All employers should review remuneration arrangements entered into with their employees as a result of changes to fringe benefits tax legislation and amendments to income tax brackets announced in the federal budget. By TERRY HAYES of Thomson Reuters
By Terry Hayes
All employers should review remuneration arrangements entered into with their employees as a result of changes to fringe benefits tax legislation and amendments to income tax brackets announced in the federal budget.
Among many tax changes coming out of the federal budget on Tuesday are the conditions pertaining to some fringe benefits for which employers and their employees will need to take account. The FBT exemption for eligible work-related items such as laptop computers and mobile phones, for example, will be limited.
The list of eligible work-related items currently includes laptops or similar portable computers, computer software, electronic diaries, personal digital assistants or similar items, certain portable printers, calculators, mobile phones, briefcases, tools of trade and protective clothing.
The Government has announced that the FBT exemption will only apply where these items are used primarily for work purposes and will be limited to one item of each type per employee, per FBT year unless it is a replacement item. The rules apply from budget night onwards.
With the exception of mobile phones, computer software and protective clothing, the current FBT exemption for work-related items is available without any requirement that their actual use be work-related.
The list of FBT-exempt work-related items will also be clarified to deal with advances in technology, and will be extended to all work-related portable electronic devices, including those with multiple functions (for example, a mobile phone that also has email, internet, diary, photographic and GPS functionality).
The Government has also announced that the income tax law will be amended to disallow employees from claiming depreciation for the work-related percentage of FBT-exempt items. This will prevent taxpayers claiming depreciation in these circumstances from obtaining a double benefit.
The FBT exemption for private use of business property will be tightened by excluding meals provided as part of a salary sacrifice arrangement.
The existing FBT exemption allows employees with a “meal card” arrangement to purchase meals out of their pre-tax income. Under a “meal card” arrangment, an employer pays for an employee’s meals, provided by a third party (for example, a cafe or catering service) located on, or delivered to, the employer’s premises.
The Government says that the FBT exemption was originally intended to exempt benefits that were modest in amount. This rationale does not apply to “meal card” arrangements.
This measure will not affect subsidised canteens that are provided to all staff and that are not part of a salary sacrifice arrangement.
Terry Hayes is the senior tax writer at Thomson Reuters, a leading Australian provider of tax, accounting and legal information solutions.