Government called on to overhaul FBT regime

One accounting body is again pushing the government to overhaul the fringe benefits tax as it becomes increasingly difficult to navigate, with more anomalies popping up to the detriment of taxpayers and accountants. 

IPA senior tax adviser Tony Greco told Accountants Daily that there is a need for the fringe benefits tax to be reviewed.

“We’ve been calling for an overhaul for some time in relation to FBT,” Mr Greco said.

“It has that unsavoury aspect of being the most cumbersome of all taxes and the one that drives most employers the biggest compliance burden relative to the amount of money it generates.”

Mr Greco highlighted that there are many anomalies in the FBT, including salary packaging bus travel, which was outlined in ATO class ruling CR 2016/58 in August last year.

The ruling allows an employer to provide a bus travel smart card as part of a salary sacrifice arrangement for bus travel between home and work, subject to a few rules.

Mr Greco said that while this quirk would have existed for a long time, it’s only recently come into the light as people search for perks while others disappear.

“In some sense it's been there ever since they defined vehicles other than cars, it's just that with more and more tax perks disappearing, such as meals/entertainment and the car tax breaks, everyone’s looking for ways to add more pre-tax benefits to the landscape,” he said.

“It’s more the climate: as you take more perks away, people will start looking for others. It highlights the anomalies that are knitted in the legislation.”

IPA chief executive officer Andrew Conway said that normally, for taxation purposes, bus travel is considered private in nature and employees have to bear this expense from post-tax dollars with no tax relief.

“This ruling confirms the anomaly, providing a tax break relating to bus transport whereas such a benefit does not apply to any other form of public transport such as trams, trains and ferries,” Mr Conway said.

“While it may be a good deal for bus travellers, it is an inconsistency within the tax regime that does not sit well with other modes of transport. In a world where we are trying to encourage the use of public transport for congestion and environmental reasons, it is hard to justify this outcome from a policy perspective.”

“This ridiculous outcome is just the tip of the iceberg when it comes to FBT.”

Mr Conway said this adds to the reasons why the FBT is due for an overhaul.

“The IPA has long argued for an overhaul of the current FBT rules, which are well past their use-by date and no longer reflect modern work practices,” he said.

“In the main, the approach has been that of band-aid fixes, which has not addressed the complexities associated with FBT.”

 

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