Contact: Amanda Kennedy
Deloitte
Media and Communications Manager
0418 806 477

Contact: Karen Stein
Deloitte
Employment Tax Partner
+61 (0) 2 9322 7387

The Government’s initial response to the red tape taskforce does not immediately reduce FBT compliance costs for business according Deloitte Employment Taxes Partner, Karen Stein.

"While increasing thresholds will certainly reduce the amount of FBT payable, it is unlikely to reduce the compliance cost for employers," Ms Stein said.

"A considerable amount of time is spent by employers in working out whether benefits, which are minor in value and infrequently and irregularly provided, are exempt from FBT in accordance with the related legislative provisions."

"We welcome the Government’s response today to increase the value of such minor benefits from $100 to $300 (effective from 1 April 2007), but it will not by itself reduce the costs associated with determining whether these low dollar benefits meet the remaining requirements of this exemption."

"Determining whether the benefits are provided on an infrequent and irregular basis, and then whether the exemption can actually be applied, is still a significant compliance burden."

"Businesses need greater guidance to help them determine whether benefits are regarded as irregular and infrequent and we are pleased the Government has asked the ATO to provide guidance in this area."

Ms Stein said that increasing the Reportable Fringe Benefits Amount (RFBA) thresholds from $1000 to $2000 per employee from 1 April 2007 will also have little impact on reducing compliance costs.

"Although the change in the threshold will benefit employees whose current RFBA impacts particular surcharges and levies (such as the Medicare Levy surcharge, child support payments and HECS), the cost of compliance for employers will still remain," she said.

"Employers will still need to have to have systems in place to identify which of their employees receive fringe benefits each year and attribute a value to those benefits."

"Only when this process is completed will employers be able to determine whether an employee has a RFBA of $2000 or more," says Ms Stein.

"We appreciate the Government’s report issued today is not the complete response to all of the Productivity Commission’s 178 recommendations."

"Lifting the FBT thresholds is a welcome initial improvement, but significantly more can be done to tackle the real deadweight costs of FBT compliance for employers."

"We look forward to assisting the Government in this regard," said Ms Stein.