FBT and the private use of vehicles clarified

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.

A trustworthy young man standing beside his utility van, ready to drive to his next installation appointment.

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.

About the Author
Melissa McCrystal , Accru Rawsons Brisbane
Melissa assists primarily small and mid sized businesses with all aspects of their accounting, tax and audit. She has a particular focus on business valuations and self managed superannuation funds, helping businesses, as well as professionals and investors, to achieve their long-term goals.
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