Yahoo Finance Long lunches, UberEats Budget plan unveiled
COVID-19 triggered a mass exodus from Australia’s CBDs, but bringing workers back and reviving cities’ hospitality industries could come down to one key tax change, a major consulting firm has said.
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Reforming the fringe benefits tax (FBT) system to allow businesses to offer employees greater perks for coming into the office should be a priority for the Government in Tuesday’s Federal Budget, PwC has said.
It considers FBT reform as one of the key ways to drive down business’ compliance costs and lure workers back into the office.
For workers, such a reform would mean new and different perks.
What is fringe benefits tax?
A fringe benefit is considered a payment to an employee, but it isn’t in the form of a salary or wages.
For example, that could be giving an employee a gym membership, free tickets to a concert, free food, access to a work car or a discounted loan.
FBT is a tax paid by employers on those benefits they provide. It’s separate to income tax and is calculated on the taxable value of the benefit.
Employers can usually claim a tax deduction for the cost of providing fringe benefits, although the process can be onerous, PwC tax partner Ellen Thomas told Yahoo Finance.
What does PwC propose?
As part of its 2021 Budget wish list, the major firm has proposed the Government “tweak” FBT to boost growth.
“Temporarily exempting the entertainment element of FBT (a notoriously time consuming and complicated exercise for employers) would encourage more workers currently working from home back to their CBD offices,” it said in its position statement.
“So too would changes to the FBT on car parking. This in turn would help to stimulate struggling hospitality and tourism sectors.”
FBT cost Australian businesses $3.8 billion in the current financial year and $4.2 billion in the 2020 financial year.
Thomas said one of the biggest issues with the current FBT system is the burden it places on employers to claim it. This is especially painful for workplace functions or lunches.
“What employers have to do is go through, item by item, every single expense and look at who was there and the purpose of the function,” she said.
“So for example, if you go out with clients and there are some employees there, you would have to look at the actual receipt, the number of employees versus clients and you would have to put that through the system. It’s quite complex.”
Anecdotally, she said PwC has seen multiple clients spend as much time managing their FBT returns as they do on their corporate tax returns.
“When you think about that in context, FBT collects around 1 per cent of Government revenue and corporate tax returns are obviously much higher.”
How would this plan affect my lunch?
Australia’s capital cities, and in particular Sydney and Melbourne, were hit hard by the COVID-19 shift to remote work.
The Property Council of Australia’s latest office survey found the Sydney CBD was at 59 per cent occupancy in April, while Melbourne’s was at 41 per cent.
Exempting the entertainment element of the FBT would mean businesses would be able to take their staff and clients out for more long lunches and provide more in-office perks.
In turn, struggling inner city hospitality businesses would see an increase in patronage.
Car parks
PwC also proposes changes to car parking allowing workers currently working remotely to bypass public transport on their return to the office.
Free or subsidised city parking has also been proposed by NAB. A recent study from the bank found that this was one key way to bring workers back to the CBD.
“We are still seeing some reluctance among consumers on going on public transport, but I think free or subsidised parking would certainly help,” NAB head of behavioural economics Dean Pearson said.
The Property Council of Australia survey revealed similar findings, with respondents saying they wanted greater flexibility and had concerns about public transport.
PwC wants the Government to allow businesses to purchase more reserved car parks for staff.
“By making changes to the FBT on car parking, more employees choosing to remain working from home could be lured back to the CBD,” PwC said.
“With COVID-19 changing the way we work and shifting the future of work for thousands of Australians, the time is now to amend the FBT so it keeps pace with today.”
UberEats
The consulting firm also believes the FBT system could be refined to allow businesses to more easily provide work-from-home benefits, like UberEats.
“Typically, if a meal is consumed in the workplace then that is exempt from FBT. For example if you’re working late, or you’re working through lunch or there’s a training activity and you get a sandwich, there’s no FBT on that,” Thomas said.
“But with everyone working from home, if you want to do the same thing, there’s FBT on that.”
PwC proposes temporarily shifting the FBT to allowing businesses to purchase food for remote workers to further reduce the compliance burden.
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