The ATO has updated its COVID-19 and fringe benefits tax (FBT) information webpage, providing a really useful outline of some issues that may arise due to an employer’s response to COVID-19. There are likely to be some pandemic-related benefits currently provided that may not otherwise have been of consideration; for example, some employers may now be presented with FBT issues for the first time.
Although the webpage (and the following summary) deals with FBT specifically, while reading it is worth thinking through the related income tax consequences, including issues such as who incurs a particular expense (as opposed to who pays it), reimbursements, invoicing and other documentation requirements.
Working from home devices
Items provided to employees to allow them to work from home (or otherwise offsite) due to COVID-19 will usually be exempt from FBT if they are primarily used by employees for work. The items include:
portable printers; and
other electronic devices.
Also, the minor benefits exemption or the otherwise deductible rule may apply if an employer:
allows an employee to use a monitor, mouse or keyboard that they otherwise use in the workplace;
provides them with stationery or computer consumables; or
pays for their phone and internet access.
The minor benefits exemption may apply for minor, infrequent and irregular benefits under $300. In addition, the otherwise deductible rule may allow an employer to reduce the taxable value of benefits by the amount that an employee can claim as a once-only deduction.
Garaging work cars at employees’ homes
Employers may have been garaging work cars at their employees’ homes due to COVID-19. There may not be an FBT liability depending on:
the type of vehicle;
how often the car is driven; and
the calculation method chosen for car benefits.
There is a separate ATO fact sheet on this matter. Its executive summary contains the following information:
Where a car isn’t being driven at all, or is only being driven for maintenance purposes, the ATO accepts that the employer isn’t holding the car for the purposes of providing fringe benefits. If the employer elects to use the operating cost method (and maintains appropriate records), it may not have an FBT liability for a car.
Certain kinds of cars may also be exempt from FBT even where they are garaged at employees’ homes.
If an exemption doesn’t apply and a work car is garaged at an employee’s home, it will be deemed to be available for private use and the employer may have an FBT liability.
The employer can take into account the impact of COVID-19 on the business use of a car if it is being driven during the period it is garaged at a home. This will require the employer to maintain a logbook (or to have kept a logbook in any of the previous four years) which will enable it to calculate its FBT liability.
The logbook-keeping requirements will depend on whether an employer is already maintaining an existing logbook for the year.
For any car fringe benefits calculated using the operating cost method, the employer may adjust its business use estimates to reflect changes in its employees’ driving patterns due to COVID-19.
Employees’ driving patterns may have changed due to the effects of COVID-19. The ATO notes that if an employer uses the operating cost method, it may have an existing logbook. If so, the employer can still rely on this logbook to make a reasonable estimate of the business kilometres travelled. However, the employer can also choose to keep a new logbook that is representative of its business use throughout the year.
The issue of logbooks is also addressed in more detail in the COVID-19 and car fringe benefits fact sheet.
Emergency accommodation, food and transport
An employer will not have to pay FBT if it provides emergency accommodation, food, transport or other assistance to an employee where:
the benefit is emergency assistance to provide immediate relief; and
the employee is, or is at risk of being, adversely affected by COVID-19.
In the context of COVID-19, this would apply to:
expenses incurred relocating an employee, including paying for flights home to Australia;
expenses incurred for food and temporary accommodation if an employee cannot travel due to restrictions (domestic, interstate or intrastate);
benefits provided that allow an employee to self-isolate or quarantine; and
transporting or paying for an employee’s transport expenses, including car hire and transport to temporary accommodation.
An employer will not have to pay FBT for benefits that are considered “emergency assistance”. This includes providing temporary accommodation and meals to fly-in, fly-out or drive-in, drive-out employees who are unable to return to their normal residences due to COVID-19 domestic and international travel restrictions.
Items that help protect employees from COVID-19
An employer may need to pay FBT on items it gives employees to help protect them from contracting COVID-19 while at work. These include:
The ATO says, however, that these benefits are exempt from FBT under the emergency assistance exemption if employers provide 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 premises.
Examples of this type of work include:
medical (such as doctors, nurses, dentists and allied health workers);
hairdressing and beautician; and
retail, café and restaurant.
Where employment duties are not of this kind, the minor benefits exemption may apply if an employer provides an employee with minor, infrequent and irregular benefits under the value of $300.
Emergency health care
There is a limited exemption from FBT if an employer provides emergency health care to an employee who us affected by COVID-19. It only applies to health care treatment provided:
by an employee of the same employer (or an employee of a related company);
on the employer’s premises (or premises of the related company); or
at or adjacent to an employee’s worksite.
If an employer pays for its employee’s ongoing medical or hospital expenses, FBT applies. However, if an employer pays to transport an employee from the workplace to seek medical help, that cost is exempt from FBT.
Flu vaccinations for employees working from home
Providing flu vaccinations to employees is generally exempt from FBT because it is work-related preventative health care.
Employers will not have to pay FBT for providing their employees with a voucher or reimbursement for getting the flu vaccine from a GP or chemist, as long as that benefit is available to all of its employees. If only some of the employees choose to receive the flu vaccine, the voucher or reimbursement is still exempt from FBT, as long as it is offered to all of the employer’s employees.
The ATO states that, as all employees are considered equally susceptible to contracting the virus, COVID-19 testing qualifies for the FBT exemption for work-related medical screening. However, employers will only be exempt from FBT liability for providing COVID-19 testing to employees if both of the following apply:
testing is carried out by a legally qualified medical practitioner or nurse; and
testing is available to all employees.
If it turns out that only some employees get COVID-19 tests, the tests are still exempt – again, as long as they are offered to all of the employer’s employees.
An employer will not have to pay FBT if it is required to pay non-refundable costs for cancelled events that its employees were due to attend. This is because:
the arrangement was between the employer and the event organisers, not its employees and the organisers; and
the employer has not provided any fringe benefits to its employees, as they did not get to attend the event.
However, an employer may have to pay FBT if its employees were required to pay for their attendance at the cancelled event and the employer reimbursed them. This would be an expense payment fringe benefit – unless the otherwise deductible rule applies.
Not-for-profit salary packaging: ATO concession for meal provision
Not-for-profit employers may provide salary-packaged meal entertainment to their employees to take advantage of an exempt or rebatable cap.
Arrangements to provide meals may qualify as salary-packaged meal entertainment, depending on the facts and circumstances of the meal and how the meal is provided.
This may be particularly salient for employers such as hospitals and aged care facilities, and the like.
Given the unprecedented circumstances brought about by COVID-19, the ATO will not apply compliance resources to scrutinise expenditure under these arrangements for the:
FBT year ending 31 March 2021 – where meals are provided by a supplier that was authorised as a meal entertainment provider as at 1 March 2020; and
FBT year ended 31 March 2020 – when restaurants and public venues were closed.
If you would like to know more please contact one of our accountants on 07 4639 1099 or come in and see us at 4 Bowen Street Toowoomba.