With most of Australia and the world still in the grips of the COVID-19 pandemic, many businesses, both public and private, are offering rewards and incentives for their employees to get vaccinated and/or get the booster dose. Depending on the type of reward or incentive offered, and whether it is exclusive to employees or the general public, there may be tax consequences for the business.
Non-cash benefits provided to the general public
Businesses that provide free or discounted goods, services, vouchers, gift cards, rewards points, or other non-cash benefits (eg entries into a draw to win prizes) to everyone that has had their COVID-19 vaccinations will not be subject to FBT, even if employees take part in the program. This is because the benefit is not provided in respect of the employee’s employment. “Public” in this case denotes both public in general, and a section of the public (ie all members of a particular club).
Non-cash benefits provided to employees
Providing non-cash benefits to employees such as goods and services, vouchers and gift cards, or points in a rewards scheme may be subject to FBT. However, a benefit that has a value of less than $300 may qualify for a minor benefits exemption provided that:
- the benefit is provided infrequently and irregularly;
- the value and total value of the minor benefit and other similar or identical benefits are low;
- it is difficult to calculate the taxable value of the benefit and any associated benefits; and
- the benefit is provided as a result of an unexpected event.
In the event that the non-cash benefit provided to employees does not qualify for the minor benefit exemption, your business may be entitled to a reduction in taxable value of FBT if the benefit is an in-house benefit. Generally, an in-house benefit is a benefit that is identical or similar to the benefits you provide to customers in the ordinary course of business (eg clothes for clothing retailers, or electronics for electronic retailers). Businesses can reduce the aggregate taxable value of these benefits by $1,000 if the benefits are not provided under a salary packaging arrangement.
If you provide transport or pay for an employee’s transport to get their COVID-19 vaccination or booster, the travel would be considered to be work-related preventative health care and is exempt from FBT.
For businesses that offer their employees entry into a draw to win prizes as a reward for vaccination, there will be no FBT consequences when the entry to the draw is given to the employee, however, FBT may apply when the winner receives their prize unless an exemption or reduction applies.
If your business gives your employees a cash payment for getting vaccinated, you’ll need to report the payment via Single Touch Payroll (STP) as part of the employee’s salary or wages, withhold tax from the amount under PAYG withholding, and include the amount in your employee’s ordinary time earnings for the purposes of determining super contributions for your employee.
According to the ATO, businesses that have already made cash payments to their employees and have inadvertently failed to withhold tax, should make contact with it as soon as practicable to facilitate the possible remission of any failure-to-withhold penalties. In addition, it reminds businesses that super contributions on cash payments should be made no later than 28 days after the end of the quarter in which the payment was made, otherwise super guarantee charge may apply.
If your business needs help to work out whether the benefits you provided to your employees are subject to FBT, we have the expertise to help you work it out. If you need to contact the ATO in relation to withholding tax, we can take care of that and save you the headache. Here’s how you can contact us: email@example.com
**The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.