FBT What s new for FBT in

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1 Contents What s new for FBT in New rules create huge FBT sting for benefits provided to overseas employees! Applying the rules before 1 July 2009 the background Applying the new rules from 1 July 2009 benefits to overseas employees may now be subject to FBT! Making the right distinction between a resident and a non-resident employee now more crucial than ever! Recent case confirms FBT dangers for cars which are parked at home offices Problems for cars which are garaged/kept at or near an employee s place of residence Facts of the Jetto Industrial case The Tribunal s decision Implications of the Tribunal s decision New ATO guidelines give the green light for cars which are parked at an airport car park Determining when a car is deemed to be available for private use under S.7 the background Identifying when a car that is parked at an airport car park is not available for private use New ATO guidelines provide greater flexibility with employee contributions ATO confirms that an employee contribution could be made at any time including after FBT year end! Dealing with excess employee contributions ATO s approach creates greater flexibility Common tips and traps with employee contributions New ATO guidelines pave the way for FBT-exempt health care/fitness programs Key features of a typical health-related/fitness program The FBT exemption for work-related counselling under S.58M the background ATO confirms that the FBT exemption for work-related counselling can apply to health/fitness programs Applying the minor benefit exemption to the fitness classes, club membership and waiving of joining fee...28 National Tax & Accountants Association Ltd: February March 2010 i

2 6. Packaging FBT-exempt private functions and holidays employees of PBIs and hospitals The concept of an EFLE the background Extending the concept of EFLEs to the cost of holiday accommodation and private venue hire Checklist of entertainment facility leasing expenses The latest guide to reportable fringe benefits avoid costly mistakes! New reporting rules apply for employer superannuation contributions from 1 July Certain income tests extended to include adjusted fringe benefits total from 1 July The FBT reporting exclusion for pooled or shared cars employees who share their salary packaged cars Checklist of fringe benefits which are excluded from the FBT reporting rules excluded benefits FBT rates and thresholds for 2010 FBT year FBT rate and gross-up rates for 2010 FBT year Capping thresholds for 2010 FBT year Hospitals, PBIs, rebatable employers, etc Certain FBT exemptions and reductions threshold amounts for the 2010 FBT year FBT reporting threshold for 2010 FBT year Benchmark interest rate for 2010 FBT year Reasonable food component of LAFHA for 2010 FBT year Non-remote area housing indexation factors Car parking threshold from 1 April Taxable value of motor vehicles which are not cars Record-keeping exemption threshold for 2010 FBT year...58 Latest guide to preparing the 2010 FBT Return Introduction ATO set to target employers not lodging FBT returns Income segment of the 2009 Company Return Expenses segment of the 2009 Company Return Financial and other Information on the 2009 Company Return...62 ii National Tax & Accountants Association Ltd: February March 2010

3 Reportable Fringe Benefit information on payment summaries What are the danger labels on the 2010 FBT return? Potential traps with applying the two gross-up rates for the 2010 FBT year Traps and tips associated with living-away-from-home allowances Correctly recording the value of reductions at Item 22(c) of the 2010 FBT return ATO set to swoop on common mistakes by FBT-exempt and rebatable employers Problems with FBT-exempt hospitals and PBIs preparing the 2010 FBT return Problems with FBT-rebatable employers preparing the 2010 FBT return ATO announces FBT audit crackdown on employers who provide car benefits Audit spotlight on business travel and documentation Don t be caught out When is an employee travelling on work? What are the paperwork requirements? Unique NTAA game plan for employers who discover an error in their FBT return Should employers who discover an error with an FBT return make a voluntary disclosure? Can employers be penalised for FBT errors that arose from employee mistakes? Can employers recover any FBT, penalties etc, when an employee has provided incorrect information?...81 Entertainment Making it simple...83 Introduction What is entertainment? How to identify what is meal entertainment Common meal entertainment & non-meal entertainment situations checklist How to value meal entertainment for FBT, income tax and GST purposes Applying the actual method Employers using the 50/50 split method Making the right choice between the actual and 50/50 split methods Common entertainment issues for fully FBT-taxable employers Dealing with the annual Christmas party/function National Tax & Accountants Association Ltd: February March 2010 iii

4 4.2 An A to Z guide to dealing with staff conferences and weekend retreats Common entertainment issues for tax-exempt employers What is a tax-exempt employer? What are the FBT (and other tax) consequences of entertainment provided by a tax-exempt employer? Tax-exempt body entertainment provided on business premises property benefit exemption does not apply $300 minor benefit exemption has limited application to tax-exempt body entertainment fringe benefits Car fringe benefits avoid audit risk! Introduction When does a car fringe benefit arise? What is a car for FBT purposes? When is a car held by the provider (normally the employer)? The car is either applied, or deemed to be available for private use Common questions about car fringe benefits Summary of circumstances where car fringe benefit rules don t apply Dealing with the fundamentals of the Statutory formula method How is the taxable value calculated under the Statutory formula method? Base value of a car Component A Statutory fraction Component B Number of days available for private use Component C Recipient s payments Component E A hands on guide to the Operating cost method Operating costs Component C What car operating costs are included and excluded? Business use percentage Component BP How to identify if a car fringe benefit is a Type 1 or 2 benefit Summary table for classifying car fringe benefits iv National Tax & Accountants Association Ltd: February March 2010

5 Cutting edge FBT planning strategies Introduction How does salary packaging affect an employee s leave, termination and super entitlements? How does salary packaging affect annual and long service leave taken by a continuing employee? How do employers calculate their super guarantee liability for an employee who has salary packaged? Are salary sacrifice amounts added back when an employer calculates termination entitlements? State-by-state guide on how salary packaging affects pay-roll tax and Workcover How is the salary sacrifice amount calculated for employers? Actual cost of the benefit FBT payable on fringe benefits Adjustments for non-deductible benefits Adjustments for GST on employee contributions Adjustments for the tax break on fringe benefits Matrix proves employees earning $40,000 or more save over $2,000 packaging a car Introduction Salary packaging cars for employees earning less than $180, Table identifying savings for an employee earning at least $40,000 by salary packaging a car Salary packaging assumptions NEW super contribution rules still provide massive savings packaging into superannuation Salary package into superannuation and pay tax at an effective rate of 15% Advanced planning strategies with the ETP rules Employees literally save $'000's How is an employment termination payment taxed? When can and should an ETP be rolled-over into superannuation? Employee who transfers an existing novated lease to a new employer saves $ 000s National Tax & Accountants Association Ltd: February March 2010 v

6 Exempt benefits the latest guide The minor benefit exemption how to deal with all the latest tips and traps Which benefits are not eligible for the exemption? Applying the less than $300 exemption threshold a new landscape for employers! Applying the factors or criteria in S.58P(1)(f) Practical guidelines and examples on how the ATO is likely to apply the minor benefit exemption The FBT exemption for eligible work-related items a new landscape for employers! Applying the new work use test to all S.58X items How to apply the new exemption category for portable electronic devices latest ATO guidelines How to apply the S.58X FBT exemption to briefcases recent ATO guidelines limit the exemption! FBT exemption now limited to one item per employee per FBT year for items with identical functions Other common FBT exemptions for employers Car parking benefits Demystified! Introduction When does a car parking benefit arise? Exempt car parking benefits Common traps associated with determining if a car parking benefit arises How do employers calculate the number of car parking benefits provided? The Statutory formula method Applying the Actual method The 12 week register method How is each car parking space valued? The commercial parking station method The average cost method The market value method Notes vi National Tax & Accountants Association Ltd: February March 2010