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FBT changes more than just a ‘remote’ possibility

FBT changes more than just a ‘remote’ possibility

Hayley Lock, Andy Larmour & Graeme Hartnett discuss why employers should consider these proposed changes before developing remuneration policies.

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The Productivity Commission released its draft report on Remote Area Tax Concessions and Payments on Wednesday. According to the Federal Government, this was “in response to concerns raised that the current remote tax assistance has failed to keep pace with a changing Australia”.

While the report also provides recommendations on the Zone Tax Offset and the Remote Area Allowance, the key recommendations for employers relate to Fringe Benefits Tax. In particular, the Commission’s view is that current FBT remote area concessions are overly generous and complex, thus creating inequalities. In addition, the Commission noted that many participants expressed the view that, while concessions were important for regional development, the FBT concessions are not currently suited for that purpose.

Broadly, the Commission (in draft) has recommended the following key changes:

  • Partly winding back exemptions for employer-provided housing. Instead of a full FBT exemption, the commission recommends changes so that employers would instead receive a 50 percent FBT concession based on the value of the benefit.
  • Removing the 50 percent concession on employee-sourced housing (for example, rent concessions and mortgage assistance). As it currently stands, if an employer reimburses an employee for housing that is sourced by the employee (e.g. a rental property under the employees name), the employer would be eligible for a 50 percent FBT reduction on that benefit. The commission recommends that this concession be removed, so the full value of the benefit is subject to FBT.
  • Imposing limitations on the application of the 50 percent concession for “remote area residential fuel”. Currently, a concession applies to residential fuel (such as electricity and gas) used in housing that is located in a remote area. Under proposed changes, access to the concession will be limited to employer-provided housing where there is an operational requirement for the employer to provide residential fuel.
  • Removing the 50 percent concession for remote area holiday transport. Currently, a concession may apply to private holiday transport to specific destinations to and from a remote area, provided certain criteria are met. The commission proposes to remove this concession altogether.

 

To continue reading more analysis of why employers should consider these proposed changes before developing remuneration policies, please log on to KPMG Tax Now.

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