31 March 2012 Fringe Benefits Tax changes – iPads and cars
Many in the design, presentation and marketing departments are using iPads to present projects, design ideas and building concepts to clients and colleagues. So how are employers to deal with the common Fringe Benefits tax issues – using Ipads and getting their staff to clients? What has changed with the 31 March 2012 FBT year coming to a close?
Well – here are some of the main changes which will hit home to employers on the 31st of March 2012.
The FBT rules pertaining to cars changed recently for situations where a vehicle is available for private use and the ‘statutory formula’ method is used to determine the taxable value. The value of the car benefit (on which the amount of FBT is based) is taken on the actual purchase price of the car. Under the statutory formula method the number of kilometres travelled determines the statutory fraction applied to determine the taxable value.
For example, an employee using a car valued at $34,000 would get a tax liability of $6,528 if they drove 24,000km, but that liability would drop to only $3591 if they drove more than 25,000km.
But starting on 10 May 2011, the government introduced a flat 20% to be applied across all bands, but to be introduced over four years, as per the following table.
New contracts entered into after that date will operate under the new rates, but contracts existing before then will still run out under the old rules, unless a significant change occurs to the arrangement after 10 May 2011 (such as extending the term of a car lease). The impact of the changes will generally be dependent on the number of kilometres travelled annually by the employee. For example: an employee travelling less than 15,000km annually would benefit from a reduction in the fraction from 26% to 20% once the new rules become applicable.
As far as the iPad goes, the Tax Office has classed it as a ‘portable electronic device’ in regard to the FBT regime, but this does not, as might be assumed, lump iPads in with laptop computers with regard to their tax treatment in all situations. The Tax Office says it accepts that an iPad does not have ‘substantially identical functions’ to a laptop computer. ‘Although an iPad may have some functions in common to a laptop, an iPad does not have functions that are the same in most respects to a laptop.’
So does this mean that an employer can provide an iPad AND a laptop computer in the same FBT year? Well, that depends, says the Tax Office. It says it will still need to be satisfied that an iPad is to be used ‘primarily for use in the employee’s employment’, and that it will be a ‘question of fact’ as to whether the iPad’s use and function is ‘substantially identical’ or different to the use and function of a laptop computer used by the employee (although if used in their intended manner, the current Tax Office interpretation would support the view that the laptop and iPad are sufficiently different to fall outside ‘substantially identical’).
So as far as being able to provide an iPad as an exempt fringe benefit, the question seems to have been settled in the affirmative (although an employer will have to agree to package). However the iPad brings with it a further requirement to prove, case by case, that the electronic device is used primarily for work purposes.
Should you wish to discuss any aspect of the ATO’s data matching program, assist with your taxation affairs or compare the level of profit in your business against ATO benchmarks, please contact DKP & Co on 03 8319 4017 or visit our website www.dkpco.com.au.
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