As businesses and employers navigate through another year of the pandemic, it’s important to be aware that providing employees with perks and benefits may attract Fringe Benefits Tax (FBT).
Since the onset of COVID-19 in March 2020, the ATO has introduced a number of FBT concessions and exemptions for businesses and employers to assist them in dealing with the pandemic. Some of these FBT concessions and exemptions include:
Car fringe benefits
With working from home being common-place, the business use of employer-provided cars may have reduced substantially or ceased entirely. This may result in company cars being garaged at the employee’s residence. Previously, this would have been treated as private use and subsequently subject to FBT.
However, an FBT exemption may apply if the car was not used privately and the operating cost method was used.
Car parking fringe benefits
Many car parking stations continue to offer discounted rates amid the implementation of the various governments’ lockdowns and workplace density restrictions.
Therefore, there may be instances where an employer has provided an employee and/or their associate with a car parking benefit but no FBT liability arises. This could include the following:
- During a particular day, all commercial parking stations located within a 1km radius of your business premises are closed or are offering free parking
- On the first day of the 2022 FBT year, the lowest representative fee charged by a commercial car parking station within a 1km radius is less than or equal to the current FBT car parking threshold of $9.15. This may arise where car park rates are discounted as a result of the pandemic.
With the extended working from home arrangement during this pandemic, employers may choose to provide equipment and/or cover home office related costs for their employees.
If employer-provided items such as laptops, computer monitors or other electronic devices are primarily used for work, it will usually be exempt from FBT. Payment of home internet costs is generally considered an expense payment benefit (where the employee is reimbursed) or residual benefit.
Cancelled work functions and entertainment
Where an employer has incurred non-refundable costs due to a cancelled event, no FBT liability will arise because a benefit has not been provided to employees and/or their associates.
Additionally, the employer will not be entitled to an income tax deduction nor input tax credits on these costs as they relate to entertainment.
PPE provided to employees
For employers in the retail, hospitality, airline, beauty, health/medical and cleaning services industries, the provision of certain items to employees to protect them from COVID-19 will be exempt from FBT. These items include masks, gloves, hand sanitisers and anti-bacterial spray.
For other employers, while these benefits may not be exempt, you may be able to apply the minor benefits exemption on an employee-by-employee basis.
COVID-19 vaccination incentives and rewards
There may be tax and super consequences involved if an employer provides incentives or rewards for getting their COVID-19 vaccination or booster dose. If a non-cash benefit is provided, you may be liable for FBT unless an exemption applies such as under $300 and infrequently provided. .
Test kits and testing
Employers may require employees to undertake COVID-19 testing as a precaution before returning to work or for work-related travel purposes. Where the employer has provided for the test or reimbursed the employee for the cost of the test, a fringe benefit may arise.
However, the tests may be exempt from FBT should the following conditions apply:
- Testing is completed by a medical practitioner or nurse; and
- Testing is available to all employees.
Applying pandemic-related FBT concessions and exemptions is a nuanced and evolving area, and should be discussed with your professional adviser.
Article author: Brendon Yuen, Senior Accountant, Business Services.
This article was first published in the Autumn 2022 issue of Financial Times.