Remember private use of Motor Vehicles attracts Fringe Benefits Tax
The 2014 Fringe Benefits Tax (“FBT”) year ended 31 March! So now is the time to shift your attention to reviewing expenses claimed throughout the year and identifying those that may be subject to FBT.
Remember, where an Employer provides a non-cash benefit (ie. private use of a motor vehicle) to an employee (including an Owner of the business who is a Director) FBT applies to the value of that benefit.
There are a few key items and also changes to the FBT rules this year which we have noted below, so please keep these in mind when preparing your FBT documents …
ATO Compliance Program for Fringe Benefits Tax
As was alluded to in the 2013-2014 FBT compliance program, the ATO are once again focusing on identifying Employers that may have an FBT obligation but who fail to lodge an FBT Return.
Through the use of the ever increasing third party information accessible to the ATO, taxpayers that have acquired motor vehicles, held boxes at sporting and entertainment events and / or engaged in other activities likely involving the provision of benefits to Employees will be under review.
Motor vehicle statutory formula for determining Fringe Benefits – Still Alive!
With the change in federal government last year, the plans to abolish the statutory formula method of calculating FBT on car fringe benefits was scrapped!
Those with an existing arrangement or cars purchased in the transitional period below still have the current rates.
The statutory percentages for car fringe benefits first provided prior to 10 May 2011 (or where you have a pre-existing commitment in place to provide the car after this time) are as follows:
|
Total kms travelled in FBT year |
Statutory % |
|
0 – 14,999 |
26 |
|
15,000 – 24,999 |
20 |
|
25,000 – 40,000 |
11 |
|
Over 40,000 |
7 |
There will be transitional arrangements that apply to any new commitments entered into from 10 May 2011 to 31 March 2014.
Where there is a change to a pre-existing commitment, these transitional arrangements will also apply and these statutory rates should be used:
|
Total kms |
Statutory % |
|||
|
From |
From |
From |
From |
|
|
0 – 14,999 |
20 |
20 |
20 |
20 |
|
15,000 – 25,000 |
20 |
20 |
20 |
20 |
|
25,000 – 40,000 |
14 |
17 |
20 |
20 |
|
Over 40,000 |
10 |
13 |
17 |
20 |
FBT Rate Changes
The FBT rate is a result of the highest marginal tax rate combined with the Medicare levy. Given the Medicare levy is shifting from 1 July 2014 to 2% (from 1.5%) the FBT rate will increase to 47% effective 1 April 2014.
This also means the gross-up rates will change. Below is an extract showing the old Type 1 & Type 2 gross up rates and the new 2015 FBT year rates.
|
Gross-Up Rate Changes |
||
|
FBT Year |
Type 1 Rate |
Type 2 Rate |
|
2013-2014 |
2.0647 |
1.8692 |
|
2014-2015 |
2.0802 |
1.8868 |
Should you require your FBT affairs reviewed or an FBT return prepared please contact our office today!