FBT For UNSWAnne Harvey – Group Tax Manager,

Corporate FinanceEric McCallum, Lucy Lowe - Tax Team

Agenda

• What is FBT - Facts• Taxable Values • Calculating FBT• Exemptions and Reductions• Types of Benefits – Examples• Entertainment• Travel• Travelling v Living Away From Home• Visiting Academics• FBT Accounts• Common Errors• Reportable Fringe Benefits• Finance Website• Questions

Fringe Benefits Tax - Facts

• FBT year 1 April to 31 March• Tax Rate 47% (49% from 1 April 2015)• FBT calculated on Grossed Up Taxable Value• FBT paid by employer – UNSW• Includes benefits under a salary sacrifice arrangement• Reportable Fringe Benefit included on Payment Summary in June, if over

$2000 in employee benefits• FBT is tax on benefits (right, privilege, service or facility)

provided to employees & associates (relative, partner/ spouse, child) by an employer, associate of employer or under an arrangement with a

third party in respect of employment – reward for service

• “Employee” includes current, former and future employees

If pay Salary PAYG deduction Employee pays taxIf provide fringe benefit no PAYG deduction Employer pays tax

r Benefits Tax - Facts

FBT Calculated on Taxable Value

What is Taxable Value• Determined by the rules applying to each category of fringe benefit• Generally the cost of the benefit• Some benefits concessional tax, e.g. Motor Vehicles• Some reductions and exemptions provided in legislation

GST Impact• Taxable Value based on GST inclusive amount• FBT payable depends on whether entitlement to ITC credit • Can claim Input Tax Credit for GST paid

Important correct GST codes are used and GST amount is correct.

ring Benefits Tax - FactsType 1

Entitlement to ITC

Gross Up rate 2.0802

Taxable Value – incl GST $1000.00

* Gross Up rate 2.0802

Grossed up TV $2080.20

FBT rate 47%

FBT cost $977.69

ITC to claim $1000/11 = $90.91Total Cost $1000-90.91+977.69+102.83=$1989.61

Type 2 No entitlement to ITC

Gross Up rate 1.8868

Taxable Value - no GST $1000.00

* Gross Up rate 1.8868

Grossed up TV $1886.80

FBT rate 47%

FBT cost $886.80

No ITC to claimTotal Cost $1000+886.80+102.83=$1989.63

FBT Calculation

PRT = $1000 * 1.8868 * 5.45% (NSW PRT rate) = $102.83

Exemptions and Reductions in Legislation

Exemptions

• Work related item - portable electronic device – limit 1 per FBT year

• Protective clothing• Minor Benefit• < $300 – Infrequent and Irregular• Relocation – transport,

consultant• Employment Interview or

Selection• Airport lounge• Professional subscriptions• Child care or gym on business

premises• LSL awards - $1000/15 years +

$100/ additional year• Car parking• Shared accommodation for

family – no additional cost

Reductions

• Otherwise deductible with declaration - reduced by % of business use

• Relocation in employee’s car – cents/km, with declaration

• Full time education of children of Overseas employees (HR)

• Holiday transport overseas employee – 50% concession. Limit 1 trip/year

• Temporary accommodation on relocation – time limits and searching for accommodation

 

Examples of Benefits Incurring FBT

Current Policy allows for these Benefits

Be aware of FBT What can the Business Unit Control

Salary packaged Motor Vehicles - Employee pays FBT UNSW provided MV - limit personal

use

Permanent Residency – application, police & medical checks, lawyers fees where already in Australia Only exempt if to enter Australia on

relocation

Gifts, awards and prizes - $300 or more Try to structure to under $300, e.g. 2 @ $250

instead of 1 @ $500

Travel for family (excludes relocation) SSP – Limit to what Policy allows

Renewal of 457 Visa where already in Australia Only exempt if to enter Australia

Reimburse deferred HECS/HELP fees – this reimbursement of loan for employee not course fee Don’t reimburse if fees deferred

VC Child care support Furniture purchase in lieu of relocation transport/ relocation allowance Transport actual goods, not buy new

household goods

Write off Advance - Debt waiver Ensure advance acquitted promptly

Accommodation and meals – provided to tutors/employees – TKC/URC

Medical Insurance – inpatriates and expatriates

Outstanding Advance not acquitted within 6 months – Loan benefit with interest calculated Ensure advance acquitted promptly

Entertainment – tax exempt body Home phone/ internet – private use %. Only provide where large business use. Need

declaration from employee

Recreational entertainment Bowling Cruises Movie tickets

Dual purpose travel – business and private. FBT on 50% - private activity Identify upfront with employee paying 50% of

airfare

Travel Diaries Run Travel Tax Exception Report. Ensure obtained

ring Benefits Tax - Facts

• On premises – less likely entertainment

• Off premises – more likely entertainment

• Overtime – Sustenance

• Employee travelling –Sustenance

• After work - FBT

• How elaborate• Sit down meal – FBT• With alcohol - FBT

• Finger food – sustenance• Coffee - sustenance

• Social – entertainment FBT

• Complete working day in comfort – Sustenance

• CPD seminar - sustenance

Why What

WhereWhen

Entertainment v Sustenance

Sustenance (No FBT) Entertainment (FBT)

Sustenance

CoffeesMorning Teas

Overtime mealWorking lunch <$15-$20 head

Finger FoodSandwiches Fruit

Seminar nibbles snacks

ring Benefits Tax - Facts

Sustenance – no FBT(6611)

• Morning and afternoon tea for employees• Birthday cake – morning tea for

employees• Light lunches, sandwiches, finger food,

salad, juice, etc for employees• Light breakfast at training seminar –

incidental to seminar• Finger food and light refreshments (with

moderate alcohol) immediately after training or CPD seminar – incidental to seminar

• Meal at seminar that goes for over 4 hours

• Meal (with alcohol) while travelling on business – employee (7010,7110)

• Tea / coffee – employee• Overtime meal in office• Conference dinner – part of conference

Entertainment – FBT

• Social function, farewells• Party, Christmas party• Restaurant meals• Business lunch & drinks • Celebrations, Dinners• Spouse meal of employee travelling on

business• Non travelling employee (when dines

with travelling employee)• Morning, afternoon tea, light lunches –

associates• Leisure or amusement activities• Sporting activities, golf days• Gym membership, sporting club

memberships• Holiday• Theatre/movie ticket• Cruises• Team bonding without structured training

Business Purpose – no FBT

• Predominantly business undertaken• Considered Incidental to business – extra

day to acclimatise/ recovery day• Weekends during business period, e.g. 2

week business trip with weekend in middle• Day to prepare/ wrap up• Make Flight connections• Due to flight availability/ unavoidable delays• 1 day Stopover en route – no extra cost• Day between business meetings

Dual Purpose - FBT

• Travel to conference then take holiday• Holiday at same or different location• Book Annual Leave days in myUNSW and

not incidental to trip• Family accompanies• Travel Allowance/accommodation only for

business days• Frequency of trips• No restrictions on private travel

Private days more than 40% of total days

Options Flight cost split 50/50 between business

and private FBT on 50% private Employee pays 50% of airfare directly to

Travel Agent No benefit No FBT

Travel Benefits

Travel – What Days are Business and Private

Business Days

At least 2-3 hours of business in day

Unavoidable delays between business activities

Travel days to and from the business location

Travel recovery days at start or end of trip

Weekends or public holidays within business activities

Working from office or hotel where majority of day spent working

Travel Diaries

• Travel Diary - TR5 form• 6 or more nights away from home or trip not exclusively business• For Employees only, not required for students, visitors• Show Business activities undertaken, location• Show dates of activities, commencement time, duration• Attach to Serko booking under UNSW tab• If outside Serko, attach to Expense Claim, Travel Acquittal, Credit Card

reconciliations, retain in School • If No Travel Diary, FBT applies to all costs for trip. • No Travel Diary - Reminder emails, follow up in Serko

Travel > 5 nights

Complete Travel

Diary

Attach to Serko

booking

Travelling v LAFH

Short periods (ATO - 21 days)

Commercial style accommodation –

hotel, motelUnaccompanied

by familyMove from

location to locationMaintain home at previous location

Longer TermSet up new

homeLease Longer

term AccommodationAccompanied by

FamilyStay in one

place

Duration

Family

Nature of

Accommodation

Frequency of trips

Move around/ Fixed place

Travelling LAFH

ATO Travel Allowances

Within Income Tax legislation

Difference Tax Treatment Within FBT legislation

Living AllowancePay Living Allowance FBT legislation on LAFHA

Meet eligibility requirementsMeet Conditions

Does an Exemption apply

Requirements – Declarations, substantiationsLimits – Time and Dollar

No Exemption – FBT applies• F

BT is Additional cost if pay LA

• Alternatively Pay as Taxable Allowance - PAYG deductions

Living Allowance – Eligibility Requirements

from 8 May 2012• Required by employer/future employer to live away from normal residence in Australia

– Must be a home in Australia

• Employee or spouse have an ownership interest in normal residence in Australia. – Incur ongoing cost of maintaining residence, e.g. mortgage, rates, rental payments

• Maintain a home in Australia (at which they usually reside) which is available for their immediate use and enjoyment at all times while LAFH.

– Residence cannot be rented out or sublet while away– Residence can be left vacant or family continue to live there– Adult children living at home with parents specifically denied LAFH

• Expect to return to normal residence upon completion of job

• Eligibility based on exemption in FBT legislation

Living Allowance - Conditions

• LAFH concessions restricted to maximum period of 12 months– 12 months per location, per employee– If work location changes, 12 month period starts again, but distance between old and new

cannot be commutable– 12 month period can be paused if employee resumes living at usual residence, e.g. annual

leave• Employee to provide a LAFH declaration – each FBT year• Substantiate amount spent on accommodation

– Exempt from FBT actual expenditure incurred and substantiated, e.g. rental receipts, bank statements, credit card statements, statement from landlord. Excludes mortgage repayments

– Any allowance not spent on accommodation subject to FBT• Food and Drink can provide an allowance

– If not exceed ATO’s reasonable limits, no substantiation required– If exceeds ATO’s reasonable limit full amount must be substantiated

ATO sets reasonable F&D rates each FBT year. 1 April – 31 March. Rates based on location and family size.

Visiting Academics

Characteristics

• Currently employed by academic institution either interstate or overseas

• On Sabbatical leave and remunerated by existing employer

• Invited by UNSW to undertake array of activities and to observe and collaborate

• Visa limits on number of days to undertake academic or research activities (if from outside Australia)

Benefits Provided• Reimburse actual cost incurred –

airfares, accommodation, meals, incidentals

• Direct payment of expense - airfares, accommodation, meals

• Provide accommodation – stay in UNSW accommodation

• Pay allowance for living costs – accommodation, meals, other costs. Based on Travel Allowance rates and minimum salary band

• Must be reasonable: 2014/2015 Accommodation $185 per day Meals $102.55, Inc’al $18.70/day

Visiting Academics

Assessment

• Duration of Visit• Visa conditions• Payment for Living

Costs• Within Reasonable

Travel Allowance rates

• Double Tax Agreement with Visitors home country

• Supporting documentation

Tax Exemption

• Pay in AP• Traveller ≤ 90 days• DTA - Professor/

Teacher Article ≤ 2 years

• DTA - Independent Contractor Article –varying Time and Monetary limit

• Visitor assessed on payment in home country

No Tax Exemption

• Pay in HR• Visitor obtains TFN• PAYG withholding

depending on tax residency and tax free threshold

Professor Teacher Clause

Maximum 2 years

• Argentina• Belgium• China• Fiji• Germany• Hungary• India• Indonesia• Ireland

Independent Contractor

No time limit

• Austria• Canada• Denmark• Netherlands• Romania• Russia• Spain• Switzerland• Taipei• Vietnam

Visiting Academics – DTA exemption countries

• Italy• Korea• Malaysia• Netherlands• Philippines• Poland• Sweden• Thailand• Turkey

< 183 days

• Chile• Czech Republic• Malta (Max $12500)• Mexico• Slovakia• South Africa• Sri Lanka• United States of America

<90 days, Max $8000• Kiribati• PNG

Visiting Academics

Visits Up to 90 Days – Pay in AP

From Country with Professor/Teacher Article in DTAVisit up to 2 years. 18 Countries – Pay in AP

From Country with Independent Contractor Article in DTADuration varies by country – No time limit, <90 or 183 days. Some have monetary limits – Pay in AP

Other Countries, no DTA. DTA but Outside time and monetary limits. – Pay in HR

FBT Applicable Accounts in General Ledger

GL Account

645764596501661366196623662466266630

Description

EntertainmentEntertainment –

RecreationalUniforms FBT PayableStaff Exp Membership

FeesStaff Gifts & Awards

$300+Staff Exp –Recognition

AwardsStaff Exp - EducationStaff Exp – ChildcareStaff Expenses FBT

FBT Accrual A/c

66626687666366646687

-669266826687

If expenses charged to the GL account, FBT will be accrued at month end

Accrued FBT v Actual FBT

V

Common FBT Mistakes

• Benefits not charged to FBT applicable account• Gifts ≥ $300 per person, allocated to account < $300• Teaching awards treat as exempt, coded to non FBT account benefit to employee• Not include name of recipient of benefit (not required for meal entertainment) “Who was the

purchase for”• Reimburse deferred course fees – not payment for work course; payment of employee’s debt• Reimburse for additional 10% when no GST charged• Renew work visa and treat as exempt. ATO view: to continue to live and work in Australia• Permanent residency application when already in Australia and treat as exempt to live and

work in Australia• SSP airfares and split based on number of employees and family. Child airfares cheaper, may

only pay contribution to spouse airfare not full amount.• Coffees/Morning teas charged to entertainment account• Conference/workshop/seminar meals/overtime meal or while employee travelling charged to

entertainment account• Description not helpful to explain what expense for • Family accommodation in same room as employee, no extra cost – can exempt• Meals while employee travelling coded to Entertainment account

Reportable Fringe Benefits

Reportable Benefits Motor Vehicles LAFHA Expense Benefit Property Benefit Residual Benefit Housing Loans Debt waiver Recreational entertainment

Non Reportable Benefits Food & Drink/Meal Entertainment Hire/Lease entertainment facility (i.e.

corporate use/ exclusive use facility) Car Parking (UNSW exempt car parking)

Employee Receives More Than $2000 in RFB in year include Grossed Up value of benefits on Payment Summary at June

Employer

RFB Grossed Up using lower gross up rate 1.8868

Example:

4 family airfares @ $1500 = $6000

TV (no GST) $6000

FBT $6000*1.8868*47% = $5321

RFB $6000*1.8868 $11321

Employee

• Not included in assessable income

• Included for rebate and surcharge calculations

• Medicare levy surcharge• Super co-contributions• Child support obligations• HELP debt repayments• Dependent tax offsets• Income tested government benefits

Reportable Fringe Benefit – Payment Summary

Finance website - Taxation

Finance website - Taxation

Finance website - Taxation

Further Information and Questions

• Further Information– Finance website - Taxation

• Questions