Simplification in FBT Record-Keeping | Update
The Australian Taxation Office (ATO) has introduced five further legislative instruments aimed at reducing Fringe Benefit Tax (FBT) record-keeping obligations. This is in addition to the four draft legislative instruments that we discussed in our earlier alert from March 2023.
While the earlier legislative instruments focused on travel benefits, these new instruments broaden the scope to include other areas such as Living-Away-From-Home Allowances (LAFHA) and private use of vehicles other than cars.
The ATO is progressively making it easier to comply with FBT obligations by offering more flexible record-keeping options. Employers now have a wider array of records they can rely on, which can be particularly beneficial for those who already maintain such records for other operational or compliance purposes. This not only simplifies the administrative process but also reduces the risk of non-compliance due to incomplete or missing employee declarations.
Summary of key points from the five additional Legislative Instruments
- LI 2023/D18 Temporary Accommodation Relating to Relocation: Employers can use employment contracts and relocation agreements as alternative records. This would be useful for organisations with frequent employee transfers.
- LI 2023/D19 Otherwise Deductible Benefits: This instrument provides guidelines for using alternative records for benefits that would otherwise be deductible to the employee. Employers can now use corporate credit card statements or expense management software as alternative records, reducing administrative overhead.
- LI 2023/D20 Maintaining an Australian Home: This instrument focuses on the alternative records that can be used for benefits related to maintaining an Australian home while an employee is living away for work. Payroll records and housing lease agreements can now be used as alternative records.
- LI 2023/D21 Fly-In Fly-Out and Drive-In Drive-Out Employees: This instrument allows employers to use employment contracts that specify an employee’s normal residence and employment details as alternative records. This is especially beneficial for industries like mining and construction, where such work arrangements are common.
- LI 2023/D22 Private Use of Vehicles Other Than Cars: This instrument specifies that employers can use alternative records like mobile apps that record travel distances via GPS and email correspondences to substantiate the usage of vehicles other than cars. This is a significant shift from traditional methods that often required manual logbooks, making the process more efficient and accurate.
These legislative changes will take effect from 1 April 2024, and employers should prepare in advance to simplify their record-keeping.
These new record-keeping options offer more flexibility and convenience for employers who already maintain such records for other operational or compliance purposes. They also reduce the risk of non-compliance due to incomplete or missing employee declarations.
To simplify record-keeping in accordance with the new FBT legislative instruments, employers should undertake an assessment of their existing corporate records. This may involve:
- reviewing the requirements outlined in the legislative instruments,
- conducting an inventory of all current records,
- cross-reference this inventory of current records with the types of records now considered adequate,
- update internal record-keeping policies and employee training for any gaps identified,
- run a test audit to validate compliance and maintain documentation of the assessment process for future reference.
How SW can help
If you need any assistance in understanding how you can simplify your record-keeping in light of these draft legislative instruments, please contact your SW advisor Stephen O’Flynn or Rahul Sanghani.