What is FBT Anne Harvey – Group Tax Manager, Corporate Finance

What is FBT Anne Harvey – Group Tax Manager, Corporate Finance

What is FBT
Anne Harvey – Group Tax Manager, Corporate Finance
Objectives
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What is FBT
What does Taxable Value mean
How is FBT calculated
Types of benefits which attract FBT
When is FBT charged
Update on LAFHA Reforms
Understand Reportable Fringe Benefits
Fringe Benefits Tax - Facts
FBT year 1 April to 31 March
Tax Rate 46.5% - Calculated on Grossed Up Taxable Value
FBT paid by employer – UNSW
Includes benefits under a salary sacrifice arrangement
Reportable Fringe Benefit included on Payment Summary in June, if > $2000
FBT is tax on benefits (right, privilege, service or facility)
 provided to employees & associates (relative, partner/ spouse, child)
 by an employer, associate of employer or under an arrangement with a
third party
 in respect of employment – reward for service
“Employee” includes current, former and future employees
If pay Salary  PAYG deduction  Employee pays tax
If provide fringe benefit  no PAYG deduction  Employer pays tax
FBT Calculated on Taxable Value
What is Taxable Value
Determined by the rules applying to each category of fringe benefit
Generally the cost of the benefit
Some benefits concessional tax, e.g. Motor Vehicles
Some reductions and exemptions provided in legislation
GST Impact
• Taxable Value based on GST inclusive amount
• FBT payable depends on whether entitlement to ITC credit
• Can claim Input Tax Credit for GST paid
Important correct GST codes are used and GST amount is correct.
FBT Calculation
Type 1
Entitlement to ITC
Gross Up rate
2.0647
Type 2
No entitlement to ITC
Gross Up rate 1.8692
Taxable Value – incl GST $1000.00
Taxable Value - no GST
* Gross Up rate
Grossed up TV
FBT rate
FBT cost
* Gross Up rate
Grossed up TV
FBT rate
FBT cost
2.0647
$2064.70
46.5%
$960.09
$1000.00
1.8692
$1869.20
46.5%
$869.18
PRT = $1000 * 1.8692 * 5.45% (NSW PRT rate) = $101.87
Types of Fringe Benefits
UNSW applicable
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Car – available for private use
Expense
 reimburse expense to employee
 pay third party for expense incurred by
employee
Property
 Provide free or discounted property
Debt waiver – forgive employee’s debt
Loan - charge no or low interest
Housing - right to use accommodation and
usual place of residence
Living Away From Home Allowance
Residual – not fit a specific category
Tax-exempt body entertainment
Non UNSW
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Car Parking – at or near work and
commercial parking station within 1km that
charges fee for all day parking which above
threshold. (Exemption for Educational
Institution in legislation)
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Entertainment (Tax-exempt body
entertainment applies)
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Airline transport - airline employees/ travel
agents; free or discounted stand by travel
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Board – accommodation and entitlement to
2+ meals a day. Remote construction, oil rig,
resident teacher at boarding school.
Examples of Benefits Incurring FBT
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Salary packaged Motor Vehicles or UNSW provided – personal use.
Medical Insurance - inpatriates
Permanent Residency – application, police & medical checks, lawyers fees
(Exempt if to enter Australia on relocation)
Gifts, awards and prizes - $300 or more
Travel for family – SSP, accompany employee on business (exclude relocation)
VC Child care support
Furniture purchase in lieu of relocation transport/ relocation allowance
Kensington College accommodation and meals – provided to tutors/employees
Reimburse deferred HECS/HELP fees
Write off Advance - Debt waiver
Outstanding Advance not acquitted within 6 months – Loan
Home phone/ internet – private %
Dual purpose travel – business and private
Entertainment – tax exempt body
Reduction or Exemption with Declaration
Benefit
Declaration
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Home internet, home telephone, fax
Generally charged to 6649/6630
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FBT 12/14. Reduction for business use %
2.
Course fees – Masters, postgraduate (not
short courses)
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FBT 21. Directly related to current job and
entitled to income tax deduction.
3.
Tax return preparation
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FBT 21. Income Tax deductible
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Where would be entitled to Income Tax
deduction if incurred expense
4.
FBT 21. Income tax deductible
Reduction or Exemption within legislation
• Work related item – portable
electronic device. Laptop,
portable printer, mobile phone,
electronic diary, PDA. Limit 1
item per FBT year – same
function
• Minor benefit < $300 provided
infrequently & irregularly (not
for entertainment)
• Professional memberships
• LSL awards $1000 for 15 yrs,
+$100 each additional year
• Otherwise deductible
• Relocation transport
• Relocation consultant
• Temporary accommodation on
relocation (limits)
• Sale/purchase new home –
relocation (conditions)
• Removals and storage
household goods (within 12
months)
Entertainment v Sustenance
• Social – FBT
• Complete working day
in comfort –
Sustenance
• CPD seminar sustenance
• Overtime –
Sustenance
• Employee travelling –
Sustenance
• After work - FBT
Why
What
When
Where
• How elaborate
• Sit down meal – FBT
• With alcohol - FBT
• Finger food –
sustenance
• Coffee sustenance
• On premises – less
likely entertainment
• Off premises – more
likely entertainment
Entertainment – FBT
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Social function, farewell
Party, Christmas party
Restaurant meals
Business lunch & drinks
Celebrations, Dinners
Spouse meal of employee
travelling on business
Non travelling employee (when
dines with travelling employee)
Morning, afternoon tea, light
lunches – associates
Leisure or amusement activities
Sporting activities, golf days
Gym membership, sporting club
memberships
Holiday
Theatre/movie ticket
Cruises
Sustenance – no FBT
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Morning and afternoon tea for
employees
Birthday cake – morning tea for
employees
Light lunches, sandwiches, finger food,
salad, juice, etc for employees
Light breakfast at training seminar –
incidental to seminar
Finger food and light refreshments
(with moderate alcohol) immediately
after training or CPD seminar –
incidental to seminar
Meal at seminar that goes for over 4
hours
Meal (with alcohol) while travelling on
business - employee
Tea / coffee – employee
Overtime meal in office
Travel Benefits
Business Purpose
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Predominantly business undertaken
Considered Incidental to business –
extra day to acclimatise
Weekends during business period, e.g.
2 week business trip
Day to prepare/ wrap up
Make Flight connections
Due to flight availability/ delays
1 day Stopover en route – no extra cost
Day between business meeting
Dual Purpose
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Travel to conference then holiday
Holiday at same or different location
Book Annual Leave days in myUNSW
Family accompanies
Private portion 40% or more of total days
Travel Allowance only for business days
Frequency of trips
No restrictions on private travel
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Flight cost split 50/50 between business
and private  FBT on 50% private
If employee pays 50% of airfare directly to
Travel Agent  No benefit  No FBT
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Living Away From Home
Currently
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FBTAA provides concessional taxation
to LAFH benefits
LAFHA is compensation for additional
expenses & disadvantages suffered
due to employee being required to live
away from usual place of residence in
order to perform employment duties
Required by employer to move
Temporary period – fixed term contract
Intention to return to live at former
locality
Employee provides a LAFHA
declaration each FBT year
Tax Implications
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Employee Salary Sacrifices for Rent
and F&D
Managed by HR through Payroll
Rent – No PAYG, No FBT
F&D – No PAYG, No FBT on exempt
statutory amount (i.e. >$42pw per
adult up to ATO rate)
No Payroll Tax - Exempt Fringe Benefit
LAFHA not subject to SGC
No Workers Compensation - Exempt
Fringe Benefit
Living Away From Home Reforms Background
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2010 - ATO started to take stricter view on LAFHA in Private Rulings issued
Mid 2011 – ATO sent review letters to some organisations requesting information
Mid 2011 – ATO audit letters
29 November 2011 – Treasury released Consultation paper on proposed LAFHA reforms
3 February 2012 – Submissions due on Consultation paper
UNSW as part of Go8 made submission to Treasury outlining significant impacts of
reforms
Large number of Accounting bodies and other organisations also made submissions
Late 2011 – HR advised Faculties to be aware of changes in recruitment discussions
February 2012 – HR arranged for PwC to provide information session to LAFHA recipients
8 May 2012 – in Federal Budget further details released on proposed reforms – expected
start date 1 July 2012
Exposure Draft and Explanatory Materials released
28 June 2012 – Bill introduced to winter sitting of Parliament
Bill not yet been passed – new start date 1 October 2012
Living Away From Home Reforms
Proposed
Reforms
Transitional
Rules
• Employment contract entered into after 8 May
2012
• Any material change to existing employment
contract e.g. time extension, working hours,
salary (except EBA), related entity
• Permanent residents who have employment
arrangements in place prior 8 May 2012
• Foreign/temporary residents maintaining
Australian home that required to live away from
and employment arrangement prior 8 May 12
• 12 month time limit not apply
• LAFHA until 1 July 2014 or new employment
contract
Living Away from Home Proposed Reforms
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Treat LAFHA as part of
employee’s assessable income
Allow an Income Tax deduction to
employees eligible for LAFHA
 For reasonable expenses
incurred and substantiated for
accommodation
 For food beyond statutory
amount. If exceed specified
amount, substantiate full
expense
 Maximum period of 12 months
 Retain written evidence for 5
years
Eligibility
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Required by employer to live away
from Australian residence
Maintain a home in Australia
Ownership interest in home
Home which living away from must
be available for their personal use
and enjoyment at all times
Cannot be rented out or sublet
Expectation to return to live at
former residence
Living Away From Home Reforms
Who impacted
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Fixed term employees from Overseas no longer eligible for LAFHA from 1 Oct
2012
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Domestic employees on LAFHA if
change to contract
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Visiting Academics Living Allowance –
from 1 Oct 2012 no longer exempt from
FBT as not living away from Australian
residence
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SSP – accommodation or living expense
paid/reimbursed – from 1 Oct 2012 only
exempt if satisfy proposed LAFHA rules
Tax Implications
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Employee - Overseas employee now
taxable salary from 1 October 2012
Employer
 Additional Payroll Tax - no longer
LAFHA
 Additional Workers Compensation
 Additional SGC
Employer subject to FBT on LAFHA
benefits provided to employees not
eligible to claim income tax deduction
Employer subject to FBT on F&D for
employees eligible for LAFHA on first $42
per week per adult, $21pw per child
FBT Applicable Accounts in
General Ledger
GL Account
Description
6457
6459
6501
6613
6619
6623
6624
6626
6630
Entertainment
Entertainment – Recreational
Uniforms FBT Payable
Staff Exp Membership Fees
Staff Gifts & Awards $300+
Staff Exp –Recognition Awards
Staff Exp - Education
Staff Exp – Childcare
Staff Expenses FBT
FBT Accrual A/c
6662
6687
6663
6664
6687
6692
6682
6687
If expenses charged to the GL account, FBT will be accrued at month end
Accrued FBT v Actual FBT
Throughout Year
Expense – FBT account
FBT accrual
FBT Return
Actual FBT cost
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Accrued FBT cost
Adjustment to FBT charge
Overcharged - Credit
Undercharged - Debit
Reportable Fringe Benefits
Employee Receives More Than $2000 in RFB in year include
Grossed Up value of benefits on Payment Summary at June
• Reportable Benefits
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Motor Vehicles
LAFHA
Expense Benefit
Property Benefit
Residual Benefit
Housing
Loans
Debt waiver
Recreational entertainment
• Non Reportable Benefits
 F&D Entertainment
 Hire/Lease entertainment
facility (i.e. corporate use/
exclusive use facility)
 Car Parking
Reportable Fringe Benefit – Payment Summary
Employer
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RFB Grossed Up using lower
gross up rate 1.8692
Example:
4 family airfares @ $1500 = $6000
TV (no GST)
$6000
FBT $6000*1.8692*46.5% = $5215
RFB $6000*1.8692
$11215
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Employee
Not included in assessable
income
Included for rebate and
surcharge calculations
Medicare levy surcharge
Super co-contributions
Child support obligations
HELP repayments
Dependent tax offsets
Income tested government
benefits
Questions
Further Information
Finance website:
http://www.fin.unsw.edu.au/PoliciesProcedures/AccountingManual/FBT.html
Contact: Anne Harvey - Ext 51635. Email: [email protected]
Eric McCallum – Ext 52825, Lucy Lowe – Ext 51204