Massive impact, lots of risk areas
FBT rates and calculations are heavily impacted by the 2010 budget. GST and personal income tax rate changes from 1 October (part way through the tax year) make the changes very complicated. The 2010 budget changes will first be noticed in Quarter 3 of the 2011 tax year with the real impact hitting in quarter 4.
The good news is you have some time to get to grips with the changes and update any excel FBT calculators that you rely on, or start using professionally maintained FBT Software.
No changes when filing 2011 Quarter 1-2
Business as usual. FBT is still payable under the single rate option at 61% or under the alternate rate option at either 61% or 49%. GST was at 12.5% for the whole quarter so no impact yet.
Everything changes in 2011 Quarter 3
New FBT rates apply. The single rate option is now 49.25% and the alternate rate option at either 49% or 43%. Interestingly, the single rate option is now 0.25% higher than the high alternate rate (previously both were 61%). This means that if you pay at 49% rather than 49.25% you are electing to use the alternate rate (which is irreversible within a year) and must attribute in quarter 4.
The taxable value of fringe benefits remains GST inclusive based on the GST paid when the employer procured the benefit. For motor vehicles the GST inclusive amount is based on the GST paid when the vehicle was originally purchased (by the employer or lessor). However, the deemed GST output tax (paid as FBT on the FBT return) is based on the GST rate at the time the benefit was provided. This could cause GST leakage.
For example, a gift certificate was purchased in September 2010 for $1,125.00 inc GST. It was provided to an employee in December 2010. The value of the supply is $1,150. The employer must pay $150 in its FBT return but only claimed $125 in its September GST return so is $25 worse off.
Unique Blended rates in 2011 Quarter 4
FBT is payable at 49.25% under the single rate option. FBT is payable using the attribution rules under the alternate rate. Attribution calculations use the 2011 individual income tax rates, which are blended rates due to the mid year 1 October change. There are also blended FBT rates for attribution adding to the complexity.
Why you should consider using FBT Software
TaxLab updated and fully tested all 2011 FBT calculations in June. If you aren’t using TaxLab, you should sign up now because the changes are time consuming and complicated. We have highlighted some of the changes below. Please contact us now to find out more about the benefits of FBT software.