Key changes to your 2023 FBT return
14 April 2023
With the 2023 FBT return deadline approaching we have provided a summary of the latest key developments which may impact your business’ 2023 FBT return.
With effect from 1 July 2022, employers will not pay FBT on eligible electric cars and associated car expenses if all the following conditions are met:
The car is a zero or low emissions vehicle - A zero or low emissions vehicle is a battery electric vehicle, a hydrogen fuel cell electric vehicle, or a plug-in hybrid electric vehicle.
The exemption only applies to vehicles that are ‘cars’ for FBT purposes (i.e., designed to carry a load of less than one tonne and less than 9 passengers). Other types of electric vehicles such as electric motorcycles and scooters do not qualify for the FBT exemption.
The first time the car is both held and used is on or after 1 July 2022. The car can be held prior to 1 July 2022. However, the car’s first use must be on or after 1 July 2022. “Held” means owned, leased, or otherwise made available by another entity.
The car is used by a current employee or their associates (including family members).
No amount of luxury car tax was payable on the supply or importation of the car. This means that the value of the car at the first retail sale must be below the luxury car tax threshold for fuel efficient vehicles ($84,916 in 2022–23).
Where the above conditions are met, the FBT exemption will also extend to the associated car expenses for that vehicle (e.g., registration, insurance, repairs or maintenance, and fuel costs). Fuel costs include the cost of electricity to charge and run the vehicle.
To clarify, hybrid vehicles that are not plug-in hybrid electric vehicles are not covered by the FBT exemption.
The ATO has recently released a draft practical compliance guideline (Draft PCG 2023/D1) which sets out a cents-per-kilometre methodology to calculate the cost of electricity when an electric vehicle is charged at an employee's premises or at an individual's home.
Note that a home charging station is not a car expense associated with providing a car fringe benefit for electric cars. However, depending upon how an employer sets up a charging station for their employee, it may be a property fringe benefit or an expense payment fringe benefit.
Reportable Fringe Benefits
Importantly, although the private use of an eligible electric car is exempt from FBT, the value of the benefit must be included when working out whether an employee has a reportable fringe benefits amount (RFBA).
Employers must work out the notional taxable value of the benefits associated with the private use of the exempt electric car. An employee has an RFBA if the total taxable value of certain fringe benefits provided to them (or their associate) is more than $2,000 in an FBT year. The RFBA must be reported through Single Touch Payroll or on the employee’s payment summary.
The ATO has issued Taxation Ruling TR 2021/2 which has provided new guidance as to the interpretation of what the Commissioner constitutes a commercial parking station
With effect from 1 April 2022 car parking facilities that charge penalty rates higher than commercial rates are now considered to be commercial parking stations for FBT purposes.
This change of interpretation is significant because historically employers have been able to exclude car parking benefits from FBT where the only car parking facilities within a one-kilometre radius of the work car park were special purpose car parks, i.e. car parks that have a free period, or a low hourly rate but impose a penalty rate to discourage all-day parking (e.g. paid car parking at suburban shopping centres, universities and hospitals).
However, these types of special purpose car parks are no longer excluded from the definition of commercial parking station and must now be considered by employers for the purpose of assessing and calculating FBT liability for car parking.
If you are uncertain whether car parking provided may now be subject to FBT, contact us and we can provide an assessment as to whether FBT would apply from 1 April 2022.
Work from home Deductions
During COVID-19, the shortcut fixed rate per hour was 80 cents and taxpayers were required to keep a record of either:
The number of actual hours worked from home during the income year or
A continuous four-week period that represented their usual pattern of working at home.
Claims under the shortcut method during COVID-19 covered all running expenses and depreciation on assets used for work purposes at home.
This method has now been revised for the current income year (i.e., the year from 1 July 2022 to 30 June 2023) and future years. To claim the new 67 cents per hour rate in the current year, from 1 March 2023, taxpayers must retain:
One representative receipt, invoice or other written evidence for each type of additional expense incurred by the taxpayer each year in relation to working from home (e.g., electricity, gas, phone, internet, computer consumables and stationery)
A record of all hours worked from home. The ATO will no longer accept estimates or a 4-week representative diary.
There is no set format that the record of hours worked at home must take.
The records can be timesheets, rosters, logs of time spent accessing an employer or business system or a diary for the full year.
The new fixed rate does not cover depreciation on assets used when working from home, such as monitors, desks, chairs, etc. Deductions for these expenses must be claimed separately, based on documents indicating the asset’s cost and the proportion of work-related use.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the thought or position of Findex (Aust) Pty Ltd ABN 84 006 466 351.
This article contains general information and is not intended to constitute legal or taxation advice. If you need legal or taxation advice, we recommend you speak to a qualified adviser.