Cars and taxes for 2020-21 financial year

New car threshold amounts will be implemented from 1 July 2020. Understanding the new thresholds and how they may affect your small business operations and vehicle usage will be important in preparing you for the financial year ahead.

Income tax:

There is an upper limit on the cost you use to work out the depreciation for the business use of your car or station wagon (including four-wheel drives). The maximum value you can use for calculating your depreciation claim is the car limit (irrespective of any amount you were paid for a trade-in) in the year in which you first used or leased the car.

For the 2020-21 financial year, the upper cost limit is $59,136 including GST.

Goods and services tax (GST):

Businesses registered for GST with motor vehicles used solely for business purposes are entitled to claim a credit for the GST included in the price of the vehicle, provided they have a tax invoice.

In the event that you purchase a car and the price is more than the car threshold, the maximum amount of GST credit you can claim is one-eleventh of your car limit amount. Keep in mind that you cannot claim a GST credit for any luxury car tax you pay when you purchase a luxury car, regardless of how much you use the car in carrying on your business.

Luxury car tax (LCT):

You are required to pay LCT if you’re registered or required to be registered for GST and you sell or import a luxury car.

LCT applies to motor vehicles designed to carry a load of less than two tonnes and fewer than nine passengers. LCT also applies to a car purchased by a person with a disability even if the car is GST-free. However, disability-related modifications are not subject to LCT. The LCT value of a car includes the value of any parts, accessories or attachments supplied or imported at the same time as the car.

Cars with LCT over the LCT threshold attract an LCT rate of 33%. From 1 July 2020, the LCT threshold will increase to $68,740. Additionally, the LCT threshold for fuel efficient cars will increase to $77,565 for the 2020-21 financial year.

Accounting
services

In the constantly changing business environment, you can rely on our business services team to be expert, up-to-date and ready at hand to assist you with your business matters...

Business
services

Thinking strategically about future changes in the marketplace can be the key to running a sustainable business...

company
secretarial

Communication and effective administration are essential elements of a successful organisation. Regardless of the size of your business, we are ready to support you...

finance
services

We can help you to secure the essential finance for you and your business....

managing your wealth

We can help ensure that your personal wealth is managed as tax-efficiently as possible. ...

tax services

We regularly deal with a broad range of personal and corporate taxation issues and make a point of understanding the individual needs of every client. Whether you need advice on company tax, personal tax effectiveness or indirect taxation....

Self Managed Super Funds SMSFs

In addition to our normal services, we have a developed specialist knowledge and expertise in Self-Managed Superannuation Funds....

firm news

Understanding Fringe Benefits Tax (FBT) And What It Covers

Posted on April 15, 2024 by admin

For businesses in Australia, providing fringe benefits to employees can be a valuable way to attract and retain talent, as well as incentivise performance.

However, employers need to understand their obligations regarding Fringe Benefits Tax (FBT). The Australian Taxation Office (ATO) administers FBT, a tax on certain non-cash benefits provided to employees in connection with their employment.

Let’s explore the types of fringe benefits subject to FBT to help businesses navigate this complex area of taxation.

1. Car Fringe Benefits

One common type of fringe benefit is the provision of a car for the private use of employees. This includes company cars, cars leased by the employer, or even reimbursing employees for the costs of using their own cars for work-related travel.

2. Housing Fringe Benefits

Employers may provide housing or accommodation to employees as part of their employment package. This can include providing rent-free or discounted accommodation, paying for utilities or maintenance, or providing housing allowances.

3. Expense Payment Fringe Benefits

Expense payment fringe benefits arise when an employer reimburses or pays for expenses incurred by an employee, such as entertainment expenses, travel expenses, or professional association fees.

4. Loan Fringe Benefits

If an employer provides loans to employees at low or no interest rates, the difference between the interest rate charged and the official rate set by the ATO may be considered a fringe benefit and subject to FBT.

5. Property Fringe Benefits

Providing employees with property, such as goods or assets, can also result in fringe benefits. This can include items such as computers, phones, or other equipment provided for personal use.

6. Living Away From Home Allowance (LAFHA)

When employers provide allowances to employees who need to live away from their usual residence for work purposes, such as for temporary work assignments or relocations, these allowances may be subject to FBT.

7. Entertainment Fringe Benefits

Entertainment fringe benefits arise when employers provide entertainment or recreation to employees or their associates. This can include meals, tickets to events, holidays, or other leisure activities.

8. Residual Fringe Benefits

Residual fringe benefits encompass any employee benefits that do not fall into one of the categories outlined above. This can include many miscellaneous benefits, such as gym memberships, childcare assistance, or gift vouchers.

Compliance With FBT Obligations

Employers must understand their FBT obligations and ensure compliance with relevant legislation and regulations. This includes accurately identifying and valuing fringe benefits, keeping detailed records, lodging FBT returns on time, and paying any FBT liability by the due date.

Fringe Benefits Tax (FBT) is an essential consideration for businesses that provide non-cash benefits to employees.

By understanding the types of fringe benefits subject to FBT, employers can ensure compliance with tax obligations and avoid potential penalties or liabilities.

Seeking professional advice from tax experts or consultants can also help businesses navigate the complexities of FBT and develop strategies to minimise tax exposure while maximising the value of employee benefits. Why not start a conversation with one of our trusted tax advisers today?

READ MORE