FRINGE BENEFITS TAX

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FRINGE BENEFITS TAX

• Presented by
• Neil Donaldson
• Taxation Specialist - FBT NTER
• Queensland Treasury

2
Topics for Discussion

• Observations from the 2007/08 FBT return
• Salary Sacrificing
• Increasing participation
• Electricity
• Public Transport
• Legislative Change
• RFBA exclusion on Shared Cars
• Laptop computers
• LAFHA

3
Trends in Tax Payable
LAFHA has jumped 40 -50 in first 2 years and by
almost 20 last year
Cars are relatively stable
Car Parking is trending upwards by almost 20 per
annum
4
FBT Return 2007/08

• Cars
• 11,394 benefits provided by departments to
  employees
• Not to be interpreted as cars available
• 10,785 Novated lease car benefits to employees
  using salary sacrifice

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Car Observations 2007/08
11,394 Car Benefits
10,785 Car Benefits
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Car Observations - Comments

• Clearly - the employees undertaking novated
  leases have a vested interest in achieving the
  necessary distance
• Pay less tax
• Comparisons to owned cars identifies a
  potential anomaly
• RISK to government as a taxpayer
• Possibility of data being manipulated in some
  situations by some employees

7
Car Observations - Actions

• Review RemServ data
• Check fuel purchases
• Compare to distances travelled using an
  acceptable litres/100km rate
• Suspect data will be reviewed
• Additional tax, penalties and interest will be
  recovered from employees that have misrepresented
  their data
• Employees may have their novation agreement
  terminated in appropriate circumstances if
  fraud is identified

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Legislative Changes

• New changes and changes that impacted this year

9
Legislative Changes

• Shared Cars RFBA Exclusion (effective 1 April
  2007)
• Dependent on the car being used for private
  purposes by more than one employee

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RFBA Exclusion First year comments

• 5,430 (47) car benefits identified as Shared
• Total number of car benefits - 11,394
• 3,266 car benefits had a RFBA Excluded
  Component that reduced the RFBA by gt 10M (120K
  still allocated as RFBA)
• 2,166 car benefits identified as shared but still
  had 1.65M in RFBA
• 5,962 car benefits not shared with 22.4M in RFBA

ALL government owned cars have the potential to
be Shared and no RFBA
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Has the RFBA exclusion reduced the tax liability?

• For 2008
• 5,430 cars created 5.6M of FBT liability
• Average FBT per car benefit - 1,026
• For 2007
• 6,495 cars created 6.86M of FBT liability
• Average FBT per car benefit - 1,056
• As expected no significant change in FBT
  liability on shared cars

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Laptops

• Changes made to rules for exemption
• Federal Government feels that abuses have been
  made over the years
• Federal Government seeking to restore the
  original policy intent
• Further discussion in salary sacrificing

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Other Budget Announcements

• Superannuation
• Changes effective from 1 July 2009
• Eligibility for a range of government financial
  assistance programs will be tightened
• Include forms of non-wage remuneration and, where
  appropriate, losses from discretionary activities
  
• Salary sacrifice contributions to superannuation
  will be assessed as income for all relevant tax
  and transfer programs

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Salary Sacrificing
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Salary Sacrifice

• Salary Sacrifice has been available to Qld govt
  employees since 28 October 1999
• Benefits are constantly being reviewed
• Types
• Risks
• Concessional employees vs non-concessional
• Latest Circular C4/08 (issued 2 Oct 2008)
  applies from 13 May 2008
• Available on DEIR web site
• Captures the latest legislative changes

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Salary Sacrifice Uptake as at September 2008

• Total employees participating - 87,000
• Superannuation - 78,000
• In-House Benefits - 21,500

Total Base gt 210,000 employees
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Employees in SSA

• Based on 30 June 2007 data there are approx.
  211,000 actual employees
• Education, Health Police comprise 152,240 (72
  of total)
• 59 of Health are in SSA
• 50 of Police are in SSA
• 25 of Education in SSA
• 38 of remainder are involved in SSA
• Primarily Super, In-house and exempts
• No FBT payable AND income tax savings

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Laptop Computers New Rules

• Prior to 13 May 2008 laptops were a popular item
  to sacrifice
• After 7.30 pm on 13 May 2008 the rules changed
• Must now be primarily for use in employees
  employment
• Primarily is applied to mean greater than 50
• Employee must receive supervisor certification as
  to use in declaration submitted to RemServ
• Uses identified,
• Dept has not and will not provide equipment

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Laptops Self Education

• Possibly an opportunity that remains open
• Will still need to satisfy an employment related
  purpose
• No longer available to laptops provided to
  employees children for school/uni
• Awaiting ATO consideration of the matter

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Why Enter into a SSA?

• Because you can
• Because you can save tax
• Because you can receive savings other than
  taxation
• Because you can put more into Superannuation at
  no extra cost
• Because you can currently get GST back on certain
  taxable benefits

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What savings can I make?

• Assume an AO7 officer earning 83,099
• Current tax payable - 20,486
• Currently paying from post tax income
• Superannuation at 5 - 4,155
• Professional fees - 500
• Electricity/Public transport - 1,333
• After tax and spending - 56,625

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These are the Savings

• Assume an AO7 officer earning 83,099
• Enter into SSA for
• Superannuation at 5.88 - 4,888
• Professional fees - 500
• Electricity/Public Transport - 1,333
• Tax Payable of 18,059 on salary of 76,378
• Take home pay 58,319
• Saving 1,694
• Costs RemServ administration fee of 120 per
  annum plus 25 start-up for in-house benefits

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SSA Outcomes
Pre tax payment
Post tax payment
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What do I get out of it?
BUT IF YOU DONT DO ANYTHING, EFFECTIVELY, THE
CHEQUE BECOMES .......
Bank of Salary Sacrificing Ltd Cheque Payable
to YOU Amount One Thousand Six Hundred and
Ninety Four Dollars ____________
AUSTRALIAN TAXATION OFFICE
NOT NEGOTIABLE
1,694.00
Your Signature
Have some weekends away
Your Choice
More Superannuation
What could you do with it?
Use it any way you want!!!
Go out for Dinner at the ATOs expense
Buy 50 DVDs
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What do you need to do?

• Access RemServ
• Sign a Participation Agreement
• Identify the types of benefits that you want and
  how much
• Do your own calculations using an on-line
  calculator
• Seek professional advice on more complex issues
• Contact RemServ to process the SSA

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Making a Claim

• Electricity
• Copy your tax invoice (front back) and proof of
  payment
• Public Transport (BCC QR only)
• GoCard users need to have a registered card and
  copy the periodic travel record from the GoCard
  website
• Maximum of 60 days is retained for access on-line
  so make sure you keep historic travel records for
  a claim
• Complete the necessary declaration for the
  RemServ claim
• Forward all the documents (receipts,
  declarations, etc) to RemServ (4 free claims
  per year)
• Receive payment

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Making the SSA work

• Superannuation
• Look at RemServ QSuper websites for information
  and calculators
• SSA Superannuation is subject to 15 tax, but is
  less than your tax rate (generally) AO2 above
  are subject to higher marginal tax rates
• Professional Fees
• Make a payment and seek reimbursement or get
  RemServ to make payment directly
• In-House Benefits
• Pay the electricity and/or public transport and
  lodge claim with RemServ (no more than 4 claims
  per year)
• All other benefits
• Contact RemServ

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Living Away From Home Allowance
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Living Away from Home Allowance

• LAFHA has been heavily criticised by the
  Inspector General of Taxation
• Jan 2007 IGoT issued a 107 page report
• Recommended
• ATO/Treasury review the legislation, and
• Possible re-write MT2030
• ATO action to date
• Scoping paper has been prepared and an ATO senior
  officer (not from FBT) has been selected to
  establish whether a legislative or ruling review
  is required

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Living Away from Home Allowance

• Current approach
• Sec.30 of the FBTAA
• Compensation for non-deductible expenses because
  the employee is required to live away from their
  usual place of residence AND there is an
  intention or expectation of the employee
  returning to live at the former place of
  residence
• Sec. 31 of the FBTAA can reduce the T/V for-
• Exempt accommodation component, and
• Exempt food component (additional costs of food
  for living away from home less any statutory
  value)
• Reasonable food values issued annually by the ATO
  TD2008/3 (211 per week for one adult)
• Excess payment will be taxed as will the first
  42 (or more if other family members live away)

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Planning for LAFHA

• Establish how much is being paid and for what
  purpose
• Public Service Directive 9/08
• If gt 4 weeks then a reasonable rate can be
  negotiated with the employee it need not be the
  daily allowance x the days absent
• If you pay this amount to employees the FBT
  payable by the department will be in the vicinity
  of 650 per week per employee

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Critical Questions for LAFHA

• Is the employee is required to live away from his
  or her usual place of residence in order to
  perform the duties of that employment?
• What are the terms of the employees LAFHA?
• What components make up the LAFHA and what is
  their value? (this is a MUST)
• How long is the employee working under this
  arrangement?
• Can it be treated as travel allowance?

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Issues for Review in LAFHA

• Does the employee regularly return home during
  the course of the absence?
• Are these costs borne by the employer?
• Is the temporary transfer open-ended?
• What happens if the employee sets up home in
  the new location?
• Establish if they in fact retain a permanent home

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Questions