At the onset of COVID-19 in Australia in March 2020, many businesses moved fast to provide much-needed flexibility to allow their employees to work from home. As the end of the 2020-21 FBT year approaches, the question for employers then becomes, what are the FBT consequences of such a move?
What is the working from home consequences for employers when it comes to fringe benefits tax?
Remember, FBT may apply any benefits you may have provided to your employees during this time, such as a laptop, but exemptions may apply in certain circumstances. If your business provided employees with one portable electronic device during the year, including laptops, tablets or a smartphone so they could work from home, an FBT exemption may apply. Note, however, this exemption only applies to one work-related portable electronic device per FBT year, unless the item is a replacement item.
Small businesses (ie turnover threshold of $10m or less for the 2020-21 FBT year), on the other hand, are able to provide multiple work-related portable electronic devices to employees and access the exemption even if the devices have substantially identical functions. Other eligible work-related items that may be exempt from FBT include computer software, protective clothing, briefcases and tools of trade.
Beware, however, tools of the trade only include items that are handheld for use in mechanical operations or require manual operation to produce a defined result, usually encompassing tools of specialised nature in a particular occupation. According to the ATO, the tools of trade classification does not cover desktop computers, computer peripherals or general office equipment.
The FBT treatment of general office equipment (ie desks, chairs, cabinets, stationery, computer monitors, peripherals and other items generally available for use in an office setting) depends on a number of factors. In a situation where you’re lending office equipment to your employees to enable them to do their job in temporary work from home arrangements, the equipment is likely to be exempt from FBT provided certain conditions are met (ie the equipment being ordinarily located on the business premises and used directly in connection with business operations).
Where an employer lends office equipment to employees as a part of permanent work from home arrangements, the benefit may still be exempt if a “no-private-use declaration” has been made that covers all equipment loaned with a consistently enforced policy in place. In situations where the equipment is not exempt, your business may be able to reduce the taxable value of the benefit using the otherwise deductible rule.
Where you’ve given or reimbursed your employee for office equipment that has a taxable value of $300 or less (including GST), the equipment may be exempt from FBT under the minor benefits exemption. However, there are other criteria that need to be satisfied to use this exemption. For equipment that is $300 or more (including GST), FBT is generally payable by the business and the otherwise deductible rule cannot be used to reduce the taxable value of the benefit.
We’d be more than happy to assist in making sure your FBT is submitted correctly and you get the most back from supporting your employees in working from home.
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