Australia: 2012 – Changing some of the FBT "sacred cows"

Last Updated: 7 April 2012
Article by Stephen Rosenstrauss

The 2012 Fringe Benefits Tax (FBT) year-end has come and gone, so once again, employers will be looking at what has changed over the last twelve months and how that will affect the employer's liability for FBT.

In preparing their FBT returns, employers should be aware of recent changes that have been made to the FBT law, as well as a number of changes that have been flagged which will affect the 2012-2013 FBT liability.

Motor Vehicle Fringe Benefits

The most significant change to the FBT for the 2012 year was the announcement in the May 2011 Federal Budget of the abolition of the tiered system of "statutory percentages" used in calculating the taxable value of a motor vehicle fringe benefit under the statutory formula method. Under the old system, four different statutory percentages ranging from 26% to 7% applied, depending on the annualised kilometres travelled by the relevant vehicle. Now, for motor vehicles purchased or otherwise made available for the first time on or after 10 May 2011, a flat rate statutory percentage of 20% will apply. That new rate will however be phased in over a 4-year period, as explained in the table below.

The existing 4-rate system will continue to apply to motor vehicles that were held on 10 May 2011. Thus, employees travelling less than 15,000km p.a. will not benefit from the reduction in the statutory rate until they change their car.

The changes were introduced because of the perception that the existing thresholds encouraged employees to drive to a target distance to fall into a lower tax rate, and thus, the new measures were seen to have an environmental purpose, as well as the potential budget saving of $954 million over the forward estimates period. Employers acquiring new vehicles for employees with high business use may need to consider other means of calculating the manner in which FBT is to be re-charged to the employee's salary sacrificed arrangements, such as using the operating cost method. Your Moore Stephens tax adviser can assist with this calculation.

Other thresholds

The Australian Taxation Office (ATO) has released the amounts that apply as various statutory thresholds and applicable rates for the 2011-2012 FBT year, as detailed below:

Other areas to note

  • During the year the ATO released a ruling which clarified the "base value" of a car. Where an employee contributes to the purchase price of a car, either by cash or by making their own vehicle available as a trade-in, the base value of the car benefit will be the amount paid by the employer/lessor, (i.e. an amount net of the employee's contribution).
  • Where a mobile phone or similar item is treated as an exempt work-related item, and the monthly call costs are exempt, the exemption will extend to internet data usage fees.
  • The ATO does not consider shopping centre car parks that provide free parking for a period (e.g. 3 hours) and thereafter charge penal rates to discourage all day parking to be "commercial parking stations" for the purposes of determining if there is a car parking fringe benefit.
  • Where a loan is made to an employee who is also a shareholder of a private company, there will be no loan fringe benefit if the loan would result in a deemed dividend being made to the borrower (even if the private company had no distributable surplus and the amount of the deemed dividend was therefore "nil").

Fly-in Fly-out ("FIFO") Arrangements

Legislative amendments have extended the FBT exemption for FIFO arrangements to situation where Australian residents travel to work in a remote location overseas. This will put those employees on the same footing as employees who have a FIFO arrangement for remote locations within Australia. The amendments apply retrospectively to benefits provided since 1 July 2009 and employers that believe they may be affected should consult their Moore Stephens tax adviser to determine whether an amended return can be lodged and refund sought.

Living Away From Home Allowances ("LAFHAs")

Changes to the rules by which LAFHAs are taxed have been announced and will, if enacted, apply to all LAFHAs with effect from 1 July 2012. The changes are being introduced because of the increasing use of LAFHAs to recharacterise income into tax-advantaged payments, thereby putting local employees (and the Revenue) at a disadvantage. The changes proposed will mean that:

  • Access to the LAFHA tax exemption for temporary residents will be limited to those who maintain a residence for their own use in Australia, which they are living away from for work purposes, such as "fly-in fly-out" (FIFO) workers.
  • Individuals will be required to substantiate their actual expenditure on accommodation and food beyond a statutory amount.
  • Permanent residents will not be affected by these changes, unless they are receiving a LAFHA in excess of their actual expenses. The Government says the changes will not prevent temporary residents who are FIFO workers in Australia from accessing the tax concession, and will not affect employees who receive allowances for having to travel from their usual place of work for short periods.

LAFHAs paid by an employer to an employee as compensation for being required to live away from home will no longer be treated as fringe benefits and the amounts will be included in the employees assessable income (as they were prior to the introduction of the FBT in 1986).

Permanent residents will be able to claim an income tax deduction for accommodation expenses they can substantiate and for food expenses beyond a statutory amount. Temporary residents who maintain a home in Australia for their own use and who are required to live away from that home to perform the duties of their employment will be able to claim an income tax deduction for their actual expenses. Allowances for other temporary residents will be taxed like other forms of income under the income tax system.

Employers who provide other LAFHA benefits will continue to be exempt from FBT on those benefits provided to permanent residents and to temporary residents maintaining a home in Australia, from which they are living away for their work.

Employers who provide direct LAFHA benefits to other temporary residents will be liable for FBT on those benefits.

Moore Stephens has made a submission to Treasury on the impact of the proposed changes. Employers paying LAFHAs are encouraged to consult with their Moore Stephens tax adviser regarding the impact of these changes on employment and FBT arrangements.

In addition, the ATO have reiterated their comments from the previous year regarding their compliance crackdown regarding employers' FBT obligations. In particular, the ATO have written to more than 2,000 businesses which had purchased exempt vehicles and had not registered for FBT, reminding them that the exemption relates to personal usage as well as body type. Further details of the ATO FBT compliance program can be found in the Moore Tax News article of 15 April 2011 (click here to access the article).

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Stephen Rosenstrauss
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
Accounting and Audit
Anti-trust/Competition Law
Consumer Protection
Corporate/Commercial Law
Criminal Law
Employment and HR
Energy and Natural Resources
Environment
Family and Matrimonial
Finance and Banking
Food, Drugs, Healthcare, Life Sciences
Government, Public Sector
Immigration
Insolvency/Bankruptcy, Re-structuring
Insurance
Intellectual Property
International Law
Law Practice Management
Litigation, Mediation & Arbitration
Media, Telecoms, IT, Entertainment
Privacy
Real Estate and Construction
Strategy
Tax
Transport
Wealth Management
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.