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The current fringe benefits tax legislation is “labyrinthian”, understood by few, and complied with fully by less, putting it in need of urgent reform, the Treasurer has been told.
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‘Over-engineered, unnecessarily complex’: CA ANZ calls for urgent FBT reform
16 June 2020
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9 minute read
Chartered Accountants Australia and New Zealand has now called on Treasurer Josh Frydenberg to add FBT to the list of Australian taxes in urgent need of reform.
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Labelling it as an “over-engineered, unnecessarily complex policy response”, CA ANZ believes COVID-19 has exposed major flaws with the FBT legislative drafting, and how it fails to cater for changing work patterns such as working from home during government-mandated restrictions.
Recognising that FBT is an inefficient tax with compliance costs disproportionate to the revenue raised, CA ANZ has called for FBT to be re-drafted using a principles-based approach which embeds flexibility into the FBT legal and administrative framework.
“The current legislation is labyrinthian, understood by few and adhered to only by those employers with substantial resources and systems,” CA ANZ said.
“Chartered accountants in public practice and in commerce regularly report to us that few employers fully comply with FBT, particularly with the onerous record-keeping obligations.
“It is recognised that FBT is needed to prevent amounts escaping the tax net entirely, thus compliance cost is not the only measure that should be considered. Even so, there are many ways to make FBT a less costly tax to comply with.”
The submission also endorses a self-assessment approach to the otherwise deductible rule, with a simple FBT process where employers make an annual binding declaration to the ATO, as part of their income tax return, that no salary sacrifice arrangements are entered into for employee expenses, and only those expenses which the employer considers to be 100 per cent work-related are paid or reimbursed.
“We anticipate that, especially for small-business employers, this declaration will effectively send a message to the ATO that ‘this business does not provide taxable fringe benefits’,” CA ANZ said.
CA ANZ has also called for the $300 minor, infrequent fringe benefit threshold to be amended to follow New Zealand’s model where there is a $300 exemption per employee per quarter, and an overall maximum exemption an employer can claim.
FBT reform calls
CA ANZ’s submission follows a long list of calls over the years to reform or repeal FBT, including from the Australian Small Business and Family Enterprise Ombudsman, who recently called for FBT to be abolished for small businesses.
The Tax Institute has also supported repealing FBT, noting that it is one of 115 taxes which bring in only a small percentage in revenue but impose a large compliance burden on taxpayers.
The Board of Taxation had also recently undertaken a comprehensive review of the compliance costs associated with FBT, with the findings and recommendations yet to be made public.
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