Getting the most benefit from fringe benefits

The most cost-efficient benefit an employer can give an employee is one that is both deductible for income tax purposes and exempt from Fringe Benefits Tax (FBT).

One such type of benefit is the ‘work-related item’ FBT exemption.

Like all concessions, there are some requirements that must be met to take advantage of it.

What is as a work-related item?

For FBT purposes, a work-related item is a portable electronic device, an item of computer software, an item of protective clothing, a briefcase, or a tool of trade.

In practice, most of these are self-explanatory and need no further explanation – the exception being the first category of items, portable electronic devices.

Continue reading “Getting the most benefit from fringe benefits” →

Is that ute really exempt from FBT?

Recent media reports suggest the ATO may have concerns that some tradies could be taking liberties with the FBT exemption available for utes and panel vans where private use is claimed to be minimal. Utes have been selling like hotcakes for some time and are now the biggest selling new cars on the Australian market. These vehicles (the dual cabs in particular) often include features that are promoted to make them appealing for family and recreational use.

If you provide vans or utes to employees principally for work related purposes on the basis that such vehicles are exempt from FBT because the employees rarely use the vehicle for private travel and are relying on the ATO’s reduced record keeping concession, here’s a refresher on exactly how the FBT exemption works. Because if things don’t pass muster, it’s the employer who will be on the hook for any FBT found to be payable.

Continue reading “Is that ute really exempt from FBT?” →

Work-related car expenses updated

The ATO has announced that the cents per kilometre rate has increased to 85 cents per kilometre for 2023/24.

To recap, there are two methods to claim work-related car expenses as follows:

  1. Cents per kilometre method

This method is easier for record keeping, involves a simpler calculation, and is generally suited to those with less vehicle use.

You simply keep a record of the number of kilometres you’re traveling for work or for business over the duration of the year and you claim these the set rate.

The drawback of this method is that you are limited to a maximum of 5000 work related or business kilometres per year. That gives you a total maximum claim of $4,250. Thus, if you’re using your car a lot for work, you may find that this is method quite limiting.

  1. Logbook method

This method can allow for greater claims depending on how much you’re using your car for work or business.

However, there are more recordkeeping requirements – the main one being that you must keep a 12-week logbook that records all of your trips, both business and private for those 12 weeks.

At the end of the 12 weeks, you calculate your work related or business percentage use, and you can claim that percentage of all deductions for your car.

You also need to keep all receipts for fuel, insurance, registration, interest, and servicing throughout the year.

As mentioned, despite the additional effort, it can often lead to a greater claim if you are using your car a lot for work and business.

Continue reading “Work-related car expenses updated” →

Do you have a side-hustle?

With the cost-of-living skyrocketing, have you taken up a side-hustle?

With new and emerging ways to make money, the ATO is reminding taxpayers to consider if they are ‘in business’ and to declare to their tax agent if they are engaged in a sidehustle.

Record numbers of taxpayers are now working multiple jobs or supplementing their income with ‘side-hustles’ or ‘gig’ economy activities.

ATO Assistant Commissioner Tim Loh said if you earn money through continuous and repeated activities for the purpose of making a profit, then it’s likely you’re running a business.

While there are always new and different ways to make money, the tax obligations remain the same. Don’t fall into the trap of forgetting to include all your income thinking the ATO won’t notice.

You also need to declare any additional income earned through that side-hustle.

Continue reading “Do you have a side-hustle?” →

ATO Tax Time focus areas

With the end of the financial year on our doorstep, the ATO has announced its three key focus areas for 2022-23 Tax Time – rental property deductions, work-related expenses, and capital gains tax (CGT). To maximise your claims in this area and protect yourself from ATO audits and adjustments, be sure to keep the appropriate records.

Work-related expenses

This year the ATO is particularly focused on ensuring taxpayers understand the changes to the working from home methods and are able to back up their claims. To claim your working from home expenses as a deduction, you can use the actual cost method, or the revised fixed rate method, provided you meet the eligibility and record-keeping requirements as follows:

Continue reading “ATO Tax Time focus areas” →

Generous depreciation in its final days

7 June 2023

The May federal budget confirmed that temporary full expensing (TFE) is now in its final days.

To recap, TFE will cease and be replaced by a $20,000 instant asset write-off (IAWO) from 1 July 2023.

Under this change, small businesses (aggregated annual turnover of less than $10 million) will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. Assets valued at $20,000 or more (which cannot be immediately deducted) will be placed into a small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.

For larger businesses, the write-off threshold is cut to $1,000 also from 1 July 2023.

Continue reading “Generous depreciation in its final days” →

FBT and car logbooks

15 April 2023

With the end of the FBT year now here, are your car logbooks in order?

The operating cost method is used by many employers to calculate their car FBT liability. This method is particularly effective where the business use of the vehicle is high. Keeping a logbook is essential to use the operating cost method.

Employees need to prepare a logbook for any vehicle that you provide them with where there is an element of private use. The logbook period is for 12-weeks, which must be representative of typical usage. For example, a period where an employee is taking a block of annual leave is not representative.

Where employees share a vehicle during a year, each employee will need to prepare a logbook to substantiate their respective business use percentage.

Logbooks are valid for five FBT years (including the year the logbook is prepared), provided there is no significant change in the vehicle’s business use.  Once the five-year period expires, a new logbook will need to be kept if you wish to continue using the operating cost method. Therefore, if a logbook was last prepared in 2017/18, a new logbook is required for this FBT year (2022/23).

Continue reading “FBT and car logbooks” →

New work from home record keeping requirements

4 March 2023

Are you one of the five million Australians who claim work from home deductions? If so, stricter record-keeping rules may now apply.

For this financial year and moving forward, there are now only two methods to calculate your work from home claim:

  1. Revised fixed rate method (with new rules applying)
  2. Actual costs method (unchanged).

The actual costs method has never been all that popular because you need to keep records of every expense incurred and depreciating asset purchased, as well as evidence to show the work-related use of the expenses and depreciating assets. By way of example, to claim electricity expenses, the ATO suggests that you need to find out the cost per unit of power used, the average amount of units used per hour (power consumption per kilowatt hour for each appliance) and the number of hours the appliance was used for work-related purposes.

For this reason, the fixed rate method has been preferred (or in recent years the COVID shortcut method where you could simply claim 80 cents for each hour worked from home. Note, however, that the COVID-method is no longer available).

Continue reading “New work from home record keeping requirements” →

ATO New-Year Resolutions

4 February 2023

The ATO has released its new year resolutions…and there is not a gym in sight! According to the ATO the five new year’s resolutions to keep if you want to stay on top of your tax and super in 2023 are:

  1. Know if you’re in business or not

Are you earning an increasing income from a side-hustle?

If you answer yes to a few of the following questions, the more likely it is your activities are a business:

  • Do you intend to be in business?
  • Do you intend and have a prospect of making a profit from your activities?
  • Is the size or scale of your activity sufficient to make a profit?
  • Are your activities repeated and continuous?
  • Are your activities planned, organized, and carried out in a business-like manner? For example, do you:
    • keep business records and have a separate business bank account?
    • advertise and sell your goods and services to the public, rather than just to family or friends?
    • operate from business premises?
    • maintain required licences or qualifications?
    • have a formal business plan or budget?
    • have a business name or an ABN?

We can help you make this call as to whether your side-hustle may be a business.

Continue reading “ATO New-Year Resolutions” →

FBT exemption for electric vehicles

13 December 2022

Electric vehicles are set to become more affordable for both households and businesses after the government sealed a deal with crossbench Senators on legislation to exempt low and zero emission cars from fringe benefits tax (FBT).

The new law introduces an electric car discount in the form of an FBT exemption. This allows for car fringe benefits comprising the use or availability for use of an eligible car that is a zero or low emissions vehicle to be exempt from FBT. Specifically, a car benefit will be an exempt benefit for a year of tax if:

  • the car is a zero or low emissions vehicle (note the scheme has been extended to include plug-in electric and internal combustion hybrids until 1 April 2025)
  • the value of the car at the first retail sale was below the luxury car tax threshold for fuel efficient vehicles (currently $84,916), and
  • the car is first held and used on or after 1 July 2022.

Continue reading “FBT exemption for electric vehicles” →