Employing overseas workers and Fringe Benefits Tax Facts.
Question – If an employer paid for a current employee’s permanent residence application is the employer’s payment subject to Fringe Benefits Tax (FBT)?
So you’ve decided to extend an overseas workers contact with a permanent residence sponsorship, but there are a few tax implications that you’re unsure of and the Fringe Benefits Tax implication for the application is one of them.
The transition to becoming an Australian permanent resident is popular for temporary 457 visa holders and also popular amongst Australian employers as it’s a great avenue to gain great overseas knowledge. So what do employers need to know before supporting an employee through this process?
When applying for permanent residence the employer must consider issues such as the employee’s age and genuine need to relocate. Along with the lengthy paperwork, as an employer you also want to know if there are any FBT tax implications when it comes to keeping such an employee in your business
Here is our break down of what seems a complicated issue.
- Applicants must show that they have been employed in their approved occupation with their employer as 457 visa holder for a period of at least two years in the three-year period immediately before submitting the application.
- Although businesses are under no obligation to offer assistance with permanent resident applications, under the ENS, most sponsoring employers will be asked to support an application.
- Who pays? Unlike the 457 program, there is no obligation for the employer to cover the fees, so this will depend on an organisation’s policy. It is not uncommon to see claw-back provisions or written agreements for a reimbursement in the event an employee ceases employment within a period of being granted permanent residence. Both the applicant and the employer will, however, need to make a formal declaration that they have not paid or received a ‘benefit’ in return for the sponsorship opportunity.
- If an employer pays the costs of a visa application for a non-resident employee to remain in Australia, will the benefit would most probably be provided in respect of their relocation & transport and be exempt under section 58F of the Fringe Benefits Tax Assessment Act 1986 (FBTAA). The ATO has a ruling confirming the Visa costs would be exempt from FBT in ATO ID 2013/35.
- The FBT exemption for relocation costs for travel & living away from home for an employee are fairly extensive and can cover many costs such as obtaining a Visa, police clearances, English tests and other expenses for employees working on assignment.
- Although the rules are different and not exempt from FBT if the employee is already living in Australia. If the expense benefit is not provided in respect of relocation or living away from home the costs will be subject to FBT. So costs paid by the employer for the renewal of a Visa or the costs in relation to varying a Visa or the application for a different Via will be subject to FBT as the costs are considered personal, private and capital in nature for the individual.
- The ATO announced in early 2018 that they would be obtaining information on taxpayers with Visas from the Department of Immigration and Border Protection to data-match and ensure compliance with tax laws. Therefore all employers of visa holders and visa holders themselves should review their taxation, FBT & superannuation records & obligations are compliant.
Australia’s taxation legislation can be complex and difficult to navigate so it is wise to always seek detailed tax advice in respect of your personal circumstances. It is also an option to ask the ATO to provide a private ruling on your exact situation to give you comfort & certainty.
This article was written by Dom Morello from DNM Group