Farm hand: help those helping you with five fringe benefits

by Grahame Barber Manager - Tax Advisory Grahame has a decade of experience advising on the complex tax matters associated with family businesses. As a member of the Tax Advisory team at Mutual Trust, Grahame focusses on achieving business outcomes whilst managing tax exposure. Contact Grahame

The Fringe Benefits Tax (FBT) year concludes on 31 March, which serves a reminder (or an opportunity) to review employee remuneration strategies. The agriculture industry in particular has some of the most generous concessions available. Many Mutual Trust clients have their own rural properties with a dedicated, full-time farm management team. By leveraging these concessions, an employer can attract talented employees; however there are also some hidden traps to be mindful of.

1. Work-related vehicles

Most utes or vans are generally FBT exempt provided that private use of the vehicle is ‘minor, infrequent and irregular’. The Australian Taxation Office (ATO) has recently focused on how much private use is reasonable, so it would be prudent to begin monitoring the private use of work vehicles to ensure its private use does not go over a reasonable limit. Log books can be an effective way of managing usage or employee contract conditions can stipulate limits to a vehicle’s private use.

There are also salary packaging strategies available to farm employees that allow them to package a private car for themselves or a spouse in a tax-effective way.

2. Remote-area housing

Provided that the farm property is located in a ‘remote area’, the provision of a residence for the farm manager or temporary accommodation for seasonal workers will generally be exempt from FBT. This concession can be used as a valuable incentive for the onsite farm manager.

3. Utilities

There is concessional treatment of the electricity and gas connected to remote-area housing (50% reduction of the value of the benefit).  This benefit can accidentally be overlooked by employers.  It is often prudent to have employees pay an amount towards utilities to reduce total FBT expense, which is currently levied at 47%.

Note that the 50% reduction does not apply to the private use of the household telephone or internet connection.

4. Mobile phones

Electronic devices provided ‘primarily’ for business use are exempt from FBT, as are the associated expense payments (i.e. monthly bills).  Providing mobile phones can assist with better communication between employees, particularly given the remoteness of the work environment.

5. Others benefits

It can be common for employees to be allocated some farm stock for private consumption.  Such benefits can be exempt under the ‘minor and infrequent’ FBT exemption (under $300 value), or concessionally taxed as ‘in-house property’ (up to $1,000 value).

Note that ‘in-house’ or ‘minor and infrequent’ benefits cannot be salary packaged by employees.  So, it is at the employer’s initiative to provide these tax-effective benefits.

If you wish to undertake a comprehensive review of your farming remuneration strategies, please contact your Mutual Trust advisor or Grahame directly for a discussion around how we can assist you in accessing these benefits for your employees and business.

Mutual Trust Pty Ltd ACN 004 285 330 (AFSL 234590). Liability limited by a scheme approved under Professional Standards Legislation. For participating members (other than for the acts or omissions of Australian Financial Services Licensees). This information is general in nature and subject to change. It does not constitute tax, legal or financialadvice. We recommend you seek advice specific to your circumstances before taking any action. Copyright © 2014 Mutual Trust Pty Ltd.
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