Get ready for FBT
Employers who have provided their employees with fringe benefits will need to lodge a FBT return and pay any FBT by the FBT lodgement due date. As an employer, you may not have previously provided employees with fringe benefits. However, the situation may be different for the 2022 FBT year due to COVID-19 related benefits.
Many businesses may require employees to test negative to COVID-19 before attending work. This may consist of taking both polymerase chain reaction (PCR) tests and/or rapid antigen tests (RATs). As an employer, if you provide a test to your employee or reimburse them for the cost of a test (whether it be a PCR or RAT test), it could be considered a fringe benefit.
There are circumstances in which an FBT exemption under work-related medical screening could be obtained, but that requires the testing to be carried out by a legally qualified medical practitioner or nurse and be available to all employees. However, not all employees need to be tested for the exemption to apply. It only needs to be offered to all employees, even if only some take up the offer.
If the provision or reimbursement of COVID-19 tests by your business does not meet the criteria for exemption under work-related medical screening, FBT will need to be paid unless the minor benefits exemption or the otherwise deductible rule apply. For the minor benefits exemption to apply, the tests will have to provided infrequently or irregularly and the cumulative value of the tests provided during the FBT must be less than $300, which may not help those businesses that require a negative test before every shift/work day.
In February 2022, the government announced that it will legislate to make COVID-19 testing expense deductible, thus allowing the otherwise deductible rule to be applied to ensure that employers do not incur FBT for tests provided. The legislation to enact this has still not been introduced into Parliament. With the fast-approaching Federal election and the reluctance of the ATO to release detailed guidance before the legislation is enacted this could mean that the otherwise deductible rule is unlikely to apply to COVID-19 tests provided by businesses, at least for the 2021-22 FBT year.
Other protective items provided to employees while at work such as gloves, masks, sanitisers and anti-bacterial spray are most likely to be exempt from FBT under the emergency assistance exemption, provided they are given to employees who have physical contact or are in close proximity to customers or clients while carrying out their duties, or those involved in cleaning premises.
In other cases, where an employee’s specific employment duties do not either involve physical contact with customers or cleaning, the minor benefits exemption could be applied so no FBT is incurred. Again, the benefit needs to be minor, infrequent and irregular, and under $300.
Where a travelling employee was required to self-isolate or quarantine, the costs related to that paid for by the business may not be subject to FBT under the emergency assistance exemption. These and many other COVID-19 specific benefits – such as rewarding employees for getting boosters – and associated exemptions highlight the complexity of the 2022 FBT return for businesses.