FBT 2016 Supplement FBT Update. General FBT update. GST and taxable value of fringe benefits. Two FBT gross-up rates. FBT Supplement 2015/16

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1 FBT 2016 Spplement April 2016 FBT Spplement 2015/ FBT Update The following is an pdate on rates, declarations and other precedent forms that may assist in the preparation of clients 2016 FBT retrns. General FBT pdate The FBT rate of tax for the year ended 31 March 2016 is 49%. The FBT rate of tax for the year ended 31 March 2017 is 49%. GST and taxable vale of fringe benefits The taxable vale of a fringe benefit, which was sbject to GST, is always calclated on the GST-inclsive cost of the benefit to the employer/provider. It does not matter whether or not the employer was entitled to an inpt tax credit on the acqisition of the fringe benefit. For fringe benefits which were not sbject to GST (e.g., fresh food or edcation costs), the taxable vale is simply the cost of the benefit. Two FBT gross-p rates Two separate gross-p rates apply to fringe benefits provided to employees. The gross-p rates are as follows: Type 1 benefits These arise where an employer is entitled to an inpt tax credit when the fringe benefit is acqired. Gross-p rate: for the year ended 31 March Gross-p rate: for the year ended 31 March Type 2 benefits These arise where an employer is not entitled to an inpt tax credit when the fringe benefit is acqired. Gross-p rate: for the year ended 31 March Gross-p rate: for the year ended 31 March Which gross-p rate applies where an employer decides not to claim an inpt tax credit on a fringe benefit for the year ended 31 March 2016? The fact that an employer decides not to claim an inpt tax credit for the GST inclded in the cost of a fringe benefit does not affect which gross-p rate applies to the fringe benefit. Once an employer has claimed or is entitled to claim an inpt tax credit, they mst se the higher gross-p rate of Example Robin s Clothing Shop incrs expenditre of $1,100 in providing Bill, the Store Manager, with a set of golf clbs. As the golf clbs represent a fringe benefit, Robin s Clothing Shop will be entitled to claim an inpt tax credit of $100 (i.e., 1/11th of $1,100) and the higher gross-p rate of will apply. The higher gross-p rate of will apply to the provision of the golf clbs, regardless of whether or not Robin s Clothing Shop decides to claim an inpt tax credit when providing the golf clbs. Voice Page 1

2 Voice Employee contribtions GST implications Employers are generally liable to GST on employee contribtions which are either paid or credited via jornal entry to the employer, in relation to fringe benefits provided to an employee. Employee contribtions which take the form of nreimbrsed car expenses (e.g., petrol) which are paid by an employee receiving a car fringe benefit, do not give rise to a GST liability for the employer. FBT implications The fll amont of an employee contribtion is sed to redce the taxable vale of a fringe benefit, even thogh the employer may be liable to remit 1/11th of the contribtion in GST. Income tax implications An employer is only assessable on the GSTexclsive vale of employee contribtions they receive in the form of direct after-tax cash contribtions or via a jornal entry. Minor benefits exemption Fringe benefits with a GST-inclsive taxable vale of less than $300 may be exempt from FBT if they are provided on an irreglar and infreqent basis. Capping rles for FBT-exempt and rebatable employers The FBT Act places a ceiling on the concessional FBT treatment that is applied to fringe benefits provided by certain FBT-exempt employers and all rebatable employers. FBT is payable on those fringe benefits in the normal way (i.e., the same as for FBT taxable employers) where an FBT-exempt or rebatable employer provides fringe benefits to an employee which exceed the ceiling (refer below) for the year ended 31 March Employer Grossed-p limit Certain Hospitals and Pblic $17,667 Amblance Services Other pblic $31,177 benevolent instittions and health promotion charities FBT rebatable $31,177 employers Note (*): Not all fringe benefits with a taxable vale are taken into accont when applying the $17,667 or $31,177 ceiling. E.g., meal entertainment, entertainment facility leasing expenses and car parking benefits are not taken into accont for the prposes of the above ceilings. The non-grossed-p taxable vale cap for fringe benefits provided to employees working for hospitals and pblic amblance services is: 9,010 at the gross-p rate; and 8,231 at the gross-p rate, for the years ended 31 March 2016 and 31 March The non-grossed-p taxable vale cap for fringe benefits provided to employees working for other FBT-exempt and rebatable employers is: 15,900 at the gross-p rate; and 14,525 at the gross-p rate for the years ended 31 March 2016 and 31 March Do yo need to lodge a nil FBT retrn? An employer is not reqired to lodge an FBT retrn where the fringe benefits taxable amont is nil. However, where an employer is registered for FBT prposes, we recommend they advise the ATO that they will not be lodging an FBT retrn by completing and lodging a Fringe Benefits Tax Notice of Non-Lodgment form by the de date of the annal retrn 23 May 2016 for self preparers and for paper lodgments by tax agents. The de date for electronic lodgments by tax agents is 25 Jne Page 2 April 2016

3 April 2016 Small Bsiness Record-keeping Exemption Threshold FBT Year Ended 31 March Threshold $ , ,164 Operating Cost Method Stattory Rates for Deemed Interest FBT Year Ended 31 March Rate % Loan Fringe Benefits Benchmark Interest Rates 1 FBT Year Ended 31 March Rate % These rates apply to loans other than pre-jly 1986 fixed interest loans and pre-3 April 1986 variable interest hosing loans. Hosing Fringe Benefits Indexation Factors 2015/16 & 2016/17 FBT Year Ended 31 March NSW VIC QLD SA WA TAS NT ACT Board and Meal Fringe Benefits Taxable Vale of Meals Recipient s Age at Start of FBT Year (in years) Taxable Vale (per Meal) $ Voice Page 3

4 Voice Living-away-from-home Allowance Reasonable Food Amont 2015/16 & 2016/17 No. of Persons 1 Weekly Rate 2016/17 FBT Year 2 $ Weekly Rate 2015/16 FBT Year 2 $ One adlt Two adlts Three adlts One adlt and one child Two adlts and one child Two adlts and two children Two adlts and three children Three adlts and one child Three adlts and two children For adlts For each extra adlt, add For each extra child, add Adlts are persons aged 12+ years on 1 April of the relevant FBT year. 2 This applies to employees that are LAFH within Astralia. Different amonts apply for employees that are LAFH otside Astralia, as set ot in TD 2014/9 for the 2015 FBT year and TD 2015/7 for the 2016 FBT year. Rates for Vehicles other than Cars /16 & 2016/17 Engine Capacity Rate per Km 2016/17 FBT Year $ Rate per Km 2015/16 FBT Year $ 0 2,500cc ,501cc Motor cycles These are residal fringe benefits. Page 4 April 2016

5 Car Fringe Benefits April 2016 What is a car fringe benefit? A car fringe benefit arises when a car, normally held by an employer, is made available for the private se of an employee (or an associate). An arrangement to provide a car to an employee incldes an arrangement between the employer and a third party (e.g., when a parent company makes a car available to an employee working for a related sbsidiary). A car is generally deemed to be available for private se where the employee has the se, cstody or control of the car. What types of vehicles are considered cars? A vehicle is considered to be a car where it satisfies any of the following reqirements: q it is a motor car, station wagon, panel van, tility trck or similar vehicle designed to carry a load of less than 1 tonne; and q it is designed to carry fewer than 9 passengers; bt q does not inclde a motor cycle or similar vehicle. Stattory formla method The formla for calclating the taxable vale of a car nder the Stattory formla method is: (A x B x C/D) E A = Base vale of car B = Stattory fraction C = The nmber of days in the FBT year that the car fringe benefit was provided D = The nmber of days in the FBT year (in 2015/ days) E = The recipient s payments A = Base vale of car The base vale of a car which is acqired on or after 1 Jly 2000 is calclated as follows: Cost price $ Add: GST on cost price (regardless of whether inpt tax credit claimed) GST-inclsive cost of car Less: Employee payment or trade-in Sb-total Add: GST-inclsive cost of dealer and delivery charges Add: GST-inclsive cost of non-bsiness accessories (sch as air-conditioning and car stereos) Less: Expenditre in respect of registration and transfer of car Registration costs Stamp dty on transfer Dedct: 1/3rd of the cost price if the provider has held the car for at least 4 fll FBT years at the start of the FBT year Base vale of car for FBT $ B = Stattory fraction The stattory fractions for the 2016 and 2017 FBT years are: Stattory Fraction Annalised kilometres Agreements in existence before 7.30pm 10 May 2011 Agreements entered into from 7.30pm 10 May , ,000 24, ,000 40, , Voice Page 5

6 Voice C = Days when car sed or available for private se of employee The taxable vale of a car fringe benefit nder the Stattory formla method is proportionally redced by the nmber of days dring the FBT year when the car was not sed or available for the private se of an employee (i.e., C/D). E = Recipient s payments The taxable vale of a car fringe benefit is redced by recipient s payments that are made in relation to a car fringe benefit. A recipient s payment will normally occr if: q an employee pays for car expenses. A car expense means: fel and oil; registration and insrance; and repairs and maintenance (inclding car washes and ato clb fees); or q a direct cash payment or jornalised contribtion (ot of after-tax dollars) is made by the employee to the employer. Operating cost method The taxable vale of a car fringe benefit nder the operating cost method is basically calclated by applying the private se percentage of the car against its operating costs. The operating cost formla is: Taxable vale = [C x (100% BP)] R C = Operating costs of car BP = Bsiness se percentage R = Recipient s payments (see E above) C = Operating costs The operating costs of the car not only inclde actal rnning costs of the car, bt can also inclde certain deemed costs. The following is a gide to the types of expenses inclded and exclded: Car expenses that are inclded Actal expenses: fel, repairs and maintenance (inclding ato clb fees and car washes/polishes); registration and insrance related to the period the car was held by employer; and for leased cars, the lease charges related to the period the car was held by the employer. Deemed costs (only where the car is owned or hire prchased by the employer): deemed depreciation at 25% (for cars acqired from 10 May 2006, 18.75% or 22.5% may apply for cars acqired before this date) nder the diminishing vale method; and deemed interest which applies the stattory percentage (5.65% for the 2015/16 FBT year and 5.65% for the 2016/17 FBT year) to the opening written down vale of the car. What car expenses are exclded? q road and bridge tolls; q car parking expenses; q actal interest on hire prchase agreements; and q repairs paid for by an insrance company. BP = Bsiness se percentage The bsiness se percentage is basically the nmber of bsiness kilometres travelled by the car, as a proportion of the total kilometres travelled dring the FBT year. To establish the bsiness se percentage of a car dring an FBT year, an employer is reqired to make an estimate which takes into accont all relevant factors, inclding: information contained in log book records which mst be kept for a continos period of at least 12 weeks, generally every 5 years; odometer records which mst be kept every year; and any variations in the pattern of bsiness se of the car throghot the FBT year sch as a change in jobs, holidays, seasonal flctation and any variations in employment dties. Page 6 April 2016

7 April 2016 Entertainment Fringe Benefits When does an entertainment fringe benefit arise? For FBT prposes, 'entertainment' is defined in S of ITAA 1997, as follows: entertainment by way of food, drink or recreation; or accommodation or travel to do with providing entertainment by way of food, drink or recreation. Frther, S.32-10(2) states: Yo are taken to provide entertainment even if bsiness discssions or transactions occr." "The following are some examples of what is entertainment: q bsiness lnches q social fnctions. "These are some examples of what is not entertainment: q meals on overnight bsiness travel q theatre attendance by a critic q a restarant meal of a food writer. An employer who has provided meal entertainment fringe benefits may work ot the taxable vale of their meal entertainment nder one of these three methods: q 50/50 split method; q q 12 week register method; or actal expenditre incrred on meal entertainment method. 50/50 split method Under the 50/50 split method, the employer first calclates the total meal entertainment expenditre incrred on all persons dring the FBT year. The employer then: pays FBT on 50% of the total meal entertainment (inclding meal entertainment provided to clients); claims inpt tax credits for the GST embedded in 50% of the meal entertainment benefits; and claims a tax dedction for 50% of the total meal entertainment benefits (less any inpt tax credit entitlement). Example Calclating taxable vale nder 50/50 split method Billy Blades Pty Ltd ( Billy Blades ) incrs total expenditre on meal entertainment of $40,000 in the 2016 FBT year and it elects to se the 50/50 split method. The following types of meal entertainment expenditre have been incrred while entertaining employees, associates and clients: restarants where associates and clients were entertained; food and drinks provided at a staff social fnction; entertainment and drinks provided to crrent employees on Friday nights; cost of taking staff and their partners ot to lnch; and cost of taxis and limosines to and from entertainment venes. Meal entertainment benefits of $20,000 (i.e., 50% of $40,000) will be sbject to fringe benefits tax and dedctible for tax prposes (less any inpt tax credits). The remaining 50% or $20,000 contines to be non-dedctible for income tax prposes. 12 week register method Under the 12 week register method, the taxable vale of meal entertainment fringe benefits is the total meal entertainment expenditre incrred by the employer on all persons in the FBT year, mltiplied by the register percentage. Voice Page 7

8 Voice The 12 week register percentage The register percentage is calclated as: Total vale of meal entertainment fringe benefits provided in 12 week period Divided by Total vale of meal entertainment provided in 12 week period This method reqires an employer to maintain a 12 week register separating meal entertainment provided between employees and their associates, and others (sch as clients, sppliers, etc.). The percentage of the meal entertainment provided to staff and associates dring the 12 week period is then applied to the total meal entertainment expenditre incrred by the employer throghot the entire FBT year. Example 12 week register method An employer s total meal entertainment expenditre in an FBT year is $20,000. The employer maintains a 12 week register and determines that 40% of meal entertainment expenditre was provided as fringe benefits (i.e., to staff and associates). The taxable vale of meal entertainment fringe benefits provided dring the FBT year is $20,000 x 40% = $8,000. An income tax dedction (less any inpt tax credits) will be allowed p to the register percentage, i.e., $8,000 (GST exclsive) with the remaining $12,000 (i.e., 60% of $20,000) being treated as non-dedctible entertainment. Actal entertainment method Where an employer does not elect to vale their meal entertainment benefits nder either the 50/50 split or the 12 week register method, the taxable vale is determined nder the actal expenditre method. This method reqires an employer to pay FBT on the taxable vale of meal entertainment fringe benefits provided to employees and/or their associates dring the FBT year of tax. Meal entertainment benefits provided to clients and non-employees are not sbject to FBT and generally not dedctible for income tax prposes. Employers who se the actal expenditre method do not complete Item 23P on the 2016 FBT Retrn form. Instead, these employers will have to break p and record the taxable vale of their meal entertainment as follows: Label code Fringe benefit type 2016 FBT Retrn Expense payments Property Tax-exempt body entertainment Residal 23E 23K 23L 23M Tax tip sing the actal expenditre method Employers who se the actal expenditre method can claim the following FBT exemptions for meal entertainment: S.41 (applies to property benefits, inclding meal entertainment, provided to staff on bsiness premises dring a working day); S.58P (applies to minor benefits, inclding meal entertainment, which is less than $300 and is provided on an infreqent and irreglar basis); and S.58Z (applies where taxi travel is provided with meal entertainment, and the travel is a single trip that begins or ends at the employee's place of work). Employers who adopt the 50/50 split method cannot claim FBT exemptions nder S.41, S.58P and S.58Z in relation to their meal entertainment. However, nder the 12 week register method, these exemptions can be taken into accont when calclating the register percentage (i.e., in determining the 'Total vale of meal entertainment fringe benefits provided in a 12 week period'). Page 8 April 2016

9 April 2016 Meal Entertainment Elections Election by employer sing the 12 week register method I, (insert name of athorised person)... hereby advise that (insert name and address of employer) elects to adopt the 12 week register method to determine the taxable vale of meal entertainment fringe benefits in accordance with the formla and register percentages for the period (insert date e.g., 1 April 2015 to 31 March 2016)... I confirm that a valid register has been maintained. Name of athorised person... Signatre of athorised person... Date... Election by employer to adopt 50/50 split method I, (insert name of athorised person)... hereby advise that (insert name and address of employer) elects to adopt the 50/50 split method of valing meal entertainment fringe benefits provided dring the period (insert date e.g. 1 April 2015 to 31 March 2016)... By electing the 50/50 split method, I acknowledge that, for FBT prposes, the taxable vale of meal entertainment fringe benefits provided to or employees, associates and non-employees is half the meal entertainment expenses incrred for the 2016 FBT year of tax. I advise that the vale of meal entertainment expenses incrred is net of any employee contribtion actally paid. Also, I confirm that recreation expenses have been exclded, inclding non-meal entertainment otgoings. Name of athorised person... Signatre of athorised person... Date... Voice Page 9

10 Voice Motor Vehicle Elections Stattory formla declaration opening and closing kms 2016 FBT year for agreements entered into before 7.30 pm 10 May 2011 Name of employee... Name of employer... Date of entry... Make and model of car... Car registration... Engine capacity... Opening odometer reading at 1/4/ Closing odometer reading at 31/3/ Signed as a tre and correct record (to be signed by employee) Dated... 1 Where the car was acqired, or disposed of, dring the 2016 FBT year, insert alternative dates. Petrol expense declaration 2016 FBT year (Note: Do not complete if sing actal petrol receipts) I,... declare that (Employee s fll name) petrol expenses of $ (amont in figres) were incrred by me dring the period 1 April 2015 to 31 March , in respect of... (make, model and registration of car) I also declare that the total kilometres travelled dring the period were... Signed... (to be signed by employee) Date... 1 Where the car was acqired, or disposed of, dring the 2016 FBT year, insert alternative dates. Page 10 April 2016

11 for year ended 31 March 2016 Section A April 2016 Expense Payment Declaration I, declare that (name of employee) (show natre of expenses, e.g., telephone rentals and/or calls) were provided to me by or on behalf of my employer dring the period from: 20 to 20 and the expenses were incrred by me for the following prpose(s): (Please give sfficient information to demonstrate the extent to which the expenses were incrred by yo for the prpose of earning yor assessable income) I also declare that the percentage of those expenses incrred in earning my assessable income was %. Section B (To be completed where the expenses were car expenses for a car owned or leased by yo and the necessary logbook records, odometer records and car records have been maintained) I declare that: (a) The period of the FBT tax year the car was in se by me for bsiness prposes was: 20 to 20 (b) (c) Logbook and odometer records for the car (or a car which this car replaces) were kept for a minimm of 12 consective weeks dring that period and have been given to the employer; or Logbook and odometer records for the car (or a car which this car replaces) were kept for a minimm of 12 consective weeks in an earlier year, and odometer records were kept this year and have been given to the employer; or (d) The car bsiness percentage for the period mentioned in (a) above was % Voice Page 11

12 Voice Section C (To be completed where the benefit relates to a car owned or leased by yo, the car travelled more than an average of 96 bsiness kilometres per week, and Section B has not been completed) I declare that the period of the FBT year dring which the car was in se by me for bsiness prposes was: 20 to 20 and that an average of more than 96 bsiness kilometres per week was travelled in that period. Section D (To be completed where the expenses relate to a car owned or leased by yo and neither Section B nor Section C is applicable). I declare that: (a) The period of the FBT year the car was in se by me for bsiness prposes was: 20 to 20 (b) The total nmber of kilometres travelled by the car in that period was: (c) Bsiness kilometres travelled by the car in that period was: Employee's signatre... Date... Explanatory notes 1. If Section B is completed, the tax dedctible percentage stated in Section A shold eqal the percentage of bsiness se shown at Item (d) of Section B. The percentage of bsiness se is the proportion of bsiness kilometres to total kilometres. The bsiness percentage nominated in Section A and Section B shold be determined by taking into accont the logbook records and any variations in the pattern of bsiness se throghot the FBT year. A new logbook mst be kept by an employee at least every five years if a redction in the taxable vale of the benefit is to occr nder Section B. 2. If Section C is completed, the tax dedctible percentage stated in Section A shold be 33.33%. 3. If Section D is completed, the tax dedctible percentage stated in Section A shold be the lesser of 33.33% and the proportion of bsiness kilometres to total kilometres as shown in Section D. Page 12 April 2016

13 April 2016 Stattory formla method worksheet Type 1 benefits This worksheet is to be sed for cars where the employer was entitled to inpt tax credits with respect to providing the car fringe benefit. Item 23A of 2016 FBT Retrn Form For the FBT year of tax from 1 April 2015 to 31 March 2016 Administrative details Name of sal driver: Make and model of car: Registration nmber: Date car first held: Car sage information Closing kilometres Opening kilometres Total kilometres kms kms kms Days in FBT year x 366 days Days car held in FBT year Annalised kilometres days kms FBT Calclation Base vale of car Stattory percentage x % Gross taxable vale Days available for private se x days Days in FBT year 366 days Sb-total Less: Employee contribtions ($ ) Taxable vale of car benefit FBT gross-p x Grossed-p taxable vale (Item 14A) FBT rate x 49% FBT payable Voice Page 13

14 Voice Operating cost method worksheet Type 1 Benefits This worksheet is to be sed for cars where the employer was entitled to inpt tax credits with respect to providing the car fringe benefit. Item 23B of 2016 FBT Retrn Form For the FBT year of tax from 1 April 2015 to 31 March 2016 Administrative details Name of sal driver: Make and model: Registration nmber: Prchase date: Original cost: Log book information Opening odometer reading Closing odometer reading as at 31 March 2016 Total kilometres Nmber of days car held by employer Bsiness se percentage % (Remember that the bsiness se percentage mst incorporate changes in the pattern of the se of the car dring the FBT year of tax) Calclation of FBT payable Calclation of GST inclsive car expenses Lease payments Fel and oil Repairs and servicing Registration Insrance Deemed: Depreciation $ Interest $ Total operating expenses Less: Bsiness se redction $ Employee contribtions $ ($ ) Taxable vale FBT gross-p x Grossed-p taxable vale (Item 14A) FBT rate x 49% FBT payable Page 14 April 2016