By Robyn Walker
When it comes to employment taxes, 1 April is the first day of new year. Payslips reset to zero, employer superannuation contribution tax (ESCT) rates are checked to make sure they make sense based on the prior year earnings, odometer readings are taken by those who do lots of business mileage reimbursements, and of course, it’s the first day of a new Fringe Benefit Tax (FBT) year. In this article we’ll cover some employment tax matters to have top of mind.
FBT
The flipside being that a year has just ended and so begins the countdown to complete fourth quarter FBT returns by 31 May. The level of dread that accompanies the fourth quarter FBT return depends on the FBT attribution approach being adopted (if any) and the level of pre-work that has already been completed in quarters 1-3. Before getting into calculations, its also crucial to understand what FBT applies to in the first instance. Some common mistakes we see include:
- Not using GST inclusive values. This is an easy mistake to make because financial information will normally be exclusive of GST. For FBT purposes everything needs to be grossed up to include GST.
- Getting the taxable value formula wrong for motor vehicles when claiming exempt days.
- Claiming exempt motor vehicle days which don’t qualify for an exemption.
- Not understanding when a car park can benefit from the “on premises” exemption from FBT.
- Misunderstanding how the $22,500 de minimis rule works.
- Linked to the above, assuming something is subject to FBT and exempt under the above-mentioned de minimis rule, when the employer is actually dealing with an allowance or reimbursement which is taxable through the PAYE regime (without exemption).
Attribution options
The simplest, but most expensive approach is to just pay FBT on everything at the flat rate of 63.93%; the most complicated but most accurate option is to determine what benefits were received by each employee and undertake a full attribution so all benefits are taxed at the FBT equivalent of the employees marginal tax rate. Between these are a couple of short-form options, which reduce the accuracy of the calculations but can strike a balance between making some tax savings without incurring excessive compliance costs. We summarise the four options below.
