Alternatives to evidentiary documents for FBT purposes
With the passing of legislation to reduce FBT compliance costs on 23 June 2023 (Treasury Laws Amendment (2022 Measures No. 4) Act 2023), employers can soon use appropriate alternative statutory evidentiary documents to satisfy FBT record-keeping requirements. From 1 July 2023, employers will have the option to rely on existing or other alternative records as determined by the Commissioner by way of legislative instrument. The legislation does not change or reduce the information employers need to hold, and only alters the prescriptive format and processes for obtaining and holding that information.
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Alternative FBT evidence
Employers that provide certain fringe benefits to their employees will soon be able to use appropriate alternative statutory evidentiary documents to satisfy FBT requirements with the passing of legislation to reduce FBT compliance costs for employers. Under the FBT law, employees are required to provide information to employers about fringe benefits received, and employers are required to prepare declarations in a form approved by the Commissioner. As a part of record keeping obligations, information and declarations are required to be kept for five years and the ATO may request these records for compliance purposes at any time.
On the ATO website, there are some 20 different approved employee declarations for various fringe benefits including expense payment fringe benefits, living-away-from-home allowance (LAFHA) fringe benefits, property fringe benefits, residual benefits, loan benefits, car and fuel, holiday transport, temporary accommodation, and relocation. In addition to approved employee declarations, there are also two employer declarations and a travel diary requirement currently used as statutory evidentiary documents for FBT purposes.
This current requirement for certain records to be in ATO approved form to comply with FBT record keeping obligations means that some employees and employers may be forced to create additional records despite the required information already being captured through other processes such as corporate records. From 1 July 2023, employers will have the option to rely on existing or other alternative records as determined by the Commissioner by way of legislative instrument. However, the new legislation does not change or reduce the information employers need to hold or support their FBT return, and only alters the format and processes for obtaining and holding that information.
While the option to use alternative records will generally reduce the FBT record keeping burden for employers, the Commissioner will not necessarily specify alternative record keeping options for all available fringe benefits or situations. Where records are extensively defined within legislation such as log books or odometer records, employers will need to continue to meet their record-keeping obligations under current arrangements. It is anticipated that future technological advances and applications may result in alternative records being held by employers that could be determined as being adequate by the Commissioner.
Draft legislative instruments specifying adequate alternative records
So far, the ATO has released for comment, four draft legislative instruments on adequate alternatives to statutory evidentiary documents that were all set to apply from 1 April 2023. The draft instruments relate to:
- overseas employment holiday transport;
- car travel to employment interviews or selection tests;
- remote area holiday transport; and
- car travel to certain work-related activities.
The draft instruments outline the specific information required for an alternative record to be acceptable in each FBT category.
For instance, the record will need to be in English and will need to contain the names of employees or associates, the make and model of car, the address of departure or arrival location, the dates of travel, the number of whole kilometres travelled. Each draft legislative instrument outlines the years of tax, the classes of persons and the classes of statutory evidentiary documents or records an employer may use to satisfy their alternative record keeping obligations.
In circumstances where the Commissioner is not “reasonably” satisfied that adequate alternative records are available for certain fringe benefits, employers will be expected to continue using existing approved forms to ensure that statutory evidentiary documents that meet record-keeping obligations are retained.
Disclaimer: The information on this page is for general information purposes only and is not specific to any particular person or situation. There are many factors that may affect your particular circumstances. We advise that you contact Mathews Tax Lawyers before making any decisions.