FBT update for Local Government Presented by: Stephen Bray Australian Taxation Office

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FBT updatefor Local GovernmentPresented by
Stephen BrayAustralian Taxation Office
NOT FOR PROFIT
Government
7 April 2006
SALGFMG Conference
SEGMENT
AUDIENCE
DATE
EVENT
www.ato.gov.au
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Session Outline

• 2006 FBT return
• 2006 FBT lodgment issues
• FBT return common errors
• FBT reminders
• FBT Information available on www.ato.gov.au

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2006 FBT return

• Mailout of 2006 FBT return
• The annual FBT return mail out occurred in March.
  
• Electronic lodgers received a letter and a
  personalised payment slip with a business reply
  envelope for the payment slip.
• All other registered FBT entities received a
  letter, a personalised payment slip with a
  business reply envelope for the payment slip, a
  paper return, the return guide and a Notice of
  Non-lodgment.

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2006 FBT Return

• There are no changes to the 2006 FBT return.
• The step-by-step instructions in the tax return
  guide have been written in two sections this
  year. Both sections contain worked examples.
• The first section is for employers liable for
  income tax and most government employers
  including Local Government Councils.
• The second section is for non-profit
  organisations that receive concessional FBT
  treatment.

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2006 FBT return

• Internet return
• To ensure the security of client information the
  FBT return available on our website
  www.ato.gov.au can no longer be lodged online and
  should be printed out and sent by post.

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2006 FBT lodgment issues

• 2006 lodgment dates
• Self preparers need to lodge and pay by
• the first business day after 21 May 2006.
• Clients of tax agents need to lodge and pay by
• the first business day after 28 May 2006.

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2006 FBT lodgment issues

• FBT instalment payers need to lodge all of the
  quarterly activity statements for the FBT year
  ending 31 March 2006 with the tax office prior to
  lodging the 2006 FBT return.

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FBT return common errors

• ITEM 12Do you expect to lodge an FBT return for
  2006-07 or future years?Label is left blank or
  NO is inserted when YES should have been.
• Answering NO to this question results in the FBT
  registration and any instalments being cancelled
  from this year onwards.

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FBT return common errors

• ITEM 13C
• Calculated amounts reported at item 13A and 13B
  are wrongly totalled at item 13C.
• Item 13C applies to hospitals, public benevolent
  institutions, health promotion charities and
  public ambulance services only.

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FBT return common errors

• ITEM 16, 17 and 18
• For non-rebatable employers item 18 should be the
  same as item 15.
• The amount of tax payable (or sub-total) amount
  is often incorrectly written at item 16 and/or
  item 17, instead of at sub-total item 18.

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FBT return common errors

• ITEM 22 Details of fringe benefits provided
• Gross taxable value (a) often this box is
  completed and Taxable value of benefits (a)
  (b) (c) - is left blank when it needs to be
  completed.
• OR
• Taxable value of benefits (a) (b) (c) is
  completed and Gross taxable value (a) - is left
  blank when it needs to be completed.

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FBT return common errors

• Return forms not signed
• Tax file number does not match the name of
  employer

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FBT reminders

• Before claiming a reduction or exemption ensure
  there is supporting documentation. e.g.
• Odometer readings and a complying logbook for the
  operating cost method for car fringe benefits
• Declarations for the otherwise deductible rule

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FBT reminders

• If treating private use of vehicles as exempt
• Ensure the vehicle is one to which the exemption
  can apply
• Ensure employees private use is restricted.
• If the use of the vehicle exceeds the limits it
  will be a car or residual fringe benefit.

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FBT reminders

• The treatment of the provision of food and drink
  depends upon whether entertainment has been
  provided. (Refer to TR 97/17 and TR 2675)
• If entertainment provided consider
• Has an election been made to value it as meal
  entertainment?
• If an election is not made would the
  entertainment be deductible?
• If entertainment not provided consider
• What type of benefit has been provided?
• Is it an exempt benefit?

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FBT reminders

• Employee contributions
• If using employee contributions to reduce the
  taxable value of a fringe benefit it may be a
  taxable supply for GST.

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FBT reminders

• Reportable fringe benefits
• Most fringe benefits need to be allocated to an
  employee for Reportable Fringe Benefits purposes.
  
• If the total value of benefits provided to an
  employee exceeds 1,000 the grossed-up value must
  be reported on the employees payment summary

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FBT reminders

• There are 2 gross up rates
• The higher (type 1) rate is used where the
  provider is entitled to claim a GST input credit.
• The lower (type 2) rate is used where there is no
  entitlement to an input tax credit and for
  calculating an employees Reportable Fringe
  Benefits Amount.
• The rate used for the FBT return may be different
  to the rate used to calculate the Reportable
  Fringe Benefits Amount

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FBT amendments reminders

• Amendment requests/Objections
• Ensure the reasons for the request are included.
• Ensure the request is signed.
• Break up type 1 and type 2 benefits.

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FBT information available on www.ato.gov.au

• Fringe benefits tax a guide for employers (NAT
  1054)
• The 2005 hard copy version is currently available
  and can be ordered on ato.gov.au.
• The html version on ato.gov.au is updated on a
  regular basis. When you are looking for the most
  current version this will be the one. A list of
  the updates is also available on the website.
• The 2005 hard copy version is under review at the
  present time. We aim to have the 2006 hard copy
  version available in April.

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FBT information available on www.ato.gov.au

• FBT Better Practice Guide
• Provides practical guidance and tools to assist
  in the management of FBT by Australian Government
  entities.
• The Guide is divided into 2 parts
• Part 1 Better practices for the administration of
  FBT
• Part 2 Better practices for managing specific
  benefit types

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FBT information available on www.ato.gov.au

• Salary sacrifice arrangements for employees (NAT
  7424)
• Reportable Fringe Benefits Facts for Employees
  (NAT 2836)
• Fringe Benefits Tax for small business (NAT 8164)
• Volunteers and tax (NAT 4612)
• Fringe Benefits Tax and Christmas parties for tax
  exempt bodies

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FBT information available on www.ato.gov.au

• Employee Declarations
• Public Rulings
• Taxation Determinations
• Law Administration Practice Statements
• ATO Interpretative Decisions
• Information on new legislation
• Tax related case law

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Our commitment to you

• The information in this presentation is current
  at March 2006.
• In the taxpayers charter we commit to giving you
  information and advice you can rely on.
• If you try to follow this information and advice,
  and in doing so you make an honest mistake, you
  wont be subject to a penalty. However, as well
  as the underpaid tax, we may ask you to pay an
  interest charge.
• We make every effort to ensure that this
  information and advice is accurate. If you follow
  our advice, which subsequently turns out to be
  incorrect, or our advice is misleading and you
  make a mistake as a result, you wont be subject
  to a penalty or interest charge although youll
  be required to pay any underpaid tax.
• You are protected under GST law if you have acted
  on any GST information in this presentation. If
  you have relied on
• GST advice in this presentation and that advice
  has later changed, you will not have to pay any
  extra GST for the period up to the date of the
  change. Similarly, you will not have to pay any
  penalties or interest.
• If you feel this information does not fully cover
  your circumstances, please seek help from the Tax
  Office or a professional adviser.
• Since we regularly revise our information to take
  account of any changes to the law, you should
  make sure this information is still current
  before relying on it. The easiest way to do this
  is by checking with us.