Yesterday, the ATO issued a reminder to tax practitioners that changes to income tax tests for reportable fringe benefits from 1 January 2017 may affect their clients.
The changes mean that all reportable fringe benefits now count as income for clients who receive family assistance and youth income support payments, including family tax benefit part A and part B, child care benefit, youth allowance, ABSTUDY and parental leave pay.
H&R Block tax communications director Mark Chapman explained to Accountants Daily that under the new legislation 100 per cent of the fringe benefits will be added to an individual’s adjusted taxable income (ATI), while prior to the change only 51 per cent of the fringe benefit amount was added into ATI.
“In practical terms, what that means for clients is that if you receive Centrelink payments, or are entitled to one of the listed offsets, and you also receive fringe benefits from your employer, your ATI may go up and your entitlement to benefits and tax offsets may go down or be lost altogether,” Mr Chapman said.
Mr Chapman said accountants should work with their clients to make sure they are aware of these changes and the implications it will have on them.
“In the first instance, it’s essential to make clients aware that the change has already happened, particularly ones who receive both fringe benefits from their employer and Centrelink benefits,” he said.
“Advisers may need to help their clients do some number crunching to ensure that they don’t lose more in Centrelink benefits than they gain from the employer provided benefit. In many cases, clients will still be ahead but without working out the numbers, it’s impossible to tell.”
Accountants also need to be across all the details of the legislation which includes exemptions for organisations defined under section 57A of the Fringe Benefits Tax Assessment Act 1986.
“Accountants also need to be aware of the various exemptions to the new rules, which keep employees of registered health promotion charities, registered public benevolent institutions, some hospitals and public ambulance services on the old rules, because not all of their clients will be impacted,” he said.