ATO Guidelines on What Makes an Eligible Vehicle Exempt from FBT
written by Darren Hagarty
Generally, a fringe benefit arises where an employer makes a vehicle they hold available for the private use of its employee. However, a fringe benefit is an exempt benefit where the private use of eligible vehicles by employees during an FBT year is limited to work-related travel, and other private use that is ‘minor, infrequent and irregular’.
Eligible Vehicles include:-
- Panel Vans
- Single Cab Utes
- Dual Cab Utes (Not designed for the principal purpose of carrying passengers)
- Four Wheel Drives (Designed to carry a load of one tonne or more or carry more than eight passengers)
Where the eligible vehicle is provided to a current employee to perform work related duties the Tax Office has laid out what it considers to be the guidelines for the vehicle to be considered to be exempt. These guidelines are detailed in the ATO’s draft Practical Compliance Guideline document entitled PCG 2017/D14 Exempt car and residual benefits: compliance approach to determining private use of vehicles and are as follows:
- you take all reasonable steps to limit private use of the vehicle and have measures in place to monitor such use
- the vehicle has no non-business accessories
- the vehicle had a GST-inclusive value less than the luxury car tax threshold at the time the vehicle was acquired
- the vehicle is not provided as part of a salary packaging arrangement and the employee cannot elect to receive additional remuneration in lieu of the use of the vehicle, and
- your employee uses the vehicle to travel:
- between their home and their place of work and any diversion adds no more than two kilometres to the ordinary length of that trip;
- no more than 750 kilometres in total for each FBT year for multiple journeys taken for a wholly private purpose, and
- no single, return journey for a wholly private purpose exceeds 200 kilometres.
Where these guidelines are met, you do not need to keep records about your employees use of the vehicle that demonstrate the use is minor, infrequent and irregular.
If the employees use of the eligible vehicles falls outside these guidelines then you may need to keep log books or other records in order to establish the private use component which may then be subject to Fringe Benefits Tax.
The ATO are considering comments and issues raised during consultation in finalising the Practical Compliance Guideline, with an expected completion date of April 2018.
If you require further information about these guidelines then please contact your regular PT Partners advisor.
Kelvin Deer is a Director of PT Partners.