Publication date: 29 Jan 99 |
Source: THE TAX INSTITUTE
The Government's proposed changes to Fringe Benefits Tax legislation which differ significantly from the original Tax Reform announcement in August 1998 will cause business enormous reporting headaches and increase the real cost of compliance, according to Taxation Institute of Australia President, Mr Ken Spence.
"These proposed changes could wreak havoc with both large and small business because employers will not have sufficient time to upgrade their computer systems to capture the additional information required to be reported on employee group certificates," said Mr Spence.
"Unless the proposed 1 April 1999 commencement date is delayed, business will be placed in an invidious position of being obliged to provide from that date, group certificates to employees showing the value of a range of fringe benefits without having any means to capture the information," he said.
The Taxation Institute submission to the Senate Committee into the GST and A New Tax System (ANTS) on the first instalment of the proposed FBT changes outlines this and other defects in the design of the policy underlying the Bill introduced to give effect to the changes.
In addition to this compliance issue, Mr Spence said that there was a major inconsistency between the original proposal on FBT announced in theGovernment's White Paper on Tax Reform released in August 1998 and the Bill introduced in December.
"In the original proposal, employers were only required to include the grossed-up taxable value of benefits that are part of an employee's remuneration package or award," Mr Spence said.
"However, under the Bill introduced into Parliament in December 1998 to give effect to this change, the range of taxable benefits is not limited to benefits provided under a remuneration package or award but includes all taxable fringe benefits other than car parking and entertainment. This change has not been acknowledged nor explained by the Government."
For example, the taxable value of the part-time use of a car could be included in a group certificate if an employee's taxable fringe benefits were in excess of $1,000 even though the provision of the car was not part of the employee's remuneration package.
Also, where an employer provided benefits to an employee by way of a goodwill gesture, eg a law firm providing free advice to their staff, the taxable value of these non-remuneration benefits would need to be reported, although under the original proposal they would not.
"The effect of this change would mean that even modest income earners could find themselves denied family benefits or be liable for the Medicare surcharge even though their income was well below the relevant income thresholds," Mr Spence said.
"In addition, extension of the reporting proposal to all fringe benefits whether or not they related to an employee's remuneration package or award would create significant additional compliance costs for employers notwithstanding that the Bill does exclude entertainment benefits and car parking benefits."
"Take the example of an employer who must split the value of benefits such as a 'pool car' between a number of employees. One or two employees may habitually use the car but an employer, with no other means of allocating the value of the car for FBT purposes, may split the value between all the employees."
"What happens if an employee disagrees with this distribution? The Bill contains no appeal mechanism for those employees who are dissatisfied as to the amount of benefit that has been allocated to them by their employer," he said.
"The change as proposed, therefore, has the potential to cause industrial disputation between employers and employees, and amongst employees!"
The Taxation Institute strongly urges the Government to revisit the original proposal in the ANTS Paper as this would largely overcome these problems.