Advice: Issued Significant FBT on Group Certificate, Now I Have an Insane HECS Repayment. What Should I Be Doing?

LDarkAvernus on 31/07/2018 - 15:35

Hi Ozb community,

Looking to understand what I should be doing in regards to my current situation.

Over the past year I have been working on a long-term travel engagement for my employer, travelling to and from my home city almost every week.
As far as I was concerned, I was just doing my job as per previous years and travel requirements and I had never received an FBT value before. As a result of this travel, in early July I was advised on my group certificate that I had incurred $120,000 in FBT to the company and as a result, I now owe a mandatory repayment of my HECS debt in the area of $14,000 (One third of my hecs debt).

Naturally, this is terrifying to be just suddenly slapped with and I'm finding it hard to figure out what I should be doing.

What is getting to me is that it was my understanding that my employer was required to hold any mandatory repayments on my behalf so when tax time comes around, repayments are as close to $0 as possible. With this, I could understand being $1000 out, maybe $3000 if they really messed up, but $14,000 is financially crippling.

As a result, the only way I can get out of this is by either taking a payment plan from the government (Paying the interest on what seems to be a massive oversight on my employer's behalf), or taking the risk of paying this on credit and transferring it to a 0% credit card.

As i was never advised of incurring this FBT value (which my accountant has told me I should have been), what are my rights in this situation? In true ozbargain fashion its been suggested to lawyer up, however id prefer to know if i actually have a real case here before pursuing something which is going to burn a bridge. On the alternate side I am about to go to my employer to request a REM review for this mistake that has impacted me, however this is early days.

I should say that despite this, I am very fond of the company I work for, however this is such a big oversight that its too big to ignore.

TLDR: I have a 120k in FBT i was never informed of incurring, the employer has not held any additional money to cover HECS repayments incurred other than the required HECS ammount, i'm now 14k in debt, what should i do?

Education & Work

Comments

  • dasher86 on 31/07/2018 - 15:45
    +1

    Are you able to tell us the nature of your work?

    Usually, travel is not FBTaxable unless it's for entertainment purposes.
    Sounds like someone may have made a mistake on your pay summary if as you mentioned it is the same as last year…

    • DarkAvernus on 31/07/2018 - 15:49

      Work is IT consultancy, I pay board at family home due to traveling so much and it not making financial sense to rent. Also the fbt has been checked and it is correct based on my living circumstances.

      Trust me I wish I was a mistake and it was my.first thought, however it's taken 3 weeks to get to this answer.

      • StateOE on 31/07/2018 - 16:00
        +1

        If it's not a mistake, they should be able to tell you what benefits you received outside of salary?
        120k in Fringe benefits is a lot of benefits to receive without you knowing.

        • DarkAvernus on 31/07/2018 - 16:08

          The benefits are working away from home allowance, and accommodation expenses.

          I believe this assigned fbt has also come as a result of an audit where now I have to wear the implication, which was obviously never advised (and as a result could never prepare for)

        • tellhimhesdreaming on 01/08/2018 - 09:17
          +2

          @DarkAvernus:

          Generally speaking allowances aren't Fringe Benefits. Allowances would either be reported separately or included in your gross pay.

          A fringe benefit would be them providing you a car to enable the travel, while allowing you to also use it personally without restriction.

          Seems to me there is a piece of the puzzle missing?

          You say it's been checked - but how did you check it and with whom?

        • mskeggs on 01/08/2018 - 09:57
          +2

          @tellhimhesdreaming:
          I strongly agree with this.
          Based on the information you have provided, you shouldn't have any FBT obligations.
          $120,000 is an extraordinary amount for FBT and I would be amazed if the ATO didn't audit it.

          Can you tell us what made up the $120,000 and how/why it is believed this is a fringe benefit?

        • HighAndDry on 01/08/2018 - 13:35
          +2

          @tellhimhesdreaming: Seconded. Unless OP is getting personal use or benefit from these payments, they're just standard allowances/reimbursements, and not fringe benefits. It'd be like if someone bought a cake for an office party, was reimbursed, and then had that amount counted as income too - it'd make no sense.

  • foxmulder on 31/07/2018 - 15:50

    I don't understand the purpose of fbt. Didn't company actually spend mlore money than should in fbt expense why not just include it on sallary?

    • mskeggs on 01/08/2018 - 10:03
      +1

      It is a legacy of old rules.
      Because companies pay low tax (25% or 30%) on their profits, they would pay the employees school fees/mortgage/health insurance etc. and claim it as a corporate tax deduction. The employee never saw the cash, so it wasn't income.

      The FBT stopped this, by applying PAYG rates to FBT, making it pointless for most companies to continue to do it.
      There is an exception for not-for-profit organisations, as they don't pay FBT (e.g. hospitals, charities) and continue to offer fringe benefits before tax. Typically, the organisation keeps some of the tax benefit for itself.
      See here for how NSW Health explains it:
      http://www.healthshare.nsw.gov.au/staff-resources/salary-pac…

      It should be done away with, but as the beneficiaries are now largely feel-good organisations like charities, it would face popular opposition as it would raise their staffing costs.

  • pantsparty on 31/07/2018 - 16:05
    +1

    What fringe benefits did your company provide to you? Travel and accommodation for work purposes is not a fringe benefit. I think this is the real question - you can worry about your next steps once we confirm the FBT amount is valid. $120k is a huge number - what are they giving you as a benefit which is so valuable?

  • bobbified on 31/07/2018 - 16:06
    +3

    $120K for travel sounds huge!

    It doesn't make sense with the limited information you've provided.

    If you work for a company and there's travel expenses, the company usually pays as their own deductible expense - it shouldn't appear as an FBT amount on your own PAYG Summary. It's only FBT'able if it's travel for personal reasons and they've reimbursed you for that travel. Or have you salary packaged your travel expenses (that you'd otherwise be paying yourself)? How much was your Gross amount?

    I think you need to provide much more information if you want help on this.

  • trex on 31/07/2018 - 16:19
    +1

    Travel from home city to the work place is not work related and is treated as a fringe benefit that your employer has provided to you unless the work place is classified as remote work site. In your group certificate, the fringe benefit value is grossed up by multiplying either 1.8868 or 2.0802 (read https://www.ato.gov.au/Rates/FBT/). The logic of this grossing up is that the benefit is treated as received net tax using the highest tax bracket of 47% similar to how you would have paid for the flight tickets out of your own pocket from income that is already deducted of taxes. So $120,000 reportable fringe benefit works out to be around $60,000 (divided by 1.8868 or 2.0802) roughly $1.100 per week (derived by dividing by 52 weeks). Does $1,100 per week for flights sound about right?

    • [Deactivated] on 05/08/2018 - 21:29

      I would assume that their regular workplace is in their home city given that it’s the same employer but the travel is new (consulting with a company based elsewhere possibly). I may be misreading it though.

  • spiff on 31/07/2018 - 17:25

    I thought the employer was liable to pay FBT on fringe benefits provided to the employee.

    • foxmulder on 31/07/2018 - 18:34

      I think what happen is that the benefit is reported under op tfn and separately, the company pays the fbt tax on the amount reported. This has resulted op get more income reported thus why the hecs Debt payment required.

      • spiff on 31/07/2018 - 18:42

        Ah gotcha, that makes sense. Ouch for the OP!

    • redforever on 31/07/2018 - 18:35

      I guess the employer are paying. However, as the OP has a HECS debt, the FBT increases his taxable income that results in a higher repayment for his HECS debt.

      Maybe discuss with your employer and see if they are open to providing an interest free loan to you.

      It just means you are paying off your HECS faster.

      • trex on 31/07/2018 - 21:58

        Interest free loan is also a Reportable Fringe Benefit :D

  • FirstWizard on 01/08/2018 - 09:48

    Where I work, if the employee does not provide a signed travel diary or in case of a Conference an itinerary including the conference schedule (signed as true by the employee) prior to each travel (only for trips longer than 5 nights), the employee would incur an FBT of 50% of the total travel cost, payable by the employee.

  • [Deactivated] on 05/08/2018 - 21:23

    I used to have to travel regularly for work and $0 of it was reported as FBT. I also had/still have a HECS debt.

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