COVID-19 and Fringe Benefits Tax (FBT): Do you know what you can claim?

When employees started working from home in March 2020, there was lots of confusion around the Fringe Benefits Tax (FBT) in Australia. Many of the usual employee benefits weren’t being provided, and some employers were offering new things such as COVID testing, face masks and flu vaccinations. 

After months of impending financial mayhem, the Australian Tax Office (ATO) finally stepped in and changed some of the rules around fringe benefits tax and FBT exemptions.

What is Fringe Benefit Tax? 

You can read all about fringe benefit tax on our blog but as a quick recap -

Fringe Benefits Tax (FBT) is a tax on certain non-cash employee benefits you can provide to employees, and their family or other associates. The benefit may be in addition to, or part of, their salary or wages package.

FBT is currently applied at a rate of 47% (for the 31 March 2021 FBT year) to the ‘grossed-up’ taxable value of fringe benefits and is paid by the employer. 

Fringe benefits can include things such as:

• Personal use of a company car
• Car parking or maintenance expenses
• Low interest loans used for personal purposes
• Gym or health memberships
• Entertainment and recreational expenses e.g. concert tickets, cinema tickets, free/discounted food or accommodation

What are some of the FBT changes for the current FBT year? 

The ATO understands that some employers are providing benefits they wouldn’t usually provide due to COVID. In response, the ATO has allowed some concessions and exemptions. 

While you can find everything you need to know on the ATO website, we wanted to talk about some of the more common things you may need to consider when filing this year’s FBT return.

Working from home 

If you’ve provided employees with items they can use to work from home during COVID-19, such as a laptop, portable printer or other electronic devices, and they’re used primarily for the employee’s work, they’re exempt from FBT.

The minor benefits exemption may apply if you:

• allow your employee to use a keyboard, monitor or mouse they usually use in the office,
• pay for their phone or internet access, or
• provide them with stationery or computer consumables.

This covers minor, infrequent and irregular benefits below $300.

Work cars garaged at your employee's homes

There can be FBT consequences if your employees have been garaging their work cars at home due to the pandemic. Usually, if an employer makes a car available for the private use of an employee, or the car is garaged at the employees’ home, a fringe benefit applies.

However, during the pandemic, if this car isn’t being driven because the employee is now working from home, the ATO agrees this is not a fringe benefit. Determining if you have an FBT liability depends on:

• the type of vehicle
• how often the car is driven, and
• the calculation method you choose for car benefits.

You can find the ATO car fringe benefits fact sheet here.

Logbooks

Employee driving patterns may have changed due to COVID-19. If you use the operating cost method, you may use an existing logbook to make a sensible estimate of the business kilometres travelled.

You can also choose to start a new logbook.

COVID-19 testing and flu vaccinations 

Providing flu vaccinations to employees is generally exempt from FBT as it’s classified as work-related preventative health care. The same applies to COVID-19 testing.

If you offer flu vaccinations to all employees, it’s exempt from FBT. All employees don’t have to have flu shots, it just must be made available to them. You can also reimburse employees for getting the flu vaccine from their GP or chemist.

The same applies to COVID-19 testing if:

• testing is carried out by a legally qualified medical practitioner or nurse, and
• testing is available to all employees.

COVID-19 protective gear 

You may need to pay FBT on protective items you supply to employees to protect them from contracting COVID-19 while at work. These include:

• gloves
• masks
• sanitisers, and
• anti-bacterial spray.

They may however be exempt under the emergency assistance exemption if you give them to employees:

• who have physical contact with – or are in close proximity to – customers or clients while carrying out their duties, or
• are involved in cleaning the premises.

Some examples: 

• medical workers (such as doctors, nurses, dentists and allied health workers)
• cleaning staff
• hairdressers and beauticians
• airline staff
• retail, café and restaurant employees.

If your employees are not described above, you may still be exempt for the minor, infrequent and irregular benefits under $300.

Emergency health care 

There’s limited exemption from FBT if you provide emergency health care to employees affected by COVID-19. It only applies to health care treatment provided by an employee of yours, on your premises or adjacent to the employee’s worksite.

FBT applies if you pay for your employee’s ongoing medical treatment or hospital expenses. But if you pay to transfer your employee from the workplace to get medical help, the cost is exempt from FBT.

Cancelled events 

You won’t have to pay FBT for non-refundable costs for cancelled events your employees were supposed to attend because:

• the arrangement was between you and the event organisers, not your employees, and
• you haven’t given any fringe benefits to your employees as they didn’t get to attend the event.

Then again, you may have to pay FBT if your employees had to pay for their attendance at the cancelled event and you were to reimburse them. This would be an expense payment fringe benefit – unless the otherwise deductible rule applies.

As flagged in our October blog about the Federal Budget, more FBT changes are due from April 1, 2021. So, it’s a good idea to wrap your head around the fringe benefits tax exemptions now.

If you’re still not sure what exemptions apply to you and your business, we’d love to set up an appointment and run through it all with you.