Docstoc

FBT SEMINARS

Document Sample
FBT SEMINARS Powered By Docstoc
					                                                                                Taxation Services



                    Fringe Benefits Tax
                           2002




                                                                  Sponsored by the Department of Treasury and
                                                                         Finance Tax Compliance Unit

3
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                           Agenda

                                                         Introduction
                                                         Disaggregation of FBT
                                                         Changes for 2002
                                                                     New Developments
                                                                     Recent FBT Cases
                                                                     Administration




4
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Agenda

                                      FBT and GST Interaction
                                      Lessons Learnt
                                                      Common Mistakes
                                                      Reportable Fringe Benefits

                                      Questions, Issues and Experiences




5
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Taxation Services


                                 Disaggregation
                                     of FBT




6
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Disaggregation

            States and Territories are now able to devolve the
             administration and payment of FBT to a
             departmental level, consistent with treatment given
             to the Commonwealth

            If a State or Territory chooses to devolve its FBT
             responsibility, the State or Territory must make a
             nomination and provide the Commissioner with
             certain information to facilitate the process



7
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Disaggregation

       The nomination must be given to the Commissioner
        on or before 21 May in the year of tax in which the
        nomination is to take effect
       The nominated State body is deemed to be a
        company, and other nominated State bodies, the
        State itself and each authority of the State is taken to
        be a related company
       Consider transitional events and need to write to the
        ATO for ‘Agreement’


8
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Disaggregation

       Eligible bodies are those prescribed by the relevant
        State or Territory legislation outlined in the Taxation
        Laws Amendment Act (No.2) 2001
             An    agency within the meaning of section 4 of the Public
                 Sector Management and Employment Act 1998 (VIC)
             An    office referred to in subsection 16(1) of the Public
                 Sector Management and Employment Act 1998 (VIC)

       Review ‘FBT Crown Disaggregation’ paper issued
        20 November 2001 by Tax Compliance Unit, DTF


9
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Taxation Services


                                              Changes
                                              for 2002




10
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                      a) New Developments




11
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Annual Updates

               Statutory interest rate for 2002 is 7.55%
                      (2001                   – 7.3%)

               Car parking threshold for 2002 is $5.79
                      (2001                   - $5.46)

               Non-remote area housing indexation figure for
                Victoria is 1.031 (TD 2001/7 lists other
                States/Territories)
                      (2001                   – 1.026)

12
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                       Remote Area Housing
               Exempt for all employers
               Applies to “housing fringe benefits”
                             Employer owns and provides house to employee,
                              or
                             Employer rents house and provides to employee
                             Does not apply to reimbursement of rent

               Other housing assistance eligible for the existing
                50% reduction only
                             Expense payments, home ownership, residential
                              fuel

13
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                       Remote Area Housing


                  Extended definition of “remote area”
                                  Applies to public hospitals, police forces,
                                   charities etc
                                  ATO PS 2000/6 FBT Exemption on Remote
                                   Area Housing
                                                 Includes a list of remote and non-remote towns
                                                 under the extended definition




14
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Police Service

             Section 47 of the FBTAA has been amended to
              extend the residual benefits exemption where:
                          A person is provided with a residual benefit arising
                           from the provision of travel on public transport
                           between the person’s place of residence and primary
                           place of employment;
                          The person is an employee of a government body;
                           and
                          The persons duties are performed in a police service.



15
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                        Charitable Institutions


            A charitable institution is an organisation
             established for:
                            The relief of poverty;
                            The advancement of education;
                            The advancement of religion; or
                            Other purposes that are beneficial to the
                             community.



16
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                        Charitable Institutions
                Institutions whose principal activity is promoting
                 the prevention or control of disease in human
                 beings are now entitled to:
                       Concessional                              FBT treatment;
                       Status                    as tax deductible gift recipients; and
                       Exemption     from sales tax on goods for use by the
                          charitable institution (before the introduction of the
                          GST).

                Retrospective application from 1 April 1998



17
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                        Charitable Institutions

             Section 57A of the FBTAA has been amended to
              provide that a benefit is an exempt benefit if:
                             The benefit is provided in respect of the
                              employment of an employee;
                             The employer is a charitable institution; and
                             The principal activity of the charitable institution is
                              promoting the prevention or control of diseases in
                              humans.



18
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                       b) Recent FBT Cases




19
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                              Recent FBT Cases

               Mines Rescue Board of NSW v Commissioner of
                Taxation [2000] FCA 382
                             The Mines Rescue Board (NSW) was found not to
                              be a “public benevolent institution” for the purposes
                              of s 57A of the FBTAA

               AAT Case [2001] AATA 155, Re Oliver and
                Commissioner in Taxation
                             Disguised payments to avoid salary cap were
                              characterised as salary and wages, and not fringe benefits



20
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                              Recent FBT Cases
             Hollis v Vabu Pty Ltd (2001) 47 ATR 55
                             The relationship between a bicycle courier and a
                              company which allocated jobs to a large number of
                              bicycle couriers, was found to be that of employee
                              and employer

             AAT Case [2001] AATA 821, Re Mann and
              Inspector-General in Bankruptcy
                             The salary sacrifice component of a remuneration
                              package is part of the "assessed income" of a
                              bankrupt under s 139S of the Bankruptcy Act 1966
                              for the purpose of determining the amount of the
                              bankrupt's contribution


21
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  c) Administration




22
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Administration
                FBT return must be lodged, with any balance of
                 tax outstanding, by 21 May 2002, regardless of
                 your notional tax amount.
                              Tax agent’s extension no longer available

                FBT instalments:
                              21 July, 21 October, 21 January, 21 April

                4th quarter instalment:
                              Due for payment on 21 April 2002
                              Mandatory for all instalment payers



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Taxation Services


                                   FBT and GST
                                    Interaction




24
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  FBT and GST

                   FBT legislation changed after GST legislation
                    introduced

                   Rationale is to ensure no additional benefit in
                    providing items as fringe benefits

                   No change to the net cost to employer

                   New gross-up factor – TR 2001/2

                   GST-inclusive value/cost for FBT purposes


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  FBT and GST

                  No GST charged to employees

                  Input tax credits (ITC) are available to employer
                                  Unless the supply is input taxed or GST free

                  Now GST on employee contributions paid out of
                   post-tax employee salary to an employer




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Input Tax Credits
           Availability determines FBT gross-up factor
           GSTR 2001/3 - GST and FBT interaction
           Claiming ITCs
                         Registered entity
                         Creditable purpose (acquired in carrying on an
                          enterprise)
                         Non-creditable purpose (private or domestic nature;
                          relates to an input-taxed supply)

           Best practice - pass ITC back through to employee

Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Gross-Up Factor
              Fringe benefits where employer entitled to ITC
                              Type 1 benefits
                              Higher gross-up factor of 2.1292


              Fringe benefits where employer is not entitled to
               ITC
                              Type 2 benefits
                              Lower gross-up factor of 1.9417
                              Eg benefits provided before 1 July 2000, input-
                               taxed supplies, GST free supplies

28
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                 Employee Contributions

                     Reduce FBT taxable value

                     Recipient contribution for GST taxable supply

                     Employer liable for GST

                     GST payable is 1/11th of contribution

                     Tax period in which contribution received




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Specific Benefits

                                                 Cars
                                                 Meal entertainment
                                                 Expense payments
                                                 In-house property
                                                 LAFHA
                                                 Discussed in more detail…



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                           Cars

                                                           Leased v owned
                                                           Date acquired
                                                                     Pre v post 1 July 2000
                                                                     Pre v post 23 May
                                                                      2001

                                                           Flowchart




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                             Car Fringe Benefits
Flowchart of FBT Gross-Up Factor to Apply for Calculating the Grossed-Up Taxable Value for FBT
                                           Liability
                                                                                                                                    Type 2
  Employer/provider                                No                 Car owned?         Yes      Purchased on or      No      lower gross-up
  solely or partially input                                        (ie not leased car)           after 1 July 2000?             factor to apply
  taxed?                                                                                                                    (multiply by 1.9417)
                                                                              No                                             for entire period of
                           Yes                                                                             Yes
                                                                                                                            ownership of the car.

                Type 2                                        Lease continues on                                                        No
           lower gross-up                                     or after 1 July 2000
                               No                                                                                      No    Sales tax exemption
           factor to apply                                    and lease payments               Purchased car on or
         (multiply by 1.9417).                                are subject to GST?              after 23 May 2001?           would have applied? *
                                                                                                                             (eg PBI employer or
                                                                                                                              Government plated
                         Type 2                                                          Type 1                                   pool car).
                   lower gross-up                                                   higher gross-up                                     Yes
                    factor to apply                       Yes                        factor to apply
               (multiply by 1.9417)                                                                                                 Type 1
                                                                                 (multiply by 2.1292)            Yes
                for period car held                                                                                            higher gross-up
                                                                                  for period car held
                 and provided as a                                                                                              factor to apply
                                                                                  and provided as a
               fringe benefit before                                                                                        (multiply by 2.1292)
                                                                                  fringe benefit after
                      1 July 2000.                                                                                           for entire period of
                                                                                       1 July 2000.
                                                                                                                            ownership of the car.
      * that is, no 100% blockage of credit for GST payable on purchase of the car between 1 July 2000 and 23 May 2001 under GST transitional provisions




 Liability limited by the Accountants Scheme, approved under the
 Professional Standards Act 1994 (NSW)
                                                             Meal Entertainment


                     An employer can claim input tax credits for
                      meal entertainment to the extent that the
                      expense is subject to FBT

                     Flowchart




33
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
           Was GST paid on the                                Were the expenses             Was a FBT election           All input tax credits
           meal entertainment                                 incurred before               made to calculate the        available. Type 1
                               Yes                                                   Yes                           Yes
           expenses?                                          1 November 2000 (for          taxable value of the         benefit. gross-up at
                                                              employers on monthly          meal entertainment           2.1292.
                                                              tax periods) or 1             under either the 50/50
                                                              January 2001 (for             split method or 12
                                                              employers on quarterly        week register method?
                           No                                 tax periods)?


                                                                             No                  No
                                                                                                           Were the input tax credits claimed
           No input tax credits                                         Input tax credits available        during the year calculated using the
           available therefore                                          only to the same extent as         same method as that used in the
           Type 2 benefit. gross-                                       the benefit is subject to FBT.     FBT return?
           up at 1.9417.                                                Type 1 benefit. gross-up at
                                                                                                           NB you need to have made similar
                                                                        2.1292.
                                                                                                           FBT and GST elections.
                                                                                                                No                        Yes

                                                                       Adjustment event for those tax periods after 1    No adjustments
                                                                       November 2000 or 1 January 2001 (as
                                                                       applicable). The decreasing adjustment is to
                                                                       be calculated and included in the BAS for the
                                                                       tax period commencing 1 June 2001.
                                                                       NB no adjustment note required.

34
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                             Expense Payments

                  Taxable value
                                  GST-inclusive value of the amount paid or
                                   reimbursed

                  ITC entitlement depends on type of expense
                                  Generally, if expense gives rise to FBT, an ITC
                                   will be available – higher gross-up factor




35
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  In-House Property
               Taxable value is reduced by $500
               How is this reduction applied where Type 1 and
                Type 2 benefits are provided?
                             ATO view
                             Reduce Type 1 benefits first (to nil)
                                           Gross up balance at 2.1292
                             Then reduce Type 2 (if any excess)
                                           Gross up balance at 1.9417
                             NB manufactured benefits are always grossed up
                              at 1.9417


36
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  LAFHA


                         GST does not impact the taxable value of a
                          Living-Away-From-Home Allowance

                         Still based on $42/adult and $21/child

                         Type 2 benefit

                         Gross up at 1.9417



37
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                        Input Taxed Suppliers

            Division 71
            Amended from 1 October 2000
                            Extended to partially input-taxed suppliers
                            Not limited to financial supplies
                            Can apply if exceed financial acquisition threshold
                            Denies all ITCs for creditable acquisitions provided
                             as fringe benefits
                            Type 2 benefit – apply 1.9417 gross-up factor


38
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                        Input Taxed Suppliers


                          Before the amendment
                                 2.1292    gross-up factor applied unless wholly
                                    input-taxed
                                 Increase                        in FBT liability exceeded ITC
                                 Applied   only to employers making financial
                                    supplies




39
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                             Pre 1 October 2000

                                                                      50% input       100% input
                                                                    taxed employer   taxed employer


                    Fringe Benefit (GST inclusive) 11,000                              11,000

                    FBT                                                11,359          10,359

                    Input Tax Credit                                     (500)             -

                    Cost of Benefit                                    21,859          21,359




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                          Post 1 October 2000

                                                                    50% input       100% input
                                                                  taxed employer   taxed employer


                Fringe Benefit (GST inclusive) 11,000                                11,000

                FBT                                                  10,359          10,359

                Input Tax Credit                                       -                 -

                Cost of Benefit                                      21,359          21,359




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                        Recommended Steps

                               Identify benefits provided

                               Is an ITC available?

                               Consider Division 71 of the GST Act

                               Identify the GST-inclusive value

                               Apply Type 1 or Type 2 gross-up factor

                               Calculate FBT

42
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                               Salary Packaging Policies
             Charge employees package only the net after-GST
              ITCs
             Consider cost v benefit of packaging
             Recommended do not package below industrial
              instrument (ATO Ruling TR 2001/10)
             Document policies and procedures
             Reimbursement v payment direct
             Negotiate and agree with employees


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Taxation Services


                                                 Lessons
                                                  Learnt




44
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Common Mistakes

             Entertainment
                    Including  meal entertainment, “official hospitality”,
                       and other non-meal entertainment
                    Use               of the meal entertainment valuation rules
                    No   usual exemptions or exclusions available under
                       50/50 split method (eg FBT payable on non-
                       employee entertainment)




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Common Mistakes

                 Cars
                        Replacement                               cars not identified and/or valued
                        Replacement                               cars calculated as being one benefit
                           only
                        Classification  of employee’s travel (ie business
                           versus private distinction)




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Common Mistakes

                       Living-away-from-home benefits
                             Not    correctly distinguishing employee’s status –
                                 travelling versus living-away-from-home versus
                                 relocation
                             Different                           tax treatment depending on status
                             21-day     rule is only a “rule of thumb”- need to
                                 consider each employee on a case-by-case
                                 basis, including family circumstances, etc




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                        Reportable Fringe Benefits

         Applies to fringe benefits provided to employees
          since 1 April 1999
               Only   to benefits subject to FBT, and not specifically
                  excluded from reporting

         Applies to all employers - including exempt and
          rebatable employers (ie hospitals, PBI’s, charities)

         Fringe benefits are reportable where the taxable
          value of an employee’s total fringe benefits exceeds
          $1,000


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                             Reportable Amount

                 Include the grossed-up taxable value on
                  employee’s payment summary (formerly group
                  certificate)
                 Gross-up factor is always 1.9417
                              Similar to salary gross-up factor

                 No impact of the new gross-up factor on
                  reportable fringe benefits amounts
                              But now need two sets of calculations



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                             Reportable Amount

                 Need to communicate to other departments or
                  through DPC where reportable fringe benefits
                  are provided to employees of another
                  department
                 New PS 2002/7 – No need to amend reportable
                  fringe benefits on group certificates where
                  incorrectly stated by <$195 per employee



50
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Excluded Benefits
                                 Car parking
                                 Meal entertainment, but not other
                                  entertainment
                                 Entertainment leasing facilities
                                 Remote area housing related benefits
                                 Remote area residential fuel
                                 Remote area food freight costs



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Excluded Benefits


                     Remote area occasional travel
                     Reducible and amortised benefits
                     Certain Australian Defence Force, and other
                      Government benefits (ie prescribed in the FBT
                      Regulations)




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                              Shared Benefits

            Employers may have to allocate a shared benefit
             between a number of employees
            Allocate on a “reasonably attributable” basis
                          ATO says this means “fair and reasonable”

            Total of each employee’s share must equal the
             total taxable value of the benefit

            Employers should agree allocation with
             employees


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                      Shared Benefits - Cars

                        Taxable value of car fringe benefits calculated
                         using either:
                                     Statutory Formula method - private use days
                                     Operating Cost method - private kilometres

                        Other option to allocate may be a mixture or
                         combination of private days and kilometres

                        Consider practicalities of allocation method



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Lessons Learnt
                    Common errors
                                 Reporting on a per item basis rather than per
                                  employee
                                 Incorrectly reporting benefits where total taxable
                                  value < $1,000
                                 Reporting the wrong amount (ie taxable value
                                  rather than grossed-up taxable value)
                                 Reporting benefit “entitlement” rather than actual
                                  benefits provided
                                 Employers omitting RFB amount from group
                                  certificate/payment summary



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Lessons Learnt

                   Common errors
                                Incorrectly including excluded benefits in RFB
                                 calculation
                                Employees omitting RFB amount from income
                                 tax return
                                Not calculating allocation of RFB’s when
                                 preparing FBT return
                                Shared benefits – not being “reasonably
                                 attributable”
                                Over/under-allocating a benefit’s taxable value


Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Lessons Learnt
                     Common errors
                                  Failing to communicate the allocation method
                                   for shared benefits to employees, especially
                                   prior to preparation of the return
                                  Resultant industrial relations issues
                                  Reality check!!
                                                 Data collection and integrity issues
                                                 Realisation of the amount of time and quality of
                                                 records now required
                                                 Necessary to talk to employees!!




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Going Forward

            Gross-up RFB amount by 1.9417
                          Regardless of whether Type 1 or Type 2 benefit

            Calculate FBT liability at either the new or old rate,
             whichever applicable

            Consider whether a GST adjustment is necessary
             in respect of meal entertainment




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Going Forward

                                        Staff training

                                        Data collection and integrity issues –
                                         Information Technology / software?

                                        Record keeping and tracking
                                                      Law
                                                      Employees
                                                      ATO



Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                                                                  Help!

                                   www.dtf.vic.gov.au
                                   ATO’s FBT Guide for Employers
                                   ATO’s FBT – Your Guide to Changes
                                   www.ato.gov.au
                                   www.taxreform.ato.gov.au




Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)
                         Questions, Issues and Experiences




61
Liability limited by the Accountants Scheme, approved under the
Professional Standards Act 1994 (NSW)

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:5
posted:6/14/2012
language:English
pages:59