Small businesses: don’t forget your FBT concessions

If you own a small business still recovering from the COVID-19 induced downturn, remember that you can take advantage of FBT concessions to lower the amount of FBT you need to pay. The concessions include exemptions for car parking in some instances, and work-related portable electronic devices. All this could mean more cash to invest in the revitalisation and ultimate success of your business. Even if your business was not considered to be a small business entity a few years ago, the turnover threshold has changed, and it may be worth a reassessment.

During these challenging economic times, many small businesses are still in the recovery phase where every dollar counts, the last thing these businesses need is to be paying more tax than they should. So, if you’re a small business don’t forget that you can access a variety of concessions including those related to FBT. These concessions could result in no FBT being payable.

For small business employers, the car parking benefits you provide to your employees could be exempt if the parking is not provided in a commercial car park and you satisfy the total income or the turnover test. This is the case if your business is not a government body, listed public company or a subsidiary of a listed public company.

The second exemption relates to work-related devices, small businesses are able to provide their employees with multiple work-related portable electronic devices that have substantially identical functions in the same FBT year, with all devices being exempt from FBT. Note however, this only applies to devices that are primarily used for work, such as laptops, tablets, calculators, GPS navigations receivers and mobile phones.

To be a small business entity, the business must satisfy the turnover threshold which for the 2020-21 FBT year (1 April 2020 to 31 March 2021) is $10m. From 1 April 2021 (ie from the 2021-22 FBT year onwards), the turnover threshold will increase to $50m.

Therefore, to be a small business entity, the business in question must have had an aggregated turnover in the previous year of less than $10m for the 2020-21 FBT or $50m for the 2021-22 FBT year and onwards. There may also be other tests that the business can satisfy in place of the aggregate turnover test depending on the circumstances.

Businesses that do not satisfy any of the small business entity tests will not be eligible for the car parking or work-related devices exemption. This means that generally, the business/employer is only able to provide one work-related item in each category (ie if the items’ functions are substantially identical) to each employee, each FBT year. However, this does not apply if the item is a replacement item.

Whether or not the items have substantially identical functions depends on the facts of each case, for example, the ATO considers that where a tablet can perform the functions of a laptop computer, even in reduced capacity, it would be considered to have substantially identical functions to a laptop. Thus, in that circumstance, either a laptop or tablet may be provided to each employee, each FBT year and not both.

As for car parking fringe benefits, where a business is not considered to be a small business or they provide car parking to their employees in a commercial car park, the business will not be exempt and will bear the extra administrative burden of having to work out whether they are liable for car parking fringe benefits, and if so, the amount of FBT they are liable for.

If your business does not satisfy the definition of a small business entity in the current FBT year, don’t fret, it may be worth a revisit in the 2021-22 FBT year as the threshold will have increased and the business may be eligible to receive these FBT exemptions as well as other tax concessions.

Take advantage today.

If your small business would like to take advantage of these concessions and pay less FBT in these challenging economic times, we can help. If you’re not sure whether your business is a small business entity or would like to revisit whether it is a small business entity, contact us today.