of interpretation may have a significant impact for businesses that provide car parking spaces for their employees where FBT has historically not been paid.
If TR 2019/D5 is finalised in its current form, the changes will come into effect from 1 April 2021.
2. TR 2017/D6 Draft ruling on travel expenses
In 2017, the ATO released Taxation Ruling TR 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? providing guidance on whether an employee’s travel expenses, including transport and accommodation, would otherwise be deductible for income tax and FBT purposes.
The ATO acknowledged it tried to cover too many issues in TR 2017/D6.
Draft Taxation Ruling TR 2019/D7 Income tax: when are deductions allowed for employees' transport expenses? partially replaces TR 2017/D6 and sets out the ATO’s view on whether a transport expense would be considered deductible for income tax purposes, or otherwise deductible for FBT purposes. Generally, a transport expense will be deductible when the following occurs:
- The travel occurs on work time
- The travel occurs when the employee is under the direction of the employer
- The travel fits within the duties of employment
- The travel is relevant to the practical demands of carrying out the work duties
- The employer asks for the travel to be undertaken.
Separate rulings will be released by the ATO in draft form for consultation later this year. These will cover the deductibility of meals, accommodation and incidental expenses, which will also have FBT implications in respect of the otherwise deductible rule and when an employee is living away from home.
3. Taxi Travel Exemption
The FBT taxi travel exemption currently only applies to a vehicle that is licenced to operate as a taxi. The FBT exemption does not extend to ride-sharing vehicles.
However, the Treasury Law Amendment (2019 Measures No. 3) Bill 2019 has been introduced which proposes to amend the FBT provisions by extending the definition to include travel by way of a motor vehicle (other than a limousine) involving the transport of passengers for a fare (e.g. ride sharing arrangements).
If enacted as introduced, the exemption will apply to travel in ride-sharing vehicles from 1 April 2019.
4. Remote Area FBT Concessions
The Productivity Commission recently completed its review on the application of the FBT remote area concessions where it concluded the concessions were too generous.
However, the Government has announced it would not be actioning any recommendations made by the Productivity Commission and the FBT concessions will remain in their current form.
ATO FBT Focus Areas
1. Motor Vehicles
The ATO is data matching with external providers to identify employers who own motor vehicles but have not lodged FBT returns or have a discrepancy in the number of motor vehicles declared on their FBT return with the number of vehicles registered in their name.
A fringe benefit may be provided where a car is available for the employee’s use even if the car is not driven by the employee.
2. Exempt motor vehicles
There are exemptions available for certain vehicles (e.g. panel vans and utes) where private use is limited to:
- Travel between home and work
- Travel that is incidental to travel during employment duties
- Non-work-related use that is minor, infrequent and irregular.
There is no requirement to substantiate the FBT exemption for each individual vehicle. However, we recommend businesses have a policy in place that limits the private use of these vehicles for employees and that the business can demonstrate the use of the vehicle meets the eligibility criteria. As an example, this could be done by comparing the opening and closing odometer readings of the vehicle with the total distance you expect the employee to travel between home and work during that particular period.
3. Meal entertainment
The ATO is focusing on the provision of food and drink, accommodation and travel in connection with the provision of entertainment.
The main issues are the distinction between entertainment and sustenance, and the application of exemptions such as the minor benefits exemption. The ATO has acknowledged that employers may be uncertain what is considered to be infrequent and irregular, and what is a reasonable total value of associated benefits.
To help mitigate the uncertainty, the ATO is reviewing Taxation Ruling TR 2007/12 Fringe benefits tax: minor benefits to provide more practical examples to assist with the application of the minor benefits exemption.
4. Car Parking Valuations
The ATO has recently announced it may contact employers from February 2020 to ensure they have been correctly calculating the taxable value of car parking benefits.
We understand there may be certain providers who are not suitably qualified as valuers providing a daily car parking rate which is not reflective of the correct market value.
If the ATO contacts you regarding the FBT car parking rates applied in your FBT return, we would be pleased to assist you in addressing the ATO requirements.
For help managing your FBT risks and identifying FBT opportunities for you in the 2020 FBT year, contact the Findex Tax Advisory team who can seamlessly assist you to fulfil your FBT obligations by advising you on tax effective FBT solutions and assisting with the preparation and lodgement of your FBT return.