Deloitte Employment Taxes Partner, Elizma Bolt, says that all employers should review remuneration arrangements entered into with their employees as a result of changes to fringe benefits tax (FBT) legislation and amendments to income tax brackets announced in the 2008 Federal Budget.

“The key change employers need to be aware of is the tightening of provisions relating to “eligible work-related items” and property consumed on an employers’ premise,” Ms Bolt said.

“This change will affect a broad range of employees across all income brackets and all current arrangements should be reviewed,” she says.

“For example, salary packaging laptops and electronic devices, as well as meal card type arrangements, may no longer be attractive.”

Laptops and electronic devices
“Previously it had been common practice for parents to salary sacrifice a laptop which was used by school or university based students. Now, to obtain an exemption all employees need to confirm that they use the item for work purposes. This requirement will impose an additional administrative burden on both employees and employers,” Ms Bolt says.

“Employers should hopefully already have the processes and procedures in place to cope with the additional requirement as it is in line with the many other substantiation requirements contained in the FBT law,” says Ms Bolt.

Ms Bolt did welcome the fact that the FBT legislation is to be amended to clarify exactly what is considered to be an “eligible work-related item”. “Further clarification is very timely as employers are increasingly faced with difficulties in determining whether new technological devices fit within the exemption contained in the 22 year old FBT legislation,” she says.

Property consumed on employers premises
Meal card type arrangements may also be affected by the recently announced changes said Ms Bolt.

“Employers allowing their employees to utilise “meal cards” to obtain lunches free from tax will also have to unwind these arrangements by 31 March 2009 or face a significant FBT liability,” says Ms Bolt. “These arrangements have been gaining popularity and have recently been the subject of ATO scrutiny.”

Ms Bolt says that it is comforting that the amendments would not impact those employers that might have incurred significant expense in establishing on-site canteens. “However, any employee that benefited from salary sacrificing under a “meal card” type arrangement will feel the pinch in again having to use after tax dollars for their meals,” she says.