While it might not be the season, FBT joins “Justified Trust” on the ATO’s transparency and tax reform agenda. Here are five important changes to be aware of when it comes to FBT this year:
- Increased tax rates. The FBT rate rose from 47 to 49 per cent in the FBT years ending in 2016 and 2017. In 2018, the rate will drop back to 47 per cent.
- Not-for-profit changes. There is now a $5,000 cap on top of the existing exemption caps for salary-packaged meal entertainment and entertainment facility leasing expenses for certain employees. The new caps require expenses to be reported in the FBT return for this year.
- New standards. Employers must now use a specific reporting method when submitting tax returns. The “concessional valuation rules” have been changed. For the current FBT year, employers can’t use either the 50/50 split method or the 12-week register methods for valuing salary packaged entertainment.
- No tax for devices. Small businesses can now avoid incurring a tax liability if they provide employees with multiple portable electronic devices that have substantially similar functions. This is particularly relevant to businesses that may need to provide employees with devices such as laptops, tablets, GPS navigation devices, and mobile phones. Previously, small business employers were taxed if they provided two devices that had a significantly identical function; a problem because most modern smartphones can perform similar or identical functions to laptops and tablets. As long as the multiple devices are primarily used for work, businesses can claim them on FBT for the first time this year.
- Three-year reporting requirements. The period of an amendment return is three years, but the ATO can extend that period if it deems it necessary, particularly if it believes an entity is involved in fraud or tax evasion. This year, employers who receive employee contributions that offset FBT must be registered and begin lodging their FBT returns showing the employee returns. This means businesses need to ensure records are kept for an appropriate amount of time.
And the reforms are not stopping there – travel and living away from home expenses are targeted in Draft Tax Ruling 2017/D6 Income tax and fringe benefits tax: when are deductions allowed for employees’ travel expenses? (TR 2017/D6). The ATO is accepting submissions on the draft ruling until 11 August 2017.
For the latest analysis of FBT and tax transparency reforms, see our Weekly Tax Bulletin.