Travelling or living away from home - what’s the difference?
Another issue that comes up is determining whether someone is living away from home, relocating or just travelling. The ATO is looking closely at Australian taxpayers claiming living away from home (LAFH) allowances to make sure they are not incorrectly accessing the FBT concessions. If somebody is living in Sydney but travelling to Melbourne on an ad hoc basis every other week for work, they are simply travelling. They may be entitled to travel deductions but are not entitled to the FBT concessions that can apply to LAFHAs. If the person relocates temporarily to Melbourne, keeps their home in Sydney for their use (can’t be rented out), then it’s more likely they can access the living away from home allowance concessions. You need to double check to get the distinctions right.
Where a motor vehicle owned or leased by the business is used by an employee for private purposes (including travelling between home and the workplace), then FBT is an issue that needs to be managed.
Interaction between FBT, income tax and GST
If you pay FBT on a benefit relating to entertainment then the business can generally claim a deduction for the costs associated with providing the entertainment as well as the GST credits. However, if FBT does not apply to the benefit then no deduction or GST credits can generally be claimed.
Entertainment can be almost anything from food, drink, recreation such as movie tickets, to non-work based travel. If you provide any entertainment benefits to employees, such as an employee attending a business lunch, then FBT might apply.
Structuring employee salaries through a unit trust
The ATO has warned employers against complex structuring arrangements designed to channel benefits to employees using an employee remuneration trust. The most recent ATO alert looks at arrangements where the employer repays an employee’s loan through a trust. Under these arrangements, employees acquire units in a unit trust funded by a loan from the trustee. The loan is repaid by the employer using amounts salary sacrificed by employees. The result is that the taxable value of the benefit provided to the employee skirts the FBT system – a big no, no from the ATO’s point of view.
How do I know if I need to pay FBT?
If you are not sure whether you are providing fringe benefits to your employees, here are some key questions you should ask yourself:
• Do you make vehicles owned or leased by the business available to employees for private use?
• Does your business provide loans at reduced interest rates to employees?
• Has your business forgiven any debts owed by employees?
• Has your business paid for, or reimbursed, any private expenses incurred by employees?
• Does your business provide a house or unit of accommodation to employees?
• Does your business provide employees with living-away-from-home allowances?
• Does your business provide entertainment by way of food, drink or recreation to employees?
• Do any employees have a salary package (salary sacrifice) arrangement in place?
• Has your business provided employees with goods at a lower price than they are normally sold to the
What is exempt from FBT?
Certain benefits are excluded from the scope of the FBT rules. The following work related items are exempt from FBT if they are provided primarily for use in the employee’s employment:
• Portable electronic devices (e.g. laptop, tablet, mobile, PDA, electronic diary, notebook computer, GPS navigation device) that are provided primarily for use in the employee’s employment (limited to the purchase or reimbursement of one portable electronic device for each employee per FBT year);
• An item of computer software;
• Protective clothing required for the employee’s job;
• A briefcase;
• A calculator;
• A tool of trade.
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