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What's new in FBT for 2024: Important Developments

As business owners, staying updated with the latest fringe benefits tax (FBT) developments is crucial to ensuring financial health.

FBT 2024

In 2024, you must be aware of some significant changes in FBT regulations. This blog post will cover the most important updates directly impacting businesses.

Car Fringe Benefits: Recent Developments and Exemptions

Let's start with car fringe benefits, which recent guidance from the Australian Taxation Office (ATO) has clarified. The ATO now confirms that no car fringe benefit will arise when an employer provides a car for extensive repairs at a workshop. This exemption applies when the car is not used for private purposes and is not held by the employer during the repair period. However, it's important to note that this exemption does not extend to minor repairs or routine servicing.

Additionally, if you hire a car for three months or more and use it privately, it is considered a car fringe benefit. However, if the hire arrangement is less than three months, it is classified as a residual fringe benefit instead of a car fringe benefit.

FBT Savings and Implications for Logbook Method

Traditionally, the ATO required employees to keep records, including maintaining a logbook and using the operating cost method to evaluate car fringe benefits. However, recent ATO guidance confirms that you can use the operating cost method even when a logbook requirement has not been satisfied or maintained. This allows for more flexibility in valuing car fringe benefits.

Furthermore, if an employee pays out the residual value of a car in a novated or operating lease and the residual value is less than the market value, there are no FBT implications. However, FBT may be applicable if the employer provides a car to an employee at the end of a hire purchase agreement and the market value exceeds the employee contribution.

FBT Trap with Employer-Provided Cars and Signage

Another recent development raises a potential trap for employers who provide cars with company signage. If an employer-provided car is wrapped in signage for advertising purposes and garaged at an employee's home every night, it gives rise to a car benefit. The ATO emphasizes that private use includes any dual-purpose use with both private and business aspects. So, employers should be cautious when it comes to such arrangements.

FBT-Exemption and Tax Reporting for Electric Vehicles

Recent amendments have introduced FBT exemptions for eligible electric vehicles (EVs) provided to current employees or their associates. However, it's important to note that exempt electric cars are still reportable for the relevant employees' income statements or PAYG payment summaries.

Employer installation of an electric car charging station at an employee's home is considered a property fringe benefit, and any reimbursement for installation is classified as an expense payment fringe benefit.

FBT Concerns with Panel Vans and Utes

Employers must be cautious when applying FBT exemptions for panel vans and utes. While certain motor vehicles may be exempt from FBT if their private use is limited and minor, the ATO has extended its motor vehicle data-matching program. Under this program, the ATO will gather information from state and territory motor vehicle registry authorities for vehicles newly registered during the 2023 to 2025 income years with a purchase price exceeding $10,000.

Employee or Contractor Classification for FBT Purposes

Determining whether a worker is an employee or contractor is critical for FBT purposes. The ATO's recent guidelines highlight the importance of the legal rights and obligations of the parties under the contract. Engaging a non-individual "interposed entity" (such as a company or trust) can help reduce the risk of a worker being classified as an employee. It is essential to distinguish between legal obligations and expectations, and the fact that a worker may be conducting their own business does not always mean they are classified as a contractor.

Car Parking Benefits and Commercial Parking Stations

When providing car parking benefits to employees, employers must ensure that a "commercial parking station" within a one-kilometre radius of the car is parked. The absence of a commercial parking station within this radius allows employers to provide car parking without an FBT liability.

However, it's important to note that special-purpose parking facilities, such as time-restricted parking facilities, can still be classified as commercial parking stations. Small business entities with less than $50 million turnover may be eligible for certain car parking benefits exemptions.

FBT-Deductibility of Employee Travel and Education Costs

Recent decisions and rulings have highlighted the dangers for employers when paying for employee travel and education costs. Travel between home and work is generally not deductible for FBT purposes unless it is part of the employee's work activities. It's worth noting that Bechtel's case, which dealt with the FBT treatment of transport costs, has been appealed.

Likewise, when paying or reimbursing an employee for course fees, employers must consider FBT exemptions, such as the retaining and reskilling exemption or the minor benefits exemption. If the exemptions do not apply, employers must assess whether the benefit can be reduced under the "otherwise deductible rule" by considering whether the employee could have claimed a tax deduction for self-education costs.

It's essential to be clear on the type of cost being paid or reimbursed, as paying course fees for employees with Commonwealth Support Places (CSP) can give rise to an FBT liability. FBT also applies differently to fee-help loans versus course fees.

Updated FBT Rates and Thresholds for the 2024 FBT Year

Finally, it's worth mentioning that there have been updated FBT rates and thresholds for the 2024 FBT year. Please refer to the attachment provided for the specific rates and thresholds.

2024 FBT rates and thresholds - Final
Download PDF • 2.96MB

In conclusion, staying informed about the latest FBT developments is essential for business owners in Australia. By understanding and incorporating these changes into your financial planning, you can effectively navigate the complex world of fringe benefits and manage your financial obligations as a business owner.



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