FBT on Vans and Utes

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By Emma Gurr

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Doesn’t just the thought of having to pay fringe benefits tax on your Van or Ute sound outrageous! As some of you may be aware the ATO has recently defined it’s meaning of “minor, infrequent and irregular” private use.

The ATO previously didn’t have a definition for this meaning so if your vehicle met the eligibility criteria it was eligible for an FBT exemption, but this has now changed. Sounds great doesn’t it, how nice of the ATO.

 

Eligible Vehicle

The first requirement is to see if your vehicle is an “eligible vehicle”, therefore it satisfies any of the following;

  1. The vehicle represents a ‘car’ for FBT purposes and it is:2
    1. A taxi, panel van or utility truck, designed to carry a load of less than one tonne; or
    2. Any other road vehicle designed to carry a load of less than one tonne (other than a vehicle designed for the principal purpose of carrying passengers); or
  2. The vehicle falls outside the definition of a ‘car’ and it does not represent a taxi let on hire to the employer or any other road vehicle designed to carry a load of less than one tonne (other than a vehicle designed for the principal purpose of carrying passengers).

 

Sounds ok so far, so it is a ute or van that carries less than one tonne. But the next requirement is that private use must be “minor, infrequent and irregular”. So what does that mean? Good question, hence why the ATO have now defined.

 

Private Use

For an employee’s private use to be eligible as ‘minor, infrequent and irregular” they must first meet these tests;

  • Any diversion for private travel that is not the normal home to work travel, such as dropping off children to school, grabbing a coffee from your favourite local coffee shop. This diversion can not be any more than two kilometres.
  • The employee can have no more than 750 kilometres in total for each FBT year, taken as wholly private purpose. For example holidays and weekend travel.
  • That no one single private purpose trip can exceed 200 kilometres. So no travelling from Perth to Albany for a long weekend getaway.

 

What does this mean for me?

The ATO has provided us with the definition but not necessarily how to track compliance. The ATO does say however, that the employer should take all reasonable steps to monitor and limit private use of their Company vehicles. Under its definition for “reasonable steps” it mentions the monitoring of private use through regular checks of odometer readings and comparing it to business kilometres. Sounds like quite a labour intensive task if you have multiple employees and vehicles.

Ask Now

If you would like further information on this or how you can implement a system to manage this into your business please connect with me and I’ll be happy to discuss and share the templates we have created for our clients.

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