REVEALED: The amazing new work perks you could soon claim thanks to sweeping tax changes – including FREE phones, discounted parking and high-speed laptops
- Small businesses will be given 10 tax concessions in federal budget next week
- About 20,000 companies employing 1.7million Australians stand to benefit
- Changes included removing fringe benefits tax for smartphones and parking
- Companies will also not have to pay the tax when they retrain staff with courses
Sweeping tax changes in the federal budget next week will make it easier for small businesses to give benefits to their staff including free parking, mobile phones and laptops.
About 20,000 companies employing 1.7million Australians will benefit from ten tax changes as the government tries to drag the economy out of the first recession since 1990.
From April 2021 businesses that make between $10million and $50million will not have to a pay an extra tax when they give their staff parking and more than one portable electronic device.
Sweeping tax changes in the federal budget next week will make it easier for small businesses to give benefits to their staff including free parking, mobile phones and laptops (stock image)
About 20,000 companies employing 1.7million Australians will benefit from ten tax changes as the government tries to drag the economy out of the first recession since 1990 (stock image)
Under current fringe benefits tax rules, companies have to pay 47 per cent of the value of these benefits to the federal government.
The change will save businesses thousands of dollars and will help them attract and retain staff.
In another major change, all Australian companies will be exempt from paying fringe benefits tax when they pay for workers to train for a different role.
The government hopes this will encourage employers to re-train their staff to fill different positions instead of making them redundant.
What is fringe benefits tax?
Fringe benefits tax (FBT) was introduced in 1986.
It requires companies to pay tax on the value of certain benefits they give to employees such as free parking.
The government says FBT plays an important role in maintaining the fairness and integrity of Australia’s taxation system by placing employees with access to fringe benefits on a more even footing with employees whose remuneration consists entirely of salary or wages.
In 2018-19, 43,288 businesses paid FBT, generating $3.8 billion in revenue, according to ATO data.
Treasurer Josh Frydenber said: ‘Making it easier for businesses to upskill or reskill their workforce will help people to keep their job or to find a new job as we recover from Covid-19.’
The government is also considering allowing Aussies to deduct education and training expenses they incur themselves where they are not related to their current employment – but no decision has been made yet.
Around eight per cent of Australians changed jobs in the past year, with half of these changing industries and around a third of these changing occupation.
Other concessions to small businesses will include allowing them to immediately deduct certain start-up expenses and prepaid expenditure; simplify their pay as you go tax installments; and settle excise duty once a month instead of weekly.
Furthermore, the amendment period for income tax assessments will be reduced from four years to two years starting from 1 July, 2021.
This means the tax office can only demand more tax within two years if officials feel a company has accidentally made a mistake on their tax return.
The changes are estimated to cost the budget $105million over the next three years.
They are part of the government’s bid to slash red tape and reduce tax to help get Australians back to work after coronavirus lockdowns destroyed one million jobs.
Prime Minister Scott Morrison has said next week’s budget is the most important since the Second World War and will aim to ‘cushion the blow of the pandemic recession, to recover what’s been lost – the jobs, the livelihoods, the hours, the incomes, the customers, the clients – and to take new ground by rebuilding our economy for the future.’
Mr Frydenberg said: ‘The Morrison Government is expanding much needed tax relief to small businesses as part of our economic recovery plan.
‘We know that the pathway to recovery is not through higher taxes but through a more competitive and efficient tax system that supports jobs and promotes investment.
‘Enabling small businesses to keep more of what they earn means they can keep operating, pay their bills and retain or hire more staff.
‘Australia’s more than three million small and medium businesses are the engine room of our economy, which is why reducing their tax burden is critical in ensuring they not only survive the crisis, but continue to invest, grow and create jobs as the economy recovers.’
The huge tax changes coming to small businesses in 2020 budget
Businesses with an aggregated annual turnover between $10million and $50million will have access to up to ten small business tax concessions. The changes are estimated to support about 20,000 businesses and 1.7million employees.
Immediate deduction for certain start-up expenses
From 1 July 2020, eligible businesses can immediately deduct a range of professional expenses and Australian government agency payments associated with starting a new business, such as professional, legal and accounting advice. Currently, these costs are usually deducted over a five year period.
Immediate deduction for certain prepaid expenditure
From 1 July 2020, eligible businesses can immediately deduct certain prepaid expenditure where the payment covers a period of 12 months or less that ends in the next income year. Currently, business expenditure that relates to multiple income years is generally not immediately deductible.
Fringe benefits tax (FBT): small business car parking exemption
From 1 April 2021, eligible businesses would be exempt from FBT on car parking benefits provided to employees if the parking is not provided in a commercial car park.
FBT: multiple work-related portable electronic devices exemption
From 1 April 2021, eligible businesses would be exempt from FBT on multiple work-related portable electronic devices provided to employees – even if the devices have substantially identical functions.
Simplified trading stock rules
From 1 July 2021, eligible businesses can choose to use a simplified trading stock regime. Under this regime, eligible businesses may choose not to conduct a stocktake (and account for changes in the value of trading stock) for an income year, if the difference between the opening value of stock on hand and a reasonable estimate of stock on hand at the end of the year does not exceed $5,000.
Pay as you go (PAYG) instalments based on GDP-adjusted notional tax
From 1 July 2021, eligible businesses would have the option to have their PAYG instalments calculated for them by the ATO (based on previously reported information).
Currently, they are required to calculate their actual income for the period, as the basis for their PAYG instalment calculation.
Small business excise concession
From 1 July 2021, eligible businesses would be able to apply to defer settlement of excise duty to a monthly reporting cycle, instead of the current weekly reporting cycle. This only applies to eligible goods under the current small business entity concession.
Small business excise-equivalent customs duty concession
From 1 July 2021, eligible businesses would be able to apply to defer settlement of excise-equivalent customs duty from a weekly to monthly reporting cycle. This only applies to eligible goods under the current small business entity concession.
Two-year amendment period
From 1 July 2021 eligible businesses (excluding entities with significant international tax dealings or particularly complex affairs) will have a two year amendment period apply to income tax assessments for income years. The current exceptions, including for fraud or evasion, would continue to apply. Businesses can lodge an amendment application before the time limit and the ATO may extend the time limit to give effect to the application. Currently, they are subject to a four-year amendment period.
Simplified accounting methods
From 1 July 2021, the Commissioner of Taxation’s power to create a simplified accounting method determination for eligible businesses for GST purposes will be expanded to apply to businesses below the $50 million aggregated annual turnover threshold.
Remove fringe benefits tax for retraining
From 2 October 2020 the government will remove the 47 per cent fringe benefits tax on retraining provided by employers to redundant, or soon to be redundant, employees.
This will encourage employers to help workers transition to new employment opportunities within or outside their business.
Assistant Treasurer Micahel Sukkar added: ‘Australia’s small business owners have shown remarkable resolve and persistence during the Covid-19 pandemic.
‘The Morrison Government is committed to do all we can to help Australia’s small business bounce back stronger on the other side of the pandemic.
‘Our plan to provide $105million in targeted tax relief to attract and retain workers, as well as reduce red tape, will support around 20,000 Australian small businesses and is a key part of our economic recovery plan.’
Previous support from small businesses has included JobKeeper, extending the Instant Asset Write Off, providing a Cash Flow Boost of up to $100,000 for employing small businesses, and boosting access to capital through the Covid-19 SME loan Guarantee Scheme.
The tax changes coming to devices and parking: A case study
This case study is about a fictional cleaning business that provides its workers free parking, phone and lap top.
Cockatoo Cleaning Co provides office cleaning services to other businesses. Its cleaners first go to Cockatoo Cockatoo Cleaning Co’s warehouse where they collect supplies and then travel in Cockatoo Cleaning Co’s cleaning vans to clean office and other commercial buildings.
To get to work many of the staff drive and park out the back of Cockatoo Cleaning Co’s warehouse. As Cockatoo Cleaning Co has a turnover of $20 million, it gets hit with 47 per cent fringe benefits tax (FBT) on the grossed-up value of car parking provided to its staff.
The annual fringe benefit provided is around $1,600 per employee or around $48,000 per year based on its estimates of 30 staff using the car park. It pays FBT on the grossed-up value of this cost, which equates to an FBT bill of approximately $42,566.
Cockatoo Cleaning Co’s margins are tight and found it couldn’t absorb these costs, so it charges staff the cost of the fringe benefit if they elect to use the car park.
Cockatoo Cleaning Co’s ten supervisors are also each provided with two mobile phones, costing the business $1,000 for each, which they use to navigate from job to job and get updates on changing schedules but are also available for private use.
Under current arrangements, Cockatoo Cleaning Co would pay the 47 per cent FBT on the second phone they provide, which would result in a tax bill of around $9,777.
Further, Cockatoo Cleaning Co needs to undertake a complex annual assessment of the value of these fringe benefits, including to assess which staff use the car park and for how long and the number of staff who receive phones and their value.
This can result in significant compliance costs, including accountant’s fees. Under the changes, Cockatoo Cleaning Co and its staff will no longer be hit with the over $50,000 FBT bill or the red tape and extra cost associated with compliance.
The tax changes coming to staff training: A case study
This case study is about a fictional retail business that provides its workers training courses.
RetailCo is closing its physical stores due to COVID-19 and expanding its online presence and other operations. It wants to offer retraining to its 10 sales assistant employees whose positions are being made redundant. It is offering training to redeploy them to different roles in the business where there are 10 vacancies in RetailCo and its related businesses, including in website marketing and fulfilment where it is growing its online sales and in administration.
The training costs are estimated at $5,000 per employee, GST free, for each of these vacancies, resulting in a $50,000 cost to retrain for the 10 vacancies.
In addition RetailCo assesses this training attracts fringe benefits tax, and would be hit with 47 per cent fringe benefits tax on the grossed up cost of $94,340 resulting in a fringe benefits tax bill of $44,340 for retraining its workers.
The Government’s changes mean RetailCo can now avoid $44,340 in fringe benefits tax and the complex assessment involved.
For those workers that are not interested in one of the available vacancies or not successful for a position, RetailCo is also offering to reimburse the training costs of up to $5,000 to those staff members to pursue a short course that will help them with future employment.
Before the Government’s change, it would have paid the 47 per cent fringe benefits tax on the grossed up cost of providing training to the redundant employees who wish to pursue a different career outside the business.