The pandemic may seem like a distant memory for some, but we’ve seen big changes in the way Australians work, which can significantly impact FBT outcomes for employers. Let's dive into the details.
For many employers, a hybrid working environment between home and the office has become the new reality, with most employees expecting their employers to pay for their home office setups. Fortunately, this can be achieved without attracting FBT. Here's how.
Provision of office equipment and FBT
Broadly, the provision of office equipment for use at an employee’s home may be exempt in the following circumstances:
- Where the office equipment being provided to the employee is used solely for work-related purposes - the ‘no-private-use exemption’
- Where the employee would have been entitled to a deduction if they had paid for the deduction themselves - the ‘otherwise deductible rule’
- Where the equipment is ordinarily located on the business premises of the employer and is wholly or principally used in direct connection with the business operations of the employer
Provision of work-related items and FBT
Mobile phones, laptops, portable printers, and other portable electronic devices may also be exempt from FBT. To be eligible for this exemption, the item must be provided primarily for use in the employee’s employment and limited to one item per FBT year where items have a substantially identical function. However, an employer may provide additional work-related items with substantially identical function in the following cases:
- Only the use of the additional item is being provided (i.e. a residual benefit);
- The additional item was a replacement of the first item;
- The additional item is a portable electronic device; and
- The employer is a small business entity; or
- From 1 April 2021, the employer is a small or medium business entity.
Fringe Benefits for Returning to the Office
With over 40% of the Australian workforce regularly working from home (this figure rockets to 64% for managers and professionals!) employers may want to consider how benefits can be used to keep staff happy, or incentivise a return to the office.
Small Business Car Parking Exemption
SMEs may be eligible for an exemption for car parking fringe benefits from 1 April 2022 if:
- The parking is not provided in a commercial car park
- For the last income year before the relevant FBT year, the employer’s gross total income was less than $10 million, or
- The employer’s aggregated turnover was less than $50 million for the previous income year, likely to be less than $50 million for the current income year, or is less than $50 million for the current income year
- The employer is not a public company or a subsidiary of one
- The employer is not a government body.
Where the car parking being provided doesn’t meet the definition of a car parking fringe benefit, it’d be considered a residual benefit that is otherwise exempt.
Minor Benefit Exemptions
When used effectively, employers can use the minor benefit exemption to provide their people with a range of benefits, without attracting FBT. The minor benefit exemption applies where the value of the benefit is less than $300 (GST inclusive) and it’d be unreasonable to treat it as a fringe benefit.
Where an employee is provided benefits that are connected with each other, the $300 threshold applies separately to each benefit provided. For example, at a staff Christmas function, the value per head of attending, and the value of the gift given to those attending, would be considered separately. Also, when considering the value for the purposes of the threshold, benefits provided to associates of an employee aren’t included.
But it’s not enough to be below the $300 threshold to satisfy the minor benefit exemption. You must determine whether it would be unreasonable to consider the benefit as a fringe benefit. This includes:
- Frequency and regularity - If the benefit is not provided on a frequent and regular basis, it’s more likely to be exempt
- Total value of other associated benefits or identical/similar benefits - The lower the total value of associated or similar benefits provided, the more likely it is to be exempt
- Circumstances in which the benefits are provided - if the benefit provided isn’t a regular and expected benefit for an employee, it’s more likely to be exempt.
Talk to a Tax Expert About All Things FBT
If you'd like to learn more about reducing your FBT bill while still providing great benefits to attract and retain your top people, get in touch with our accounting team today for a free consultation by submitting the form below.
