ATO focus on Micro & SME businesses who fail to meet their FBT obligations

Fringe benefits tax (FBT) – the year ahead (from the ATO website)

Over the coming year, we’ll be focusing on the failure of some micro and small-to-medium employers to recognise and comply with their fringe benefits tax (FBT) obligations.  We are particularly concerned that these employers are not registering for FBT and lodging FBT returns when they should.  We’re conducting data-matching activities to identify businesses operating outside the FBT system.

Don’t forget to consider the FBT implications when you provide non-cash benefits, such as motor vehicles, to your employees. If you use employee contributions to reduce your FBT liability, make sure you include these at the correct label on your tax return.

We will provide help and support, particularly to employers that have recently started a business, to make sure they understand their FBT obligations.  We will offer concessional treatment to those employers that disclose details of FBT non-compliance before we contact them. But we’ll be taking firmer action in cases where employers are deliberately avoiding their FBT obligations.

www.fbtsurvival.com.au

We are proud to announce that www.fbtsurvival.com.au  is live and available to you!

The site contains key FBT documents, past training materials, checklists, LAFHA food rates and key ATO source materials

 

Highlighting the total FBT + cost of a fully taxable fringe benefit

What is the total cost of a $1,100 taxable fringe benefit?

1.  FBT – $1,056
2.  Payroll Tax – $113 (average)
3.  Workers Compensation – $103 (estimate)
4.  Benefit acquisition (less GST) – $1,000

Total cost = $2,272 = no good for salary packaging!

ATO Get Serious on FBT

Current & Planned Audit activity

1.5,000 PAYG audits
2.400 audits – 34% outside FBT system
3.10,000 education letters – 3% registering for first time
4.Encourage voluntary disclosure
5.Tax agent focus

The future:

1.Cars 62% of revenue – increased data matching
2.FBT education with registration / glove box
3.A new form of FBT audit: Short & Sharp
4.Apply penalties more firmly
5.Falsified logbooks
6.LAFHA audits 12 months away

FBT Returns – common oversights

Frequently overlooked fringe benefits

1.PR costs – application + consulting fee
2.Spouse / family travel
3.Meals provided to non travelling employees
4.Meals provided to non travelling clients
5.Meals provided to non travelling spouses (incl. clients)
6.Health insurance
7.Taxi from “non place of work” to home
8.Visa renewals
9.LAFHA Food – statutory amounts
10.NEW FOR 2013 – Temporary Accommodation

GST & Income Tax issues with 3, 4, 5 & 7

What should I do if I find a mistake (or two) in a prior year FBT Return?

What should I do if I find a mistake (or two) in a prior year FBT Return?

When preparing the current year FBT return you may identify an error in a prior year FBT return. Examples may include:

  1. Incorrect closing odometer reading at 31 March 2012
  2. Car parking spaces provided to employees that were omitted
  3. Failure to include Permanent Residency costs paid for by the employer
  4. Incorrect use of the minor benefit exemption in respect of meal entertainment under the 50/50 valuation method
  5. Failure to include contributions to an offshore pension fund paid on behalf of a resident employee

We suggest the following approach in managing the potential exposure related to prior year mistakes:

  1. Assess if the error is only related to the prior year or multiple years
  2. Assess if the error has resulted in an underpayment or overpayment of FBT
  3. Check if the error/s have resulted in incorrect payment summary reporting
  4. Determine & quantify the full extent of the error
  5. Assess the broader impact on other employer obligations
  6. Determine if a voluntary disclosure and subsequent amendment is required

And let’s not forget, a mistake often means you’ve paid too much FBT – if this the case, then time to apply to the ATO for a refund.

2013 FBT Return Preparation Seminars – Melbourne, Sydney & Brisbane

2013 FBT Return Preparation Seminars – Melbourne, Sydney & Brisbane & some key areas to start thinking about

With an unprecedented number of law changes and increased ATO focus, attending one of our 2013 FBT return preparation seminars is an absolute must do. Our 2013 FBT return preparation seminars will be practical and cover the important law changes for LAFHA, Relocations, Cars, Airline Transport Benefits and In-house Benefits, and how these will impact on your 2013 FBT returns.
We will work through the identification and valuation of all benefit categories, and explain what information and documentation is required to claim an exemption, concession or a reduction.
We are holding three full day FBT return preparation seminars in March 2013. Spaces are limited to maximise learning. The dates, locations and registration links are as follows:
Melbourne, Thursday 14 March – Register online here: http://www.cvent.com/d/dcqx6v/1Q
Sydney, Wednesday 20 March – Register online here: http://www.cvent.com/d/dcqx6v/1Q
Brisbane, Wednesday 27 March – Register online here: http://www.cvent.com/d/dcqx6v/1Q
Alternatively, download and print out the registration form here: http://www.fbtsolutions.com.au/pdf/fbt_return2013_seminar.pdf
Pricing
Early bird – register by 25 January and you only pay $550 including GST.
On time bird – after 25 January, you pay $660 including GST.
Loyal bird – if you or one of your colleagues has previously attended any of our seminars, reduce the applicable fee for each attendee by $55 – that’s our way of saying thank you for your loyalty.

CPD / CPE Hours – 6.5 hours, a certificate in your name will be provided.

Key areas for 2013 FBT Returns
Here are some of the key areas to consider when planning your 2013 FBT return preparation process:

  1. Planning – start the process early, think about the prior year issues and business changes
  2. Prepare a list of updated key contacts – internal and external, and confirm availability
  3. Prepare a timetable of key dates, resources and responsibilities
  4. Law changes – consider the key law changes to LAFHA, relocations, airline transport benefits, cars and in-house benefits. We’ll cover these in detail at the seminars
  5. Car parking – understand where the benefits are being provided, the duration and source the lowest daily rates www.fbtme.com.au – our pricing is competitive, we’ll beat any written quote by 15%.
  6. Training – unless you focus on FBT all year round, then it is recommended that you attend a training session – register here for our full day FBT return preparation seminar: http://www.fbtsolutions.com.au/pdf/fbt_return2013_seminar.pdf or http://www.cvent.com/d/dcqx6v/1Q
  7. LAFHA – understand who received LAFHA, the start and end dates, the food and accommodation components and who was eligible for the transition
  8. LAFHA – for those employees who are eigible for the transition, check that the accommodation allowance is equal to or less than the actual renatl expense
  9. LAFHA – issue declarations now for those who’s LAFHA ended on 30 September 2012. Let me know if you require a template declaration.
  10. Relocations – pull together a list of employees who relocated, either temporarily or permanently and start understanding the circumstances of their relocation and the    remuneration or reimbursement arrangements
  11. New benefits – were new benefit offerings made in 2012 /13?
  12. Cars – start early to understand the cars outside the SFM transitional rules and ensure logbooks are on file and compliant.
  13. Were there any big parties? Start gathering the detailed costings and understanding the nature of the event/s.

Talk to us about your FBT needs. If you have a query, please let us know.

Yours in FBT,

Paul Mather
Director & Registered Tax Agent
FBT, Payroll & Salary Packaging Solutions
T: 02 8079 2924 F: 02 8249 8101 M: 0403 050 358
E: paul.mather@fbtsolutions.com.au
W: www.fbtsolutions.com.au
A: Level 12, 95 Pitt Street, Sydney NSW 2000
P: PO Box 4508, Sydney NSW 2001

LAFHA – what are the changes?

What are the changes?

As we all know, from 1 October 2012, the Living Away From Home rules have been significantly overhauled. Whilst the rules remain in the FBT law, there is an increased requirement to ensure LAFHA payments are properly tracked and categorised. The main changes are as follows:

(a)  The taxation of LAFHA will continue to occur wholly within the FBT regime

(b)  LAFH benefits will only be FBT exempt where the  employee maintains a home in Australia (subject to transitional rules and fly-in-fly-out or drive-in-drive-out arrangements)

(c)  LAFH benefits will only be FBT exempt for the first 12 months of each work location (subject to transitional rules), unless the employee is on a fly-in-fly-out or drive-in-drive-out arrangement

(d)  LAFH benefits will only be FBT exempt to the extent they are actually incurred by the employee and substantiated

(e)  Substantiation provisions require documentary evidence of accommodation and food and drink expenses. Documentary evidence includes:

  1. normal LAFHA – a declaration in an approved format
  2. fly-in-fly-out or drive-in-drive-out arrangement – a different declaration in an approved format
  3. requirement for the employee to substantiate their expenses

(f)   There are transitional rules up to 30 June 2014

  1. Will apply to permanent residents who were LAFH as of 8 May 2012 to access concessional treatment after 1 October even where not maintaining a home in Australia.
  2. Will not apply to temporary or foreign residents after 1 October 2012, unless they are maintaining a home in Australia
  3. The transitional rules are subject to there being no material amendments to the employee agreement

Want to learn more:

2013 FBT Return Preparation Seminars

Registration form:  http://tinyurl.com/8b64uqw or online at: http://www.cvent.com/d/dcqx6v/1Q

Melbourne 14 March – Sydney 20 March – Brisbane 27 March

LAFHA changes – some practical Payroll considerations

Managing the changes

There are a number of practical challenges that require managing:

A variety of LAFHA scenarios

From 1 October, it is possible that organisations will have a variety of LAFHA scenarios, including the following:

Scenario

Payroll   Code

Fully exemptLAFHA Accommodation is   equal to or less than actual rental expense

LAFHA Food is equal to   or less than the exempt component

 

LAFH Accom – Exempt

 

LAFH Food – Exempt

Fully TaxableEmployee doesn’t qualify   for the transition or not eligible from 1 October

 

LAFH Accom – Taxable

LAFH Food – Taxable

Partially taxable accommodationAccommodation allowance   in excess of actual cost. Therefore, the amount of the allowance up to actual   cost is exempt, and the excess is taxable and subject to FBT

 

LAFH Accom – Exempt
LAFH Accom – Taxable
Fully exempt / fully taxableThe employee qualifies   for the transitional LAFHA arrangements on 1 October 2012 and then on 1   December 2012 has a material change in contract From 1 Oct to 30 NovLAFH Accom – Exempt

LAFH Food – Exempt

 

From 1 Dec to 31 March

LAFH Accom – Taxable

LAFH Food – Taxable

The reason for setting out the above 4 scenarios in a table is to illustrate some of the complexities brought about by the law changes and the need to manage these scenarios carefully in the payroll system. It must be noted that other scenarios will exist!

Change over challenges

From our experience, organisations are taking a variety of approaches to managing the change over to the new rules and/ or applying the transitional rules. A common, but generally unintended approach due to time pressures, results in three time periods across the 2013 FBT return year as follows:

LAFHA paid from 1 April 2012 to 30 September 2012

  1. LAFHA paid from 1 October 2012 to the date a decision is made
  2. LAFHA paid from the date a decision is made until 31 March 2013

The reason for the above is due to a number of factors, including:

  1. the short time frame available to employers from the date of the law change to the start date of 1 October. Basically, it may not be  physically possible to understand the law changes, whilst understanding each employee’s personal and contract position and put the appropriate change in place, including consulting with the employee (remembering that the law only received Royal Assent in September);
  2. employers required time to develop and agree a policy, and determine the appropriate treatment to apply to each employee; and
  3. some employers were / are constrained by workplace agreements and other business needs

And the above doesn’t recognise that some organisations have / had trouble with allocating responsibility for the change.

LAFH Declarations

The ATO have issued 4 approved LAFH declaration formats. It is vital that the correct declaration is completed by each employee.

Importantly, for many employers who stopped paying LAFHA to temporary residents as at 30 September, declarations up until that date are required. Whilst it may feel like rubbing salt in to the wound, it is preferable to go through that process sooner than later. If an employee leaves and a signed declaration is not available, then come FBT return time, the employer will be faced with additional FBT liabilities.

Conclusion

The transition to the new LAFHA rules is a difficult process and many organisations are still working through the rules and trying to apply these to the employee’s personal circumstances, contractual agreements and broader agreements.

Payroll has an increased role to play in categorising LAFHA payments between taxable and exempt, and splitting components between the exempt portion and the excess taxable portion.

Many employers will be faced with significant FBT liabilities due to a range of factors and continued additional workload in the short to medium term. To the extent that payroll can help to manage this burden, this will in turn help to manage risk and deliver accurate data for FBT reporting requirements in May 2013. Want to learn more:

2013 FBT Return Preparation Seminars

Registration form:  http://tinyurl.com/8b64uqw or online at: http://www.cvent.com/d/dcqx6v/1Q

Melbourne 14 March – Sydney 20 March – Brisbane 27 March