Some employers believe if you provide an employee with a vehicle such as a work ute, they are exempt from FBT. However, this isn’t always the case.
The ATO has issued employer guidance regarding how to determine an employee’s private use of a vehicle for the purposes of car-related FBT exemptions. Draft Practical Compliance Guideline PCG 2017/D14 is designed to provide more certainty and transparency about when the ATO will not apply compliance resources to determine if private use of a vehicle meets these exemptions.
Eligible employers who rely on the guideline do not need to keep records to prove that an employee’s private use of a vehicle is minor, infrequent and irregular, and the ATO will not review the employers’ access to car-related exemptions for that employee.
Are you an eligible employer?
An employer can rely on the guideline if:
- The employer provides an eligible vehicle to an employee for performance of their work duties.
- The employer takes all reasonable steps to limit private use of the vehicle and has measures in place to monitor such use.
- The vehicle has no nonbusiness accessories.
- When the vehicle is acquired, its GST-inclusive value is under the luxury car tax threshold.
- The vehicle is not provided as part of a salary packaging arrangement, and the employee cannot elect to receive additional remuneration in lieu of using the vehicle.
- The employee uses the vehicle to travel between home and work, and
- any diversion adds no more than 2 km to the ordinary length of that trip;
- no more than 750 km of travel in total for each FBT year for multiple journeys is for a wholly private purpose; and
- no single, return journey for a wholly private purpose exceeds 200 km.
Employers will need to assess their eligibility to rely on the guideline on a yearly basis.
Examples of when employers can rely on the guideline include:
- Incidental travel (regularly stopping at a newsagent) and wholly private travel (taking a relative to school 10 times during the FBT year).
- An employee who travels a total of 20,000 km and whose private use of the vehicle involves taking domestic rubbish to a tip (100 km return trip) and moving house three times (200 km in total).
Examples of when employers cannot rely on the guideline include:
- Travel to attend seasonal weekly football training, which adds more than 2 km to the journey from home to work – the employer cannot rely on the guideline.
- Private travel, including a single return trip of 300 km – the employer cannot rely on the guideline.
When it is finalised, the guideline will apply to car and residual benefits provided from the 2017-18 FBT year, ie from 1 April 2017.
Fringe Benefits Tax can be complex. Should you wish to discuss your FBT requirements, please contact your local Accru office.