Fringe benefits tax lodgment
The end of March signals the approach of FBT time.
Employers that have not previously provided employees with fringe benefits need to be aware this year that any COVID-19 related items provided may be subject to FBT, including rapid antigen tests and protective equipment.
However, depending on the employer and employee’s circumstances, some of these items may be subject to exemptions.
For the 2021-22 FBT year, 23 May 2022 is the deadline for employers to lodge returns and pay any associated liabilities unless they have an extension to lodge or a registered tax agent is lodging the return electronically.
The end of the FBT year has just passed. Employers who have provided their employees with fringe benefits any time during the 2022 FBT year – 1 April 2021 to 31 March 2022 – will need to lodge a FBT return and pay any liability by 23 May 2022. As an employer, you may not have previously provided employees with fringe benefits. However, the situation may be different for the 2022 FBT year due to COVID-19 related benefits.
COVID tests and FBT
Many businesses may require employees to test negative to COVID-19 before attending work. This may consist of taking both polymerase chain reaction (PCR) tests and/or rapid antigen tests (RATs). As an employer, if you provide a test to your employee or reimburse them for the cost of a test (whether it be a PCR or RAT test), it could be considered a fringe benefit.
There are circumstances in which an FBT exemption under work-related medical screening could be obtained, but that requires the testing to be carried out by a legally qualified medical practitioner or nurse and be available to all employees. However, not all employees need to be tested for the exemption to apply. It only needs to be offered to all employees, even if only some take up the offer.
If the provision or reimbursement of COVID-19 tests by your business does not meet the criteria for exemption under work-related medical screening, FBT will need to be paid unless the minor benefits exemption or the otherwise deductible rule apply. For the minor benefits exemption to apply, the tests will have to provided infrequently or irregularly and the cumulative value of the tests provided during the FBT year must be less than $300, which may not help those businesses that require a negative test before every shift/work day.
Government announcement on tax deductibility of COVID testing
In February 2022, the government announced that it will legislate to make COVID-19 testing expense deductible, thus allowing the otherwise deductible rule to be applied to ensure that employers do not incur FBT for tests provided. The legislation to enact this has still not been introduced into Parliament. With the fast-approaching Federal election and the reluctance of the ATO to release detailed guidance before the legislation is enacted this could mean that the otherwise deductible rule is unlikely to apply to COVID-19 tests provided by businesses, at least for the 2021-22 FBT year.
Emergency assistance FBT exemption
Other protective items provided to employees while at work such as gloves, masks, sanitisers and anti-bacterial spray are most likely to be exempt from FBT under the emergency assistance exemption, provided they are given to employees who have physical contact or are in close proximity to customers or clients while carrying out their duties, or those involved in cleaning premises.
In other cases, where an employee’s specific employment duties do not involve physical contact with customers or cleaning, the minor benefits exemption could be applied so no FBT is incurred. Again, the benefit needs to be minor, infrequent and irregular, and under $300.
Where a travelling employee was required to self-isolate or quarantine, the costs related to that paid for by the business may not be subject to FBT under the emergency assistance exemption. These and many other COVID-19 specific benefits – such as rewarding employees for getting boosters – and associated exemptions highlight the complexity of the 2022 FBT return for businesses.
Need help?
If you run a business and have provided your employees with COVID-19 related items, we can help you work out whether they are subject to FBT and if so, whether the FBT can be reduced by various exemptions. Contact us today to take all the hassle out of FBT time.
For expert advice and assistance in dealing with your Business Employment Taxes in Australia, please contact Mathews Tax Lawyers on 1800 685 829
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.