2018/2019 Salary Packaging & FBT

Transcription

1 Paul Mather 2018/2019 Salary Packaging & FBT FBT Return Outsource FBT Compliance Risk Review FBT Advisory and Consulting FBT Query Service FBT & Salary Packaging Training Car Parking FBT Valuation Logbook Solutions Salary Packaging Solutions

2 Our Core Services FBT Return Outsource Removing the annual FBT Return reporting burden so you can focus on what you do best. FBT Compliance Risk Review Are you paying too much FBT or too little? A risk review will identify risk areas and workable solutions. FBT Advisory and Consulting When you need advice on an FBT issue or require a strategy for implementing benefits. FBT Query Service Responding to your day to day queries in a timely fashion with practical advice. FBT & Salary Packaging Training Training on all aspects of FBT or Salary Packaging. Face-to-face, inhouse and webinar. Car Parking FBT Valuation Ensuring your compliant whilst minimising your FBT liability. Strategies to reduce the compliance burden. Logbook Solutions Helping employers to manage FBT costs on cars, car parking and fleet. Salary Packaging Solutions Outsourced salary packaging for all employers to meet employee needs.

3 Questions Rule for today.. : All questions are good questions, but only if you ask them! Happy to receive questions later! paul.mather@fbtsolutions.com.au

4 FBT Refresher Employer tax & multiple employer types with different rules FBT liability rests with employer Third party arrangement rules Employee = employee + spouse + family members Tax on non-cash fringe benefits and certain allowances (LAFHA) Annual FBT return 31 March year end FBT grouping provisions do not exist 13 benefit categories Multiple valuation methodologies, concessions, reductions, exemptions Understanding FBT

5 FBT Refresher Type 1 benefits GST charged (cars, car parking, entertainment, gifts) Type 2 benefits no GST charged (loans, health insurance, gift vouchers) Type 1 = $100 x x 47% = $98 FBT less GST of $9 = $89 NET Type 2 = $100 x x 47% = $89 FBT Tax on Tax - benefits valued on a GST & LCT inclusive basis Reporting on employee payment summaries ($2,000 threshold) gross up Interaction with other taxes: Income Tax, GST, Payroll Tax + Workcover Remuneration reporting Understanding FBT

6 Payroll & FBT A match made in heaven? Not quite, but..we do need to be good friends We help people We don t always see eye to eye Payroll is dedicated / FBT more part-time or third party Why do organisations outsource FBT time, resources, expertise? Salary Packaging connection You say deduction, we say otherwise deductible You say cash, we say non-cash You say award/s, we say awards, as in FBT exemptions for Long Service Awards and Safety Awards You say earnings, we say provided Taxing point can be deferred in FBT Understanding FBT

7 FBT and Payroll = Friends We need each other We support each other FBT needs Employee details including ID, Names and State, Salary Packaging data Payroll needs RFBA s, fringe benefit Payroll Tax amounts, FBT on Salary Packaging Understanding FBT

8 Paul Mather What can go wrong? FBT Return Outsource FBT Compliance Risk Review FBT Advisory and Consulting FBT Query Service FBT & Salary Packaging Training Car Parking FBT Valuation Logbook Solutions Salary Packaging Solutions

9 Recent focus on Payroll / Awards A number of recent cases / controversies have highlighted underpayments What about FBT & Salary Packaging? FBT doesn t have the same level of scrutiny from a regulatory perspective, and often is not a top priority within organisations. Salary packaging is essentially unregulated. Understanding FBT

10 Agenda: FBT & Salary Packaging What can go wrong with FBT & Salary Packaging? A lot FBT Failure to register / lodge or overlooking benefits Motor Vehicles Car Parking Entertainment Relocations / LAFH Travel RFBA obligations Salary Packaging Failure to understand the FBT rules Lack of policy & process Not managing the caps Claiming MV exemption Use of Logbook method Remote Area Failure to offer or limited Understanding FBT

11 What can go wrong? Failure to register for FBT / failure to lodge FBT returns ATO focus area By not lodging, unlimited ATO audit time Organisations often say we don t claim FBT or we don t provide benefits or we don t claim tax deductions for the benefits we provide or they don t think they have an FBT obligation Understanding FBT

12 2018/2019 FBT Update Motor Vehicles The biggest issue in FBT

13 What can go wrong? Motor Vehicles ATO focus area Failure to recognise private usage on Utility type vehicles Incomplete or missing logbooks Understanding FBT

14 What can go wrong? Motor Vehicles are their any FBT exemptions? A panel van or utility truck designed to carry a load of < 1 tonne, or Any other road vehicle designed to carry a load of < 1 tonne and not principally designed to carry passengers is an exempt car IF: private use is limited to home to work travel, and other private travel is minor, infrequent or irregular. Once private travel is more than minor, infrequent or irregular, the car is subject to FBT in the usual way ATO take a very narrow view on the definition of minor, infrequent or irregular, consider a logbook Understanding FBT

15 What can go wrong? Tool of Trade and Work Related Vehicles ATO shines the spotlight on FBT & Utility Vehicles Practical Compliance Guideline PCG 2018/3 Exempt car and residual benefits: compliance approach to determining private use of vehicles was released in final by the ATO on 11 July The much anticipated PCG on exempt vehicles and determining private use has been released by the ATO. Without doubt, the PCG shines a strong spotlight on the FBT obligations and potential risk for work related and tool of trade vehicles (Eligible Vehicles) including vans, panel vans, utilities, single cabs and dual cabs. Understanding FBT

16 What can go wrong? Motor Vehicles that may be eligible for exemption Panel van solid rigid-bodied, non-articulated car, smaller than a truck Single cab ute Dual cab ute different from conventional goods vehicles with extra seats behind the driver and front passenger. Share a common chassis which can fit a single or dual passenger cab and alternate tray section Four-wheel drive vehicle (other than utilities and dual cabs) qualify for the work-related use exemption if they are: designed to carry a load of one tonne or more, or designed to carry more than eight passengers, or not designed for the principal purpose of carrying passengers. Modified vehicle qualify for the work-related use exemption if, for the entire FBT year when the car is provided, a modification or alteration permanently affects the inherent design of the vehicle (eg: hearses). Other road vehicles qualify for the work-related used exemption if they are designed to carry a load of one tonne or more, or more than eight passengers. Understanding FBT

17 What can go wrong? Motor Vehicles ATO shines the spotlight on FBT & Utility Vehicles Paragraph 6 In order to rely on the PCG, the following criteria apply: a) the employer provides an eligible vehicle to a current employee b) the vehicle is provided to the employee to perform their work duties c) the employer takes all reasonable steps to limit private use of the vehicle and have measures in place to monitor such use d) the vehicle had a GST-inclusive value less than the luxury car tax threshold ($66,331 or $75,526 for fuel efficient vehicles) e) the vehicle is not provided as part of a salary packaging or remuneration arrangement, and Understanding FBT

18 What can go wrong? Motor Vehicles ATO shines the spotlight on FBT & Utility Vehicles Paragraph 6 Travel criteria: I. travel between their home and their place of work and any diversion adds no more than two kilometres to the ordinary length of each trip II. no more than 1,000 kilometres in total for each FBT year for multiple journeys taken for a wholly private purpose, and III. no single, return journey for a wholly private purpose exceeds 200 kilometres. Understanding FBT

19 What can go wrong? Motor Vehicles Claiming the exemption Onus of proof is on the employer, not the employee Does the vehicle meet the requirements for exemption? Has there been any private use? How has the private use been measured? What records are available to prove private use? What policy is in place? Is it available and current? Is the employee prohibited from using the vehicle privately? Employers will need to consider in detail for FBT 2019 Understanding FBT

20 What can go wrong Logbooks Show me the logbook! Locating logbooks in May is a problem Incomplete Handwritten Logbooks are an important document to access the FBT concession Lack of detail Work / Business A novated lease agreement or lease quote, calculation of FBT for salary packaging, an , a promise these are not acceptable reasons to accept a business use % without the underlying documentation Understanding FBT

21 2018/2019 FBT Update Car Parking - The too much & too little FBT issue

22 What can go wrong Car Parking ATO focus area on valuation Location, location, location who knows all of the locations? In-house assessments and valuations FBT liability assessment determined with reference to 1 April 2018, not in May 2019 Is it a car parking benefit? (or could it be a reimbursement) Counting the benefits - usage Records? Usage register / boom gate records Default = 228 days Can t estimate Based on full year Understanding FBT

23 Car Parking & FBT Two recent war stories In both cases Head Office not aware of business locations or employee car parking facilities a) 18 business locations on company website I. Historically 2 locations considered for FBT II. 16 locations were taxable for FBT 2016 III. Changing the flawed logic / outdated thinking b) Over 50 business locations on company website I. Historically 2 locations considered for FBT II. III. 12 locations surveyed for 2016, 9 were taxable Risk that other locations are taxable Understanding FBT

24 Car Parking & FBT Two recent WIN stories a) 2 business locations (Melbourne & Brisbane) a) Both locations treated as taxable going back to 2012 b) We undertook a survey to identify lowest daily rates for each year c) Rates were $7 - $13 overstated across an average of 60 spaces d) Refund of over $800k + interest b) 2 business locations (Sydney & Melbourne) a) Both locations treated as taxable going back to 2013 b) We undertook a survey to determine if a FBT liability existed c) Sydney location was not taxable d) A full refund available for Sydney parking e) Refund of over $580k + interest Understanding FBT

25 2018/2019 FBT Update Entertainment the most challenging FBT issue

26 The Hostplus Case Study I wish I didn t have to do it : Hostplus chief defends wining and dining at Australian Open Industry super fund Hostplus spent $267,000 on entertainment for clients and staff and $220,300 on accommodation in the year to June 2017, the banking royal commission has heard. The fund also spent $260,000 on tickets to the Australian Open tennis, where Hostplus CEO David Elia said his wife and two children were among his guests. Another $40,000 was spent on football tickets at Melbourne s Etihad Stadium, with some of the sports-related spending covered by the fund s marketing budget. Understanding FBT

27 The Hostplus Case Study What are the challenges for Hostplus? analyse the $267,000 spent on entertainment for clients and staff and $220,300 on accommodation; analyse the $260,000 spent on Australian Open tennis, where Hostplus CEO David Elia said his wife and two children were among his guests; analyse $40,000 spent on football tickets at Melbourne s Etihad Stadium. Valuation Not as simple as using 50/50 method Recreational benefits are reportable on payment summaries (employee + their spouse & family) Understanding FBT

28 The Hostplus Case Study What are the challenges for Hostplus? The following information is required: Entertainment / Australian Open / Etihad Stadium Information needed Date of each event Meal Entertainment GST amounts & already claimed Names of attendees at each event Entertainment Facility Leasing Flights, taxis, accommodation Type of attendee Recreational Entertainment Deposits & other expenses Understanding FBT

29 Paul Mather FBT Exempt & Rebatable Employers FBT Return Outsource FBT Compliance Risk Review FBT Advisory and Consulting FBT Query Service FBT & Salary Packaging Training Car Parking FBT Valuation Logbook Solutions Salary Packaging Solutions

30 FBT Exempt and Rebatable Employers FBT Year Type 1 Type 2 PBI & HPC & Capped Type 1 Capped Type 2 Additional Additional Rebatable Cap - TV of benefits TV of benefits Entertainment Entertainment Grossed Up $5k cap $5k Cap 2016 $31,177 $14,525 $15,900 Unlimited Unlimited 2017 $31,177 $14,525 $15,900 $2,330 $2, $30,000 $14,421 $15,899 $2,404 $2, $30,000 $14,421 $15,899 $2,404 $2, $30,000 $14,421 $15,899 $2,404 $2,650 Type 1 Type 2 FBT Year Hospital & Other Additional Additional Type 1 TV Type 2 TV Cap Grossed Up Entertainment Entertainment $5k cap $5k cap 2016 $17,667 $8,231 $9,010 Unlimited Unlimited 2017 $17,667 $8,231 $9,010 $2,330 $2, $17,000 $8,172 $9,009 $2,404 $2, $17,000 $8,172 $9,009 $2,404 $2, $17,000 $8,172 $9,009 $2,404 $2,650 Full FBT applies if caps exceeded, except for: Car parking; and Employer provided entertainment Salary Packaged Entertainment is Reportable on the Employee Payment Summary

31 FBT Exempt and Rebatable Employers Recent observations and challenges. Don t assume that your organization is Exempt or Rebatable because it always has been. Confirm your FBT status Substantiation is required, it is not acceptable to just deduct a set amount pre-tax each pay period Look outside the caps for salary packaging opportunities If your salary packaging provider or fleet manager makes a mistake, then it is the employer that needs to manage the issue / interact with ATO if necessary Amendments can t be made prospectively

32 Salary Packaging what are we seeing Some recent observations. Many small organisations are not providing packaging Many are trying to manage in-house The caps are not being maximised Other FBT exemptions are not being utilised Lack of understanding of the FBT rules

33 Salary Packaging cap & time limits Real flexibility with salary packaging. Caps are annual Some exemptions are not time limited Some exemptions are not threshold limited The key is to capture the opportunity before 31 March 2019

34 Paul Mather What else can go wrong? FBT Return Outsource FBT Compliance Risk Review FBT Advisory and Consulting FBT Query Service FBT & Salary Packaging Training Car Parking FBT Valuation Logbook Solutions Salary Packaging Solutions

35 The Cash Award Case Study A high performing employee receives recognition by their team leader with a generous $5,000 award and certificate. The team leader asks the employee to submit an expense claim for $5,000 with a copy of the certificate attached. The team leader then authorises the payment of the $5,000 to the employee s bank account on 15 February The 2018 FBT return is prepared and the $5,000 is included as a taxable benefit. The FBT payable is $4,434. The FBT return is lodged in June The FBT return preparer advises Payroll the employee has an RFBA of $9,434. Any comments on the above? Understanding FBT

36 Travel Mixing Business and Pleasure Scenario Employee required to attend a week long training course in Queenstown. Employee stays an additional 3 days for skiing holiday. Employee overseas for total of 6 weeks. 5 days were spent at a work conference as required by employer. Employee teacher undertakes overseas self-guided, educational tour. Tour directly contributed to teachers professional skills and professional advancement. An employee was on holiday when they became aware of a half day work related course. Apportionment Private component incidental to the workrelated component. 100% business. Court held that equal weight should be placed on each objective. Held 50% business / 50% private Court held that dominant purpose was work-related but there was a degree of private objective. Held 75% business / 25% private The airfare was considered wholly private. Held 0% business / 100% private Understanding FBT

37 ATO Draft Ruling on Employee Travel. TR 2017/D6: Income tax and fringe benefits tax: when are deductions allowed for employees' travel expenses? The ATO has withdrawn Miscellaneous Taxation Ruling MT 2030 Fringe benefits tax: living-away-from-home allowance benefits The 21 day rule no longer exists When does travel become Living Away From Home? Up to 6 weeks is considered Travel days is considered Living Away From Home

38 Taxi v Uber.is there a difference? The FBT law taxi exemption applies to: Taxi travel beginning or ending at the workplace; Taxi travel to attend medical appointment; or Taxi travel if employee is unwell. Uber, and other similar ride sourcing arrangements, do not fit within the definition of a taxi for the purposes of the FBT exemption. The ATO is continuing consultation on this since mid 2017 Note: for GST purposes, taxi and uber are treated the same.

39 Paul Mather Salary Packaging FBT Return Outsource FBT Compliance Risk Review FBT Advisory and Consulting FBT Query Service FBT & Salary Packaging Training Car Parking FBT Valuation Logbook Solutions Salary Packaging Solutions

40 Did the Keating Government know? It sounds strange, but the FBT law is full of exemptions and concessions. The FBT law was introduced way back in 1986 with the intention to tax non-cash fringe benefits. But in doing so, the FBT law has allowed for a wide range of exclusions, concessions, reductions and exemptions. Many employers are not fully aware of the opportunities these may present as part of strategies for remuneration, reward, policy or salary packaging. Many employers do not fully understand the rules and requirements involved

41 The great SP opportunity of Australian FBT Fully Taxable Fringe Benefits Exempt or Concessionally Taxed Fringe Benefits

42 What s left in Salary Packaging? Significant opportunities. including Exempt employers Remote Area Rebatable employers FIFO transport Motor Vehicles Expatriates Associate Leases Public transport * Car Parking LAFHA Relocation costs Temporary Accommodation Sale and Purchase costs Self-education Work related items Portable electronic devices In-house recreational Airline lounge memberships

43 Salary packaging key points 1. Not a right but an employer choice 2. Foregoing (sacrificing) future income in exchange for non cash fringe benefits 3. Re-arranging remuneration to maximise take home pay 4. Employers: Works best for exempt & rebateable employers 5. Benefit types: Works best with exempt benefits and concessionally taxed benefits 6. Should be cost neutral to the employer 7. Compliments flexible working arrangements 8. Increases buying power = significant discounts available Understanding FBT

44 Salary Packaging - Employee What s important? Seek own advice Understand what s in / what s out of the package Understand your obligations Understand your employers policies, written or otherwise ie use of logbook method or acceptance of exempt car Understand the effect on after tax income Understand the effect on super contributions Understand the RFB effect

45 Salary Packaging - Employer What s important? Written salary packaging policy Written policies on the provision of fringe benefit type Ability / willingness to administer (collaborate) Capability of Payroll system / outsource Documented processes Incorporate into employment contract Understand the implications Tax (FBT, income tax deduction, GST, Payroll Tax) End of employment Administration

46 Salary Packaging - Employer Benefits for employees Can increase overall value of remuneration package Can afford better car, better laptop etc The hidden benefits of packaging Employer may have buying power Administration with employer Salary sacrifice impacts on other taxes: Payroll tax Work comp

47 Salary Packaging & FBT Savings for employees and employers Detailed calculations are all stand alone the savings can add up to significant amounts Whole of business approach necessary if running inhouse Less collaboration if outsourcing The FBT technical rules are the key drivers Policies are crucial Employer of choice

48 Paul Mather Questions FBT Return Outsource FBT Compliance Risk Review FBT Advisory and Consulting FBT Query Service FBT & Salary Packaging Training Car Parking FBT Valuation Logbook Solutions Salary Packaging Solutions

49 More information. Contact: Phone: Sydney: Level 4, 95 Pitt Street Understanding FBT

50 Paul Mather Thank you for attending FBT Return Outsource FBT Compliance Risk Review FBT Advisory and Consulting FBT Query Service FBT & Salary Packaging Training Car Parking FBT Valuation Logbook Solutions Salary Packaging Solutions