The Otherwise Deductible Rule (ODR) is a mechanism within the Fringe Benefits Tax (FBT) legislation which enables the taxable value of an expense payment benefit provided to an employee to be reduced to Nil, this consequently removes the requirement to pay fringe benefits tax.
A tax benefit can be classified as Otherwise Deductible if the employee would have been entitled to claim an income tax deduction if their own personal income for the expense if the University had not paid for the expense.
To determine if the employee is eligible to claim an income tax deduction, the expense must be sustained in the duration of producing assessable income.
Where an employee determines that only part of the expense was incurred in the course of producing assessable income, the employee is require to allocate the cost between business and private use and complete the declaration only for the business use portion.
It is essential for the otherwise deductible rule to be supported by specific documentation, if it is to be used to reduce the taxable value of a fringe benefit. This documentation must substantiate the extent to which the cost of the benefit would have been deductible to the employee.
This required documentation is called the “Otherwise Deductible Declaration” and is available to be submitted in via either hardcopy or electronically.
Here is a list of typical benefits which may include private use and for which an Otherwise Deductible Declaration may be claimed;
- Professional memberships & subscriptions
- Licence fees
- Home internet facilities
- Medical examination costs
- Conference, Workshop, Congress and Seminar Registration fees
- Course and tuition fees in relation to study relating to the staff members current employment
- Text and reference books and reports.
Things The Otherwise Deductible Declaration cannot be used
The Otherwise Deductible Declaration is unable be used for entertainment related expenditure. Entertainment related expenditure includes:
- Food and drink provided to University staff at a social function, either on or off campus
- Food and drink provided to University staff who have not travelled away from their home city of employment
- Venue and facilities hire for a social function
- Food and drink provided to associates (family & partners) of a staff member
- Travel and accommodation costs associated with staff attending a social function.
Other Important Information about the Otherwise Deductible Rules and Declarations
A declaration needs to be completed for each expense item provided as a benefit. For example; items are not allowed to be bulked together under one declaration, such as ‘conference costs’.
Benefits provided by the University to staff which have a value less than $300.00 do not need a declaration.
Declarations are not required for expenses with an individual value of less than $300.00 and where those expenses are provided irregularly and infrequently.
Benefits of this nature are categorised as a Minor Benefit and are excluded from FBT.
New Car Park FBT Changes Came Into Effect on 1st April 2021
From 1st April 2021, FBT exemptions for car parking will apply to employers with a combined turnover of less than $50 million, where the parking facilities provided to employees are not located at a commercial parking station.
This change was first announced by the Australian Government in October 2020, as part of the 20-21 Federal Budget.
The second major change is that the ATO plans to revise its definition of what constitutes a commercial parking station. This means that a parking facility which does not have the primary purpose of providing all-day parking may now be considered a commercial parking station.
This means employers could be liable for FBT when staff are provided parking within 1km of a shopping centre, airport or hospital which charges for all-day parking.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 07 36086800.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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