The ATO has updated its COVID-19 and fringe benefits tax (FBT) advice, providing a useful outline of some issues that may arise due to an employer’s response to COVID-19.
Tip: Although the following summary deals with FBT specifically, it is worth thinking through the related income tax consequences. Contact us to find out more.
Working from home devices
Items provided to employees to allow them to work from home (or otherwise offsite) due to COVID-19 will usually be exempt from FBT if they are primarily used by employees for work.
Also, the minor benefits exemption or the otherwise deductible rule may apply if an employer:
- allows an employee to use a monitor, mouse or keyboard that they otherwise use in the workplace;
- provides them with stationery or computer consumables; or
- pays for their phone and internet access.
The minor benefits exemption may apply for minor, infrequent and irregular benefits under $300.
In addition, the otherwise deductible rule may allow an employer to reduce the taxable value of benefits by the amount that an employee can claim as a once-only deduction.
Garaging work cars at employees’ homes, and logbooks
Employers may have been garaging work cars at their employees’ homes due to COVID-19. There may not be an FBT liability depending on:
- the type of vehicle;
- how often the car is driven; and
- the calculation method chosen for car benefits.
Employees’ driving patterns may have changed due to the effects of COVID-19. If an employer uses the operating cost method, it may have an existing logbook. If so, the employer can still rely on this logbook to make a reasonable estimate of the business kilometres travelled. However, the employer can also choose to keep a new logbook that is representative of its business use throughout the year.
The issue of logbooks is also addressed in more detail in the COVID-19 and car fringe benefits fact sheet.
There is also a separate ATO fact sheet on these matters.
Emergency accommodation, food and transport
An employer will not have to pay FBT if it provides emergency accommodation, food, transport or other assistance to an employee where:
- the benefit is emergency assistance to provide immediate relief; and
- the employee is, or is at risk of being, adversely affected by COVID-19.
An employer will also not have to pay FBT for benefits that are considered “emergency assistance”.
Items that help protect employees from COVID-19
An employer may need to pay FBT on items it gives employees to help protect them from contracting COVID-19 while at work. These include gloves, masks, sanitisers and antibacterial spray.
The ATO says, however, that these benefits are exempt from FBT under the emergency assistance exemption if employers provide them to employees who:
- have physical contact with – or are in close proximity to – customers or clients while carrying out their duties; or
- are involved in cleaning premises.
Where employment duties are not of this kind, the minor benefits exemption may apply if an employer provides an employee with minor, infrequent and irregular benefits under the value of $300.
Emergency health care
There is a limited exemption from FBT if an employer provides emergency health care to an employee who us affected by COVID-19.
If an employer pays for its employee’s ongoing medical or hospital expenses, FBT applies. However, if an employer pays to transport an employee from the workplace to seek medical help, that cost is exempt from FBT.
Flu vaccinations for employees working from home
Providing flu vaccinations to employees is generally exempt from FBT because it is work-related preventative health care.
COVID-19 testing also qualifies for the FBT exemption for work-related medical screening, under ceration conditions.
An employer will not have to pay FBT if it is required to pay non-refundable costs for cancelled events that its employees were due to attend.
However, an employer may have to pay FBT if its employees were required to pay for their attendance at the cancelled event and the employer reimbursed them. This would be an expense payment fringe benefit – unless the otherwise deductible rule applies.