Another year has gone by … FBT Year Ends on 31 March – what you need to do

The 2020 FBT year ends on 31 March 2020. (Really?) Yes, that date is not an error as the Fringe benefits tax (FBT) year runs from April to March (unlike the Australian tax year which runs from July to June). It can be confusing at times.

What is FBT?

FBT is the short for Fringe Benefits Tax. It is a tax imposed on employers who provide certain fringe benefits they provide to their employees, including their employees’ family and associates.

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Updates from Office of State Revenue & ATO – January 2019

A few important updates from Office of State Revenue affecting businesses that is registered for payroll tax, or those who pays motor vehicle allowance to employees.

December 2018 Payroll tax lodgement due date extended

For businesses that are registered for payroll tax, the due date for lodgement and payment of your December 2018 payroll tax return has been extended to midnight 14 January 2019. You may still receive reminders to lodge by 7 January 2019 – feel free to ignore them.

New cents per km rate for work-related car expenses

The ATO has increased the cents per km rate from 66 cents/km to 68 cents/km from 1 July 2018. This change applies to eligible individuals who claims work-related car expenses under the cents per km method.

Using the new rate, eligible individuals can claim a maximum of $3,400 as tax deduction against their income.

Note the work-related car expenses deduction is still subject to the following:

  • You may be asked to show how you worked out your business km
  • There is no separate claim for depreciation expenses on the car
  • This amount includes all your vehicle running expenses.

Reasonable rate for motor vehicle allowance for Payroll tax purposes

Although the ATO has increased the reasonable rate for work-related car expenses claim to 68 cents per km from 1 July 2018, for payroll tax purposes, you are only entitled to claim 66 cents in your payroll tax returns for the 2018-2019 financial year. The 68 cents per km claim comes into effect on 1 July 2019 (2019-2020 financial year).

The motor vehicle allowance for payroll tax purposes refers to an allowance paid to an employee who uses their own car for business-related travel is exempt from payroll tax up to a reasonable amount (currently 66 cents per km for 2018-19 financial year). To claim this exemption, business km travelled must be recorded.

Do you know Aston Accountants can help you with your payroll tax matters?

We can help you in the following ways:

  • Answer your burning question: Do I have to register for payroll tax?
  • Register for payroll tax
  • Preparation and lodgement of payroll tax
  • Annual reconciliation of payroll tax
  • Liaise with Office of State Revenue in relation to your payroll tax matters

Have a specific payroll tax question? Contact us for help!

ATO eye on ‘standard’ deductions

The ATO have recently issued warnings of increased audit activity such as motor vehicle claim for 5,000kms, work-related expenses up to $300 and laundry expenses of $150. These items are claims you can make where you do not have to have kept actual receipts for every expense, however the ATO is stressing that this does not make them “standard deductions” that everyone can claim automatically.

The ATO are not saying that you cannot claim these in any circumstances, but they are saying that they can only be claimed where you have actually incurred the expense and have made a reasonable calculation of the amount you are claiming.

Motor vehicle expenses

For motor vehicle expenses you need to be able to show how you calculated the number of kilometres you travel for work and have you remembered that you cannot claim travel between home and work unless you need to carry bulky tools.

Laundry

For laundry expenses the ATO allow up to $150 claim without substantiation. However, you need to be able to show that you need to wash your registered uniform or protective clothing using the ATO’s estimate of $1.00 per full load and $0.50 per part load. So to claim the full $150, you will need to be able to justify that you wash your uniform 150 times per year.

Work-related expenses

For work-related expenses you need to be able to explain what sort of expenses they were and how they add up to the amount you are claiming. If you are claiming for a home office as part of your work-related expenses, you need to have a dedicated office space and a reasonable estimate of the number of hours that you work from home.

The ATO are concerned that a large number of taxpayers are using Motor Vehicle, Work-related expenses and Laundry as “standard” deductions when they do not actually need to incur the cost for their work.

If you have these type of deductions we will contact you prior to finalising your return to make sure you are comfortable that you could provide further information if your tax return is reviewed by the ATO.

The ATO have sent out many media releases about this in the past few weeks, so you may have already been alerted to their increased audit activity from items in the news. Here is a link to one of ATO’s media releases about the dangers of claiming unsubstantiated deductions.

There is a more comprehensive summary of the ATO’s crackdown here.

Maximize your tax deduction – Individuals

As 30 June is fast approaching, this is the best time to review your situation to see if you are able to maximize your income tax deduction to get back more tax refund (or reduce your tax liability) when lodging your 2018 tax return!

This article will focus on what individuals can do to legally maximize their tax deduction to minimize income tax liability. We will look into some work-related expenses, donations, tax agent fees, personal super contributions and income protection insurance in this article.

There will be a separate article for business owners so keep an eye on our website!

Note that we are only providing general advice on what items you may be able to claim as your tax deduction, the actual tax deductibility for certain items depend on your personal circumstances. If you would like assistance for your situation please contact us.

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FBT Updates & Reminder – Exempt Vehicle

The following article applies to those who use motor vehicles in the course of running their businesses.

FBT Motor Vehicle Exemption – Updated Guidelines

For many years, many entities have enjoyed a FBT exemption where:

  • the vehicle is a panel van, utility (ute) or other commercial vehicle (that is, one not designed principally to carry passengers)
  • the employee’s private use of such a vehicle is limited to
    • travel between home and work
    • travel that is incidental to travel in the course of duties of employment
    • non-work related use that is minor, infrequent and irregular (eg: occasional use of the vehicle to remove domestic rubbish).

These have been a grey area and have caused confusion to business owners when attempting to work out whether their vehicles are exempt or not.

The ATO has recently released new guidelines to reduce confusion and provide more certainty for employers when applying the FBT exemptions. The guidance notes relate to the clarification on the definition of an employee’s (and/or their associate’s) private use where it is ‘minor, infrequent and irregular’ for FBT purposes.

If you believe you fall under this category and would like more clarity, contact us for more information and we can talk you through this over the phone, or via email.

2018 FBT Return Lodgement

The FBT year has ended 31 March 2018. For those who require a return lodgement, your FBT Return is due by 21 May 2018. Please contact us for instructions on the lodgement of the return.

Motor Vehicle Odometer Readings

For those who provide motor vehicle benefits to employees and/or associates, it is important that you keep records of your vehicle’s odometer reading as at 31 March 2018.